REPORT: Five ways the world of crypto will change in 2022
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BitMEX crypto exchange has released a report exploring the five ways cryptoworld will change this year.
Some of its predictions seem pretty logical: More women will embrace crypto (fine, that’s a pretty low bar to clear). Ethereum has some serious competition in Solana (seems legit). Crypto gaming will explode, (seems… inevitable).
Some of its other claims are, well… a little wild.
Crypto exchanges will become the new banks (yup). If not through the ability to offer compound interest and consistent returns not experienced for a generation, then simply by the wholesale acquisition of banks and TradFi institutions.
That’s a bold claim. If you can’t beat ’em, buy ’em?
Anyway, according to BitMEX, crypto years are like dog years, apparently. In that one year in crypto is like seven years in the outside world. Whether this means we should be looking to our canine overlords for trading advice, they didn’t say. But it could definitely open up a new TikTok genre.
@whataboutbunny Sweet silly girl #PetStory #fyp #whataboutbunny #mydoggo #dogchallenge #dogsoftiktok #smartdog #sweetgirl #talkingdog #petstory #petlover #animal ♬ Summer Days – Martin Garrix / Macklemore / Patrick Stump
This but for crypto predictions^.
But let’s get into the details.
BitMEX really isn’t overstating things when it describes the crypto gender gap as “colossal”, given that, at least according to its report, the gulf between genders is wider even than in traditional finance. “Globally, women make up only about 5% of crypto investors, compared to about 24% of investors in traditional equities,” the report reads. “This needs to change.”
According to Analytic Insight, which BitMEX cites in the report, women are more diligent about evaluating the risks before making investment decisions. But the exchange reckons that we are approaching some kind of tipping point.
Sixty-three per cent of US adults identify as “crypto-curious”, apparently, “meaning they don’t yet own crypto but want to learn more”.
If historical adoption patterns of transformative technologies are anything to go by, it is expected that the next influx of adopters will come from this group, “shifting the gender balance rapidly” in 2022.
“For example, the vast gender gap in PC usage during the 1980s had largely disappeared by 1993,” the report read, “and whereas internet users were predominantly male in 1994, by 2001, more women than men used the internet regularly.
This suggests the proportion of crypto investors who are women could scale up much faster than many expect.”
A pretty safe bet. The number of women involved in crypto couldn’t possibly be lower than it already is.
Solana has experienced a whopping 11,400% growth over the last year, but BitMEX reckons there’s still room for more.
So much so that it will challenge Ethereum within the year, if not in terms of market cap, then in its perception within the crypto community who are rightfully frustrated by high gas fees.
BitMEX predicts that Solana will enjoy “a further runway of rapid growth” off the back of Ethereum’s continued delays and various problems splitting its blockchain, which is expected to occur in the second half of the year, “prolonging Solana’s advantage for a good while longer.”
Combining its Proof of Stake and Proof of History mechanisms address both scalability, security and “censorship resistance”, preventing miners and bots dictating the order in which transactions are recorded on the blockchain.
“And although the Proof of History approach is open source, meaning Solana’s competitors are free to adopt it, the complexity involved makes it unlikely that any of them would do so anytime soon.”
Meanwhile, its high-speed and low-cost transactions also give Solana a distinct advantage over the other leading layer-1 protocols supporting smart contracts, like Ethereum, Cardano, Terra, Avalanche, Polkadot, and Algorand.
According to the exchange, Solana’s distinct “inherent advantages”, bolstered by its strong support within the developer community, will “help further entrench the protocol within the burgeoning NFT, metaverse, and Web 3.0 spaces.”
Perhaps unsurprisingly, crypto is set to take over gaming this year. Despite the fact that gamers mostly loathe crypto, the pretty sorry state of crypto-gaming with its slow load times, rubbish graphics, and sub-par user experience, developers are still pushing ahead with crypto-powered gaming.
According to a recent survey of game developers by research firm Opinium, 58% of respondents reported they were beginning to use blockchain technology, while 48% were already incorporating NFTs into their games.
To give you a sense of how quickly they have scaled, NFT games generated $2.32 billion in revenue in Q3 2021.
Further, 64% of respondents said they believed blockchain would become prevalent in gaming over the next two years, 61% felt the technology could facilitate innovative and more interesting gameplay, 55% thought it could secure value for players by keeping money in the game, and 54% felt rewarding players with real-world value was the top use case for blockchain in gaming.
“We believe that as the Fed tightens monetary conditions in 2022 to control inflation, coins that support play-to earn gaming, along with NFT-related and metaverse themes, will likely prove more resilient than other coins because their success flows from an actual change in consumer behaviour,” the report reads.
“By the looks of it, this change looks set to become even more entrenched.”
And as the increased convergence between physical and digital worlds moves us ever closer towards the “poorly understood” metaverse, the play-to-earn model of crypto-gaming point to a future where “digital identities and assets become at least as meaningful as their physical counterparts, if not more so.”
Investors are reportedly looking to crypto to do what banks used to do: generate “significant low-risk returns” simply by virtue of having a bank account or by purchasing government bonds. Exchanges will be the new banks, apparently.
Thanks to the 2008 crisis, BitMEX says that “an entire generation has grown up without witnessing the power of compounding in action”. (We would argue that it’s two generations. Older millennials will tell you they weren’t benefiting from compound interest on their savings accounts balances even before the GFC.)
“When the 2008 crisis struck, the oldest members of Gen Z were just reaching adolescence. Unlike previous generations, they never had the opportunity to generate significant low-risk returns by simply placing their money in banks or buying government bonds, so it’s not surprising they seem more willing to take risks to see their money grow.”
BitMEX reckons that investors will be looking to crypto to generate “decent low-risk returns” while they wait out the potential volatility likely to occur in the event of a rate rise (a “distinct possibility”), and as quantitative easing programmes begin winding down.
“Seeking further upside from risky assets such as stocks is a tad optimistic”, according to BitMEX, (not that they have a distinct interest in saying so…)
“Banks and bonds won’t cut it, because even if interest rates continue rising gradually, inflation will keep real yields at historically low levels for the next several years at least.”
Given that more than $10 billion was lost to DeFi fraud last year, DeFi won’t cut it either.
Thus, BitMEX predicts that “high-yield savings offerings” and the “principal protection” afforded by established crypto firms, their savings products will become “an increasingly popular option”.
Savings products that use stablecoins with pegged values can offer investors protection from fluctuations in cryptoprices, while others can earn interest on coins like Bitcoin and Ethereum etc.
And finally, traditional finance (TradFi) better watch out. The great crypto-colonisation is upon us. More specifically, upon *them*.
Given the growing adoption of crypto and digital assets by major financial institutions – such as Galaxy Digital’s $1.2 billion purchase of crypto custodian BitGo, and Siam Commercial Bank’s 51% stake in Bitkub, Thailand’s leading crypto exchange – it makes sense they’d want to rapidly scale-up these offerings by acquiring crypto companies.
But given the conservative and slow-moving nature of traditional finance, it’s possible that they’ll be bought out by a crypto-firm before they can even load-up their PowerPoint presentation. At least, according to BitMEX.
“In the meantime, we are likely to see crypto firms begin to turn the tide by making strategic TradFi acquisitions,” the report reads.
Understandably, crypto firms are the biggest target of mergers and acquisitions in the crypto space. BitMEX described 2021 as the “year that marked crypto’s coming-out party”, recording a record high of $32.8 billion in VC investment which took 47 crypto & blockchain companies to unicorn status.
Mergers and acquisitions jumped 131% in 2021, up from its previous record high of 85 in 2020, totalling 201 deals – five of which were the most valuable in the sector’s history – and which generated a combined value of $6.1 billion.
The cumulative effect of crypto-growth bestowed by the bull market is that it “bestowed many firms with sufficient valuations and war chests to make sizeable purchases”… purchases such as banks.
BitMEX points to BXM’s plan to purchase German bank, Bankhaus von der Heydt, as just one example of how “the tables could turn”, along with Coinbase’s “blockbuster IPO” and its acquisition of eight crypto firms.
“Even though the company’s stock is now well off its November high, its market cap continues to comfortably exceed that of Nasdaq,” the report reads.
“…It’s hardly a stretch to think that the crypto exchanges could consider buying stakes in TradFi companies for strategic reasons” such as increasing access to new communities of potential customers, simplifying and accelerating the onboarding of new users, and crypto culture more generally.
“This could come from making acquisitions not only in the crypto and TradFi worlds, but pretty much any other realm, such as gaming and entertainment, or even environmental and social causes,” the report reads.
BitMEX predicts that crypto M&As will likely “once again smash records in 2022”. And while most deals will likely continue to consist of crypto firms cannibalising each other, motivations will be less about warding off competition and more to do with increasing their value-offerings.
“So, with the next phase of mass crypto adoption in 2022 set to usher in an unprecedented era of inclusiveness, when it comes to M&A, you may well see some new and unexpected pairings.”