Thursday, May 19 2022

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Bitcoin opened in 2021 with a strong performance and saw a rapid increase in adoption and interest throughout the year. Crypto has gone through many stages, from the first Bitcoin-linked exchange-traded funds (ETFs) to large companies announcing that they would accept it as a method of payment. (Then roll it back, in Tesla’s case.) While Bitcoin closed the year lower than expected and got off to a slow start in 2022, it’s important to note that crypto outperformed other asset classes. in 2021, including commodities, stocks and gold.

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NYDIG, a dedicated Bitcoin technology and financial services company, has released its balance sheet and outlook for 2022, and several themes from last year, including regulation and institutional adoption, will continue into the new year, say. they.

Let’s take a look at NYDIG’s Bitcoin forecast for 2022 and what the experts are saying:

Macro-correlations remain high

“In the future, we should expect the correlations to settle at these new, higher levels; there is no reason to expect them to revert to a zero correlated asset. Like commodities however, despite modest positive correlations, Bitcoin is still expected to act as a portfolio diversifier, ”NYDIG said in the report.

Reeve Collins, co-founder of BLOCKv, a leading platform for building highly programmable and customizable digital assets, told GOBankingRates that Bitcoin continues to unlock new ways for more people and people who never had access. to banking, pay and connect with global ecosystems.

“It is important that Bitcoin is treated as a portfolio diversifier so that people have continued access to this currency and the technology that goes with it. Because this is a young asset, and because it is only now being adopted on a large scale, you should expect there to be a correlation with stocks, ”Collins said. . “But in the longer term, this adoption is likely to unfold in such a way that Bitcoin is seen as a hedge and, therefore, the correlation with stocks will decrease.”

Jorge Pesok, general counsel and chief compliance officer for leading crypto software company Tacen Inc., echoed the sentiment, telling GOBankingRates that if there is a correlation given that crypto assets are still in their prime. early stages of adoption, he expects it to dissipate. in the years to come – in part because the functionality of so many of these crypto assets and protocols are so diverse that they will appeal to different markets in different ways.

“For example, it’s hard to see how DeFi or NFT remains correlated to, say, ETH or BTC given that they all perform so many different functions for users,” Pesok said. “Additionally, Bitcoin, as its adoption continues to grow, will likely see itself transformed into a risk-free asset, much like digital gold. But it will take time and further adoption. “

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Stablecoin regulation in the foreground

NYDIG said there appears to be a predictable partisan divide on the issue, with Republicans preferring a lighter touch to regulation than Democrats and Democrats not necessarily having enough control in Congress to avoid compromise.

“Either way, we expect finalizing a stable coin approach to continue to be a major regulatory goal in 2022,” according to the report.

According to Collins, “regulating stablecoin is the most likely regulatory action we’ll see in 2022, but given the lack of consensus in Congress, I expect it to be softer.”

Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs, added that following the President’s Task Force (PWG) stablecoins report on financial markets last year, he is possible that “while it is unlikely that we will see a full legal framework for crypto in 2022 given the complexity of the issue and an apparent partisan divide, we could see a move on stablecoins given the pressure from the PWG report and laser focus on potential risks.

Pesok added that there is growing support among regulators and both political parties to tackle stablecoins, and this is an arena in the crypto industry that is likely to receive relatively regulation. quick and hopefully constructive.

“Such regulations can include something akin to FDIC-type insurance, much like bank deposits, as well as clearer measures and guidelines for stablecoins to be backed by dollar and dollar assets. . The crypto industry would welcome something like this, in general, and so there could be a lot of movement here in a positive direction for the year ahead, ”he said.

Learn: A Look at Crypto’s Highs and Lows in 2021

Classification of cryptocurrencies as securities

“Charmain Gary Gensler has indicated on several occasions that he believes that many of the cryptocurrencies currently traded should probably be treated as securities,” NYDIG notes in the report. However, Bitcoin investors can be reassured by Gensler’s historic comments that he doesn’t think the digital asset is security, reflecting the views of his predecessor, Jay Clayton, according to the report.

However, bitcoin lending products may be covered by securities regulations. Staking of a proof of stake currency may also be included. It is not yet clear when (or if) the SEC will start cracking down on it. ‘either of these activities,’ the report notes.

Pesok agreed, saying there had already been a slew of crypto lending products, which came under scrutiny by the SEC and various states.

“Yet the level of support for sensible regulations for crypto-centric products, including lending, is increasing,” he said. “And I suspect there will be a constructive touch in terms of regulation that will allow these products to thrive,” he said.

Payments as a use case continue to grow

“Bitcoin is best known today as an unsupported store of value by a sovereign, like a digital form of gold. BTC rewards credit cards, which were rolled out by some companies on a limited basis at the end of 2020, entered the mainstream in 2021. “Get paid in bitcoin,” or payroll in bitcoin, has been in the news to mayors and professional athletes throughout 2021. We believe 2022 is the year that getting paid in bitcoin can cross the sideline and be available to the general public, ”NYDIG said.

According to Collins, 2022 will be the year of global cryptocurrency adoption as entrepreneurs begin to bridge the divide between decentralized currencies and the centralized world through the underlying technologies.

“Usability is currently a major obstacle in the quest to bring bitcoin payments to the masses: custody, ramps, difficulty accessing funds on mobile phones and interfaces not designed for the target demographic,” said Collins. “As the industry moves rapidly, I think we’ll see products that provide users with a seamless way to move decentralized, fiat and digital currencies globally without middlemen, removing the major barriers to entry that exist. currently and allowing the general public to pay and be paid via cryptocurrency.

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Additional themes

BLOCKv’s Collins is bullish on Bitcoin’s outlook in 2022, despite the Fed’s tightening of monetary policy due to inflation, which in turn has triggered massive sell-offs in the stock and crypto markets.

“It’s to be expected,” Collins said. “But at some point, maybe even now, the sell will be seen as too much of a reaction. And as things calm down we will again see significant price growth across the board. crypto. So if you look beyond next year, Bitcoin in particular is poised for strong growth. “

For Redbord, the main theme is regulatory clarification in 2022, becausethere is a myth that crypto is the Wild West, ”he said – a reference to Gensler’s comments in 2021.

“What we’re actually seeing is an already regulated space in the United States where crypto companies are required to put in place risk-based compliance controls. And there is more visibility into financial flows than ever before, ”he said, adding that this visibility on the blockchain allows law enforcement to trace the flow of proceeds of crime and regulators to gain an overview of their regulated ecosystem.

“In 2022, we will likely see more clarity on the regulations. Are some cryptocurrencies securities or commodities? Should DeFi projects be regulated like ESMs like exchanges? And how do we categorize and regulate the exploding NFT space? ” he said.

As for Pesok, he too is bullish on Bitcoin’s prospects this year.

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“Bitcoin has spawned a breakthrough innovation that is seeing all kinds of new products coming to market which, in turn, bring tremendous value to people around the world,” he said. “Indeed, the speed at which the adoption of Bitcoin and other crypto assets is occurring suggests that, if you zoom out, we are still in the early stages of a fast growing industry that is on its way. to experience massive growth in the coming year. . Indeed, it is hard not to be optimistic about the direction this industry is taking.

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This article originally appeared on Bitcoin Trends for 2022 by Experts


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