THE FUTURE OF CRYPTOCURRENCY

Published in

Coinmonks

12 min readSep 19, 2022

The crypto market has had a very bad first half of 2022.

Since their all-time highs in late 2021, Bitcoin and Ethereum are down more than 50%. Even though there have been small jumps in the last few weeks, the cryptocurrency market as a whole is mostly stuck. Even though no one knows for sure, some experts say that the prices of cryptocurrencies could fall even more before they start to rise again.

In 2021, Bitcoin reached a number of new all-time highs. This was followed by big drops and a rise in institutional investment from big companies. Ethereum, the second-largest cryptocurrency, also hit a new all-time high late last year. In June, it fell below $900, which was its lowest level since the beginning of 2021. More and more U.S. government and Biden administration officials are interested in making new rules for cryptocurrencies.

Even so, people are still very interested in crypto. It’s a hot topic not only among investors, but also in pop culture, thanks to people like Elon Musk and that kid from your high school who’s on Facebook.

According to Dave Abner, head of global development at Gemini, a prominent cryptocurrency exchange, 2021 was a “breakthrough” in many respects. “[The cryptocurrency business] is receiving an abundance of publicity and interest.”

The sector is still young and developing rapidly. To a large extent, this is why every new Bitcoin high is usually followed by even larger declines.

The rest of 2022, then, what can we expect?

In the coming months, analysts will aim to gain a better feel for the market by watching developments like crypto regulation and institutional adoption of crypto payments.

While it is impossible to make accurate forecasts, we did poll five industry professionals on where they see crypto headed.

The recent crash of the Terra Luna cryptocurrency has piqued the interest of U.S. authorities in the topic of stablecoin regulation. Due to the freefall in the cryptocurrency markets in May, stablecoin TerraUSD (UST) unpegged from the dollar, sending its connected cryptocurrency Luna tumbling. Consequently, many people on Terra and Luna saw their money disappear in a couple of days. Only a short time after Terra’s demise, the cryptocurrency market dropped again, prompting a number of enterprises to announce layoffs and withdrawal freezes in an effort to reduce expenses in light of the dire market situation. Since then, some businesses have gone bankrupt, including Three Arrows Capital and Celsius.

As a result, federal regulators now have greater ammunition to advocate for crypto regulation.

Marcus Sotiriou, market analyst at digital asset broker GlobalBlock, said, “After the disastrous events that have transpired in the crypto market over the past few weeks, it is evident that harsh regulation could approach soon.” There is a possibility that the collapse of DeFi lenders would provide regulators with the justification they need to implement stringent regulations on cryptocurrency.

Although there is still more to do, regulatory progress has been made thus far in 2022. In March, Vice President Joe Biden signed an executive order mandating research into the “responsible development” of digital assets like stablecoins across federal departments. President Biden issued an executive order on digital assets, and the U.S. Treasury Department has just produced the first framework to implement it. The United States can learn from this approach how to collaborate with other nations on digital assets.

Security and Exchange Commission Chairman Gary Gensler has consistently commented on his agency’s and the Commodity Futures Trading Commission’s role in policing the industry, while Federal Reserve Chair Jerome Powell stated in 2021 that he had “no intention” of banning cryptocurrency in the United States.

Gensler has warned multiple times that investors will be harmed if stronger legislation is not implemented. Furthermore, it is in the IRS’s best interest to ensure that taxpayers know how to account for virtual money. The sentiments expressed by Powell and Gensler regarding the need for additional regulations for cryptocurrencies mirror those of the Biden administration and other U.S. lawmakers.

Investor protection around the exchanges, lending platforms, and broker-dealers would help the public at large, Gensler argued in a recent interview. The SEC is “working in each of those three categories” (exchanges, lending, and broker-dealers), wherein they are “talking to industry participants about how to come into compliance, or modify some of that compliance.”

Constraints posed by regulations are typical of the bitcoin industry as a whole. According to Jeffrey Wang, head of the Americas at Canadian crypto finance business Amber Group, “there are multiple agencies that may or may not have jurisdiction to monitor anything.” Also, “it varies from state to state.”

According to Wang, the lack of clear standards for U.S. corporations and investors is a “major hurdle for cryptocurrency,” which might be removed with the introduction of clear legislation.

The potential impact of new regulations on investors

Although cryptocurrency regulation can be divisive, many professionals agree that it is beneficial for both investors and the sector as a whole.

The famously unstable cryptocurrency market might benefit from increased regulation. Protecting long-term investors, preventing fraud in the crypto ecosystem, and providing clear standards for business innovation in the crypto economy are all possible if the framework is well-balanced.

Ben Weiss, CEO and co-founder of CoinFlip, a cryptocurrency buying platform and crypto ATM network, has said, “Sensible regulation is a win for everyone.” It boosts trust in crypto, but I believe we need to take our time with this and get it right.

The already volatile price of bitcoin can be further impacted by regulatory announcements. As a result, financial advisors advise limiting cryptocurrency investments to no more than 5% of your overall portfolio and never putting up money you can’t afford to lose.

Higher Rates of Cryptocurrency Adoption in Institutions: In 2021, conventional businesses from a wide range of sectors began exploring cryptocurrency and blockchain technology, and some even made initial investments in the two. For instance, AMC stated last year that they will begin accepting Bitcoin payments. PayPal and Square, two of the biggest names in online payments, are also placing bets on cryptocurrency by enabling in-app purchases. Even though the corporation has billions of dollars in crypto assets, Tesla has wavered in its support of bitcoin payments and now also accepts Dogecoin payments. This level of commitment is expected to increase, according to experts.

According to Abner, “we’ve seen a significant amount of attention inflow, and that will continue to fuel the expansion of the business for some time.”

It has been speculated that larger, international firms may help accelerate this adoption in the second half of this year. Weiss predicts that large corporations like Amazon and major banks will begin to adopt cryptocurrency. By setting off a chain reaction of other retailers embracing it, a major player like Amazon would “add a lot of legitimacy.”

In fact, the company recently shared a job listing for a “digital currency and blockchain product lead,” fueling speculation that it is taking steps in that direction.

The implications of increased institutional usage for traders

Although most individuals don’t see the point in using cryptocurrencies to make purchases at the moment, this may change if more stores started accepting them. There is still a long way to go before it makes financial sense to spend bitcoin on products and services, but increased institutional adoption may eventually lead to more use-cases for common users, which in turn may affect crypto pricing. While there can be no assurances, the more practical applications there are for a cryptocurrency, the more likely it is that its demand and price will rise in the long run.

The Prospects for NFTs: Although the concept of NFTs, or non-fungible tokens, has been around since 2014, it wasn’t until 2021 that it became widely used.

Celebrities and major corporations like American Express and Gucci are interested in NFTs because they reflect digital ownership of a variety of irreplicable intangible items. DappRadar, a decentralized app store, forecasts that in 2021, sales of NFTs would reach $25 billion, up from $94.9 million in the previous year.

But the question of whether NFTs are here to stay or a passing trend remains open. DappRadar reports that NFT sales dropped below $1 billion in June, the first time this has happened in a year.

Some experts are calling it a “bubble,” while others argue that the underlying technology of NFTs — the smart contracts on blockchain technology — is what provides genuine value. However, artists and producers are advocating for this as the future of revenue generation.

I think they’re really hot right now, especially in the last four months,” says Humphrey Yang, the personal finance guru at HumphreyTalks. I believe they will be around in the next decade or two. I’m unsure of how often we actually make use of them. Communities will always remain important to some extent, but NFTs’ more far-reaching potential is where the real excitement lies.

Insights from recent reports indicate the market may be beginning to cool. According to a recent survey by Chainalysis, the number of accounts actively buying and selling NFTs has dropped from nearly a million at the beginning of the year to around 491,000. The dropping value of cryptocurrencies, together with other macroeconomic reasons like inflation, rising interest rates, and the war between Russia and Ukraine, have led some experts to predict that the NFT industry will continue to struggle.

According to Chainalysis’s study, “NFTs showed tremendous growth in 2021, but this growth has not been continuous and has leveled off so far in 2022.”

What the decline in NFTs mean for investors

Many people have purchased NFTs over the past year, either as an investment or because they find them enjoyable. For whatever reason, the current decline in the cryptocurrency market has significantly reduced the value of numerous digital assets.

Buying an NFT is “even riskier” than buying cryptocurrency, says Yang, because it is “almost like a leveraged bet on cryptocurrency.” Many “don’t really know the difference and buy them because they’re enjoyable,” he says, referring to the fact that people don’t realize that what they’re doing is effectively gambling.

In light of the fact that NFTs are even more speculative and risky than cryptocurrency, it’s probably best to avoid them for the time being, especially as crypto values fall generally. Most long-term investors, according to financial experts, would be better off investing in bitcoin or ethereum, the two major cryptocurrencies, rather than an NFT, but only with a small percentage of their portfolio (less than 5%, and never at the expense of accomplishing other financial goals).

Next Steps for DeFi: DeFi is a term you’ve probably heard if you’re familiar with the cryptocurrency industry. It’s an abbreviation for “decentralized finance,” which describes the emerging ecosystem of cryptocurrency and blockchain-based online financial services.

The “smart contracts” utilized by DeFi serve as an alternative to the usage of middlemen in the form of banks and other lending institutions. As a result, software can now serve as a substitute for the traditional financial institutions with which we deal on a daily basis. Due to this, there is no single boss to answer to in the DeFi industry.

However, DeFi is still in its infancy, much like the early days of the internet, when it was characterized by simple chat rooms, crude websites, and nascent online service providers. Experts predict that there will be growing pains as the industry evolves, but that one day we may see a company equal to Amazon or Google in the DeFi industry.

Blockchain researcher and fintech professor at Rutgers Business School Dr. Merav Ozair believes that the next crucial step for DeFi is further development. “The next step is learning how to build solid code and taking things to the next level,” he explains.

What broader DeFi adoption means for investors

DeFi is the place to go if you desire complete freedom over your financial situation.

However, this may have unintended consequences, such as a reduction in safeguards meant to protect your assets from any legal action. DeFi is similar to the “wild west” of banking and investing in that there is no guarantee that your assets will be recovered if they are stolen or otherwise lost.

It’s prudent to assess the risks and benefits when deciding between traditional financial products and DeFi solutions, as the former are still in their infancy. Due to the lack of oversight, investors in the DeFi industry can expect to face more financial risks but also enjoy greater autonomy and choice. You’ll need to invest in cryptocurrency and arm yourself with some crypto knowledge before you can get entry.

Experts recommend not investing more than 5% of your portfolio in cryptocurrency and waiting to do so until you have established a solid emergency fund and eliminated any high-interest debt.

The Prospects for Bitcoin: Since Bitcoin is the largest cryptocurrency by market cap, its movements are often indicative of those of the whole crypto market.

The price of bitcoin had a roller coaster year in 2021, reaching a new all-time high of almost $68,000 in November. Then, in the year 2022, everything came tumbling down.

Due to persistent macroeconomic uncertainty this year, Bitcoin and the larger crypto market have been falling. This anxiety has been fuelled by skyrocketing inflation, a volatile stock market, rising interest rates, and worries of a recession. Bitcoin’s value has dropped by about $6,500 (or 66%) since last November, reaching a low of $17,500 in the past few weeks. To this day, analysts can’t agree on whether or not bitcoin has hit rock bottom. There are predictions that the price of bitcoin could drop to as low as $10,000 in 2022, while some argue that this has already happened.

In light of the high degree of volatility associated with cryptocurrency investments, it is advised that you allocate no more than 5% of your portfolio to this asset class initially.

But how far do you see bitcoin going in the future? Bitcoin has had a rough start to the year, but market watchers still believe it will eventually reach $100,000. Bitcoin’s history may shed light on its future, says Kiana Danial, author of “Cryptocurrency Investing for Dummies.”

Danial claims that the price of Bitcoin has seen numerous large increases followed by decreases since 2011. My forecast for Bitcoin is short-term volatility and long-term growth.

Prospects for Ethereum: Ethereum is the most popular alternative money and the second largest cryptocurrency. In the same way as bitcoin does, it can be used as a benchmark for the entire cryptocurrency market. Its value has skyrocketed over the past six years, from $0.311 at its inception in 2015 to nearly $4,800 at its all-time high at the end of 2017.

The price of ethereum is still well below its all-time high, but it might increase dramatically by the end of 2022.

According to experts, the success of ethereum’s major update on September 19 might have a significant impact on that figure. As a result, Ethereum is migrating to a less power-hungry version of its technology, known among industry insiders as “The Merge.” The upgraded network should be speedier and less expensive to utilize in other ways as well.

If ethereum delivers on its promises with the combine, ether prices may soar to above $12,000 by 2022, according to some analysts. Financial market participants are keeping a tight eye on the merger’s development and, in some cases, buying the market’s recent decline in anticipation of the merger. Whether the price of ethereum keeps rising or falls to new lows is unknown at this moment, even to the experts.

Henri Arslanian, global crypto head at PwC, predicts that this year will be a “make-or-break” one for Ethereum.

What bitcoin and ethereum price volatility means for investors

Due to its extreme volatility, Bitcoin and Ethereum are best invested in for the long haul. Ignore short-term fluctuations if you’re investing for long-term growth. If you want to maximize the return on your bitcoin investment, you should “set it and forget it.” The experts keep warning us that whenever there is a market swing, up or down, investors may act impulsively, causing them to incur losses.

A Look Into The Future Of Cryptocurrency:We can, and will, speculate on the potential value of cryptocurrencies to investors in the months and years ahead, but the fact remains that it is still a new and speculative investment with little precedent on which to build. No one knows for sure, regardless of what any one expert claims to know. For this reason, you should only put up money that you can afford to lose and avoid speculative investments in favor of safer ones if you’re looking to grow wealth over the long run.

Asking, “Would you be okay if one morning you woke up and crypto had been banned by developed nations and become worthless?”

In an interview with NextAdvisor, Atlanta-based certified financial planner Frederick Stanield shared his thoughts.

Invest only a small portion of your available funds, and never let crypto take precedence over things like retirement savings or paying down debt.

Visit Vorem Academy today and get or upgrade your Digital skill. Click Vorem.co

New to trading? Try crypto trading bots or copy trading