The year 2021 was a watershed moment for cryptocurrencies. But what will happen in 2022?
Over the last year, we’ve seen Bitcoin hit many new all-time high values, followed by significant dips, and increased institutional buy-in from major corporations. Late last year, Ethereum, the second-largest cryptocurrency, also reached a new all-time high. New bitcoin restrictions have piqued the curiosity of US government authorities and the Biden administration.
Public’s faith in crypto has soared in the meantime: it’s a hot topic not only among investors but also in popular culture, due to everyone from long-time investors like Elon Musk to that guy from junior high on Facebook.
According to Dave Abner, head of global development at Gemini, a renowned cryptocurrency exchange, 2021 marked a “breakthrough” in many aspects. “[The crypto business is receiving a lot of attention and interest.”
However, the sector is still in its early stages and is continually changing. That’s one of the reasons why every new Bitcoin high is quickly followed by a sharp slump. It’s tough to forecast where things will go in the long run, but experts will be watching issues like regulation and institutional acceptance of crypto payments in the next months to get a clearer feel of the market.
The future of cryptocurrency: Expert predictions after a breakthrough in 2021
While it’s tough to make exact predictions, we asked five experts what they’re watching in the crypto industry for the future:
- Cryptocurrency Regulation
- Crypto ETF Approval
- Broader Institutional Cryptocurrency Adoption
- Bitcoin’s Future Outlook
- The Future of Cryptocurrency
Expect to hear more about bitcoin legislation in the future. Stablecoin regulation has piqued the curiosity of US officials.
Lawmakers in Washington, D.C., and around the world are attempting to find out how to make cryptocurrency safer for investors and less appealing to hackers by enacting regulations and guidelines.
“One of the major overhangs in the crypto industry globally is regulation,” says Jeffrey Wang, president of the Americas at Amber Group, a crypto financing firm based in Canada. “We would greatly appreciate unambiguous regulation.”
Chairman of the Federal Reserve, Jerome Powell, has stated that he has “no intention” of prohibiting cryptocurrency in the United States, while SEC Chairman Gary Gensler has repeatedly stated his agency’s and the Commodity Futures Trading Commission’s roles in policing the market.
Investors are “certain to be harmed,” according to Gensler, if stronger regulation is not implemented. Furthermore, the IRS has a vested interest in ensuring that investors understand how to report virtual currency on their tax returns. The statements of Gensler and Powell are in line with a growing consensus among the Biden administration and other US politicians that stronger cryptocurrency regulation is required.
Regulation, like most things in bitcoin, is fraught with difficulties. Wang explains, “There are various agencies that may or may not have jurisdiction to monitor anything.” “And it varies from state to state.”
Clear legislation would remove a “major obstacle for bitcoin,” according to Wang, because U.S. enterprises and investors are now operating without clear restrictions.
What impact could new regulations have on investors?
Crypto tax reporting measures were included in the president’s $1.2 trillion bipartisan infrastructure package, which might make it easier for the IRS to trace crypto activity among Americans. That’s why, even before the new regulation, experts recommend that investors maintain track of any capital gains or losses on their crypto assets. The new regulations may also make it easier for investors to disclose cryptocurrency transactions correctly.
Shehan Chandrasekaran, CPA, head of tax strategy at CoinTracker.io, a crypto tax software startup, recently told NextAdvisor that exchanges will have to submit 1099-B tax forms including cost basis information to investors. “This will considerably minimize the amount of time required to file crypto tax returns.”
In already unpredictable markets, regulatory news can have an impact on the price of cryptocurrencies. Because of market volatility, investing professionals advise keeping cryptocurrency investments to less than 5% of your whole portfolio and never investing money you can’t afford to lose.
In the end, many experts agree that regulation is beneficial to the sector. “Everyone benefits from sensible regulation,” argues Ben Weiss, CEO and creator of Coinflip, a cryptocurrency buying platform and crypto ATM network. “It gives people greater trust in cryptocurrency, but I believe we need to take our time and get it right.”
Crypto ETF Approval:
In October, the first Bitcoin ETF debuted on the New York Stock Exchange, marking a significant step forward in this area. The development represents a new, more traditional approach to investing in cryptocurrency. The BITO Bitcoin ETF allows investors to acquire cryptocurrency directly from traditional investing brokerages such as Fidelity or Vanguard, where they may already have accounts.
“We do it in the stock market, we do it in the bond market, and people might want it here,” Gensler said last summer at the Aspen Security Forum.
However, some argue that the BITO ETF is insufficient because, while it is tied to Bitcoin, it does not actually own the cryptocurrency. Instead, the fund invests in Bitcoin futures contracts. Experts suggest Bitcoin futures may not directly reflect the price of Bitcoin, despite the fact that they follow the overall patterns of the actual cryptocurrency. For the time being, investors must wait for an ETF that holds Bitcoin directly.
The SEC has considered ETF clearance numerous times in recent years, but BITO is the first to receive permission.
What does a cryptocurrency exchange-traded fund (ETF) mean for investors?
It’s too early to know how many investors will flock to BITO, but the fund saw a lot of activity in its first few weeks. In essence, the more traditional financial products that include bitcoin assets, the more Americans will be able to participate in and influence the crypto market. You may add crypto to the portfolio straight from the same brokerage with which you already have a retirement or other traditional investing account, rather than learning how to navigate a cryptocurrency market.
Investing in a crypto ETF like BITO, on the other hand, involves the same risk as any other crypto investment. It’s still a risky and speculative investment. You shouldn’t put your money in a crypto fund if you’re not willing to lose the money you put into crypto by buying it on an exchange. Consider whether you’re willing to incur the risk of including cryptocurrencies in your portfolio.
Broader Institutional Cryptocurrency Adoption:
In 2021, prominent businesses from a variety of industries expressed interest in cryptocurrencies and blockchain, and some even invested in it. AMC, for example, just announced that before the end of the year, it will be able to take Bitcoin payments. PayPal and Square, for example, are banking on cryptocurrency by allowing consumers to buy it on their platforms. Tesla continues to waver on whether or not it will accept Bitcoin payments, despite the fact that the firm owns billions in cryptocurrency. Experts expect that this type of buy-in will become more common.
“We’ve seen a great flood of interest,” Abner adds, “and that’s likely to continue to drive the industry’s growth for a long time.”
Some analysts believe that in the second half of this year, larger, worldwide organizations will accelerate adoption even further. Weiss says, “What we’re looking at is institutions getting involved in crypto, whether it’s Amazon or the large banks.” Amazon, as a large store, may “start a chain reaction” of others accepting it, as well as “give a lot of legitimacy.”
Indeed, by publicizing a job advertisement for a “digital currency and blockchain product lead,” Amazon has recently prompted rumors that it is moving in that direction. Walmart is also looking for a blockchain expert to supervise its strategy.
What more institutional adoption means for investors?
While most individuals don’t see the value in paying for products with cryptocurrency right now, more merchants taking payments could change the scene in the future. It will likely be a long time before spending Bitcoin on products or services is a wise financial decision, but more institutional acceptance could open up more use-cases for common people, affecting crypto pricing. Nothing is sure, but if you buy cryptocurrencies as a long-term store of wealth, the more “real-world” applications it has, the higher the demand and value.
Bitcoin’s Future Outlook:
Since Bitcoin is indeed the biggest crypto by market cap, and the rest of the market tends to follow its patterns, it is a good predictor of the crypto market in general.
In 2021, the price of bitcoin embarked on a rollercoaster swing, reaching a new all-time high of $68,000 in November. Following earlier highs of over $60,000 in April and October, as well as a summer decline to less than $30,000 in July, this current record high has been set. Because of this volatility, experts recommend that you limit your crypto investments to less than 5% of your overall portfolio at first.
But how far can Bitcoin rise? According to many experts, it’s simply a question of time until Bitcoin reaches $100,000, not if. According to Kiana Danial, author of “Cryptocurrency Investing for Dummies,” Bitcoin’s past may provide some pointers as to what to expect in the future.
Since 2011, Danial claims that Bitcoin’s price has experienced numerous massive rises followed by pullbacks.
What does the price volatility of Bitcoin indicate for investors?
The volatility of Bitcoin is yet another reason for investors to stick to a long-term strategy. If you’re purchasing for long-term profit, don’t be concerned with short-term fluctuations. The greatest part you could do is “set it and forget it” when it comes to your cryptocurrency investment. Emotional reactions can force investors to act rashly and make judgments that result in losses on their investment, as experts continue to warn us every time there is a market movement – whether up or down.
The Future of Cryptocurrency:
We could guess what value bitcoin has for investors in the future months or years, however the reality is that it’s still a new and speculative investment with little history on which to make predictions. No one really knows what a particular expert believes or says. That’s why, for long-term wealth accumulation, you should only invest what you’re willing to lose and stick to more traditional assets.
“Would you be okay if you woke up one morning to find that crypto had been banned by industrialized countries and had become worthless?” Frederick Stanield, a certified financial planner at Lifewater Wealth Management in Atlanta, Georgia, recently told NextAdvisor.
Maintain your crypto investments minimal, and never prioritize them over other financial goals such as retirement savings and debt repayment.