Cryptocurrency 2022: a year of extraordinary development in 2021 sets up great expectations for the year ahead

Cryptocurrency 2022: a year of extraordinary development in 2021 sets up great expectations for the year ahead

The cryptocurrency market passed several important milestones in 2021, as corporate and institutional engagement with the sector deepened, crypto market infrastructure grew more robust, financial regulators started to take the emergence of blockchain-based decentralised finance (DeFi) seriously and non-fungible token (NFT) applications expanded rapidly.

ETF Securities Head of Distribution, Kanish Chugh, said, “On the same day in February that Tesla announced it had invested US$1.5 billion in Bitcoin, the Federal Reserve of St Louis published a paper on DeFi that pointed to the potential benefits of financial infrastructure built on the Ethereum blockchain.”

Chugh says that was just the start of a momentous year for cryptocurrency. Morgan Stanley became the first US bank to offer Bitcoin exposure when it authorised its 16,000 advisers to make it available to wealth management clients.

The European Investment Bank raised €100 million with an issue of two-year bond tokens (or digital notes) on Ethereum.

Another milestone was the listing of cryptocurrency exchange operator Coinbase on the Nasdaq Exchange. The company had a US$100 billion market capitalisation at listing, underlining the value that the broader investment community now sees in the crypto market and its leading participants.

One of the more surprising developments was the decision of the government of El Salvador in September to accept Bitcoin as legal tender.

In its review of market developments in 2021, crypto specialist investment manager 21Shares, ETF Securities’ partner in developing cryptocurrency investment opportunities, said increasing institutional engagement and price expectations led the market to become overleveraged and triggered a couple of big corrections. Another contributor to volatility was the Chinese Government’s crackdown in Bitcoin mining and trading.

But 21Shares said that, overall, the year’s positive developments outweighed the uncertainty and volatility, pointing to strong expectation for the current year and beyond.

21Shares are optimistic about the future of this space because of the pace of innovation and the financial support entrepreneurs are receiving from venture capital (VC) firms and from a crowdsourced network of talents and resources. A good indication of this new era is the amount of VC investment in the industry, which increased 300% last year.

21Shares is forecasting that the rate of adoption of DeFi applications will pick up in 2022. Decentralised finance is a blockchain-based financial infrastructure built on smart contract platforms, replicating traditional financial services in what is aimed to be a more open and transparent way, bypassing intermediaries and centralised institutions.

In the NFT market, 21Shares says the wide acceptance of crypto-native art, music and games has given the industry a new profile and attracted a large cohort of creative talent. It says new marketplaces are emerging in this sector, including Fractional, which allows owners of NFTs to sell a fraction of their artwork at an affordable price.

21 Shares also expects to see greater interoperability across blockchains in the year ahead, improving user experience and unlocking a range of new services.