2022 Trend Forecast: More traditional investment companies will set foot in the encryption market for the first time
2021 is a record year for the encryption market, and both investment institutions and retail investors have benefited more or less. For most analysts and industry insiders, 2022 will be another year of increased adoption of cryptoassets, both in terms of their potential as investment vehicles and inflation hedges, and in terms of their niche.
This article combines the views of many people in the encryption industry to predict the trend in 2022 from the following three perspectives:
DeFi：
Reshape the DeFi industry to better meet the expectations of investors and regulators.
DAOs may become more involved in DeFi.
We may see some NFT-related trading pairs and yield products in 2022.
The integration of DeFi and blockchain games.
Crypto Market Regulation:
Smaller countries may take the lead in regulating the crypto market.
A standardized approach to regulating crypto assets is expected to emerge.
Traditional finance will insist on fair competition in terms of regulation.
Transactions involving on-chain smart contracts often do not comply with basic legal concepts.
There may be more interesting debates around NFT transactions, whether to pay taxes on game profits.
The venture capital company:
Established venture capital firms now realize that crypto is the next wave of technology.
Investors will mainly focus on Metaverse, Web 3, DeFi, NFT and blockchain games.
Current projects related to the Metaverse need to improve social functions in order to obtain greater investment.
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DeFi Trends in 2022
Decentralized finance (DeFi) has seen phenomenal growth in 2021, fueling the growth of the broader crypto market, which in turn impacted it. According to Defi Llama, the total value locked in the DeFi space currently exceeds $240 billion.
It is expected that DeFi will continue to expand in 2022, and various sub-sectors in DeFi will also see considerable growth, from liquidity mining and yield farming to decentralized autonomous organizations (DAO), decentralized exchanges (DEX) and DeFi +NFT.
Continued growth with new users added
At the time of writing, the crypto market is in a downturn. So an inevitable question arises: can DeFi really grow this year?
Brad Yasar, CEO of the lending agreement EQIFI, believes: "After 2020, the 2021 epidemic still affects our daily life and ability to earn a living, as well as the opening of global trade/financial markets. Therefore, most people began to seek to enter the DeFi field In addition, we expect DeFi to gain more traction in 2022 as more traditional banks and financial services institutions realize that by adopting some DeFi protocols, they can develop faster and serve customers more effectively. Broad adoption and continued growth."
As Yasar said, the macroeconomic situation under the epidemic has brought many people into contact with DeFi, which has significantly increased the capitalization of the DeFi and encryption markets, and the participation of traditional financial institutions has also increased.
Similarly, Timo Lehes, co-founder of Swarm Markets, expects asset tokenization, regulatory clarity, and lower transaction costs to increase mainstream adoption of DeFi in 2022.
"Bringing more real-world assets and financial products (such as securities) to the chain will greatly expand the DeFi ecosystem and attract more investors and traders. DeFi provides more opportunities than traditional markets and can Reap benefits from a wider range of asset types and empower people with greater autonomy."
Others in the industry expect that in 2022, DeFi will become popular among users other than crypto-natives. Rachid Ajaja, CEO of AllianceBlock, is one of them, and he believes:
“According to a survey, 7 out of 10 wealth advisors globally have had conversations with clients about crypto assets, and a survey by Goldman Sachs showed that about 15% of family offices worldwide have some understanding of crypto assets. But That wasn't the case a few years ago."
DeFi regulation will become a reality in 2022
Ajaja also noted that one of the biggest hurdles currently facing institutional adoption of DeFi is compliance and regulation. Fortunately, the expected 2022 DeFi compliance has a chance to become a reality. For example, the European Union’s upcoming crypto market regulation (MiCA) will have a major impact on the DeFi space. In addition, the US SEC will strengthen scrutiny, which requires the DeFi protocol itself to improve compliance.
“In order for DeFi protocols to meet these requirements and truly feel the benefits of regulation, effective cross-border regulatory cooperation and KYC/AML frameworks are required. Centralized crypto exchanges and decentralized exchanges urgently need these solutions, which will have Helps provide a compliant gateway for encrypted assets. In DeFi, [know-your-customer, KYC] and [anti-money laundering, AML] solutions, wallets with built-in KYC will help DeFi increase in the coming year Institutional adoption."
Timo Lehes also agrees that regulation will be key in 2022: “The good news is that some jurisdictions, such as Germany, have already made crypto assets compliant with existing securities laws. DeFi projects looking to attract capital can find opportunities there. Regulatory conversations turn into action in 2022, and we expect to see a reshaping of the DeFi space to better meet investor and regulator expectations.”
DappRadar's CDO Dragos Dunica believes that the regulatory challenges facing DeFi in 2022 may be huge, but the field is ready to meet the challenges.
“I think the DeFi space will do everything in its power to legitimize itself and become a real competitor to CeFi [centralized finance].”
more and more products
Assuming that the DeFi field can clear more and more regulatory hurdles in 2022, it will be able to provide users with increasingly rich products.
Timo Lehes believes: "In 2022, NFT will evolve to represent assets with intrinsic value. Based on the composability of DeFi, we will see some interesting products."
“I would like to see DAOs, along with investor protection, DeFi, and NFTs, become a key theme in the crypto industry in 2022,” Lehes said.
One of the most successful projects in the crypto industry in 2021 is Axie Infinity, whose daily active users increased from 38,000 in April to 2.7 million in mid-November. The surge in users has also sparked the growth of GameFi, and DeFi is clearly a big part of it.
Dragos Dunica believes: "We have seen the success of Axie Infinity and Alien Worlds, so we expect the further rise of gamified finance and P2E mechanisms. Gamification has enabled the number of users in the DeFi field to hit a record high, with more than 2 million active wallets in October. It is expected that DeFi and blockchain games will be further integrated in 2022 to provide users with interesting experiences.”
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Crypto Market Regulatory Trends in 2022
As in 2021, 2022 is likely to see a variety of attitudes towards crypto assets in different countries, with some countries taking a favorable view (such as El Salvador) and others taking a more hawkish stance (such as China). However, some industry players estimate that most of the regulations implemented in 2022 will be increasingly beneficial to the industry as more countries and official agencies start to recognize crypto assets.
At the same time, industry insiders said that regulators will start looking to regulate specific areas of the encryption industry in 2022, with stablecoins, NFTs and DeFi in focus. While some members of the crypto community may be alarmed by the arrival of more regulation, the introduction of investor safeguards could ultimately have a positive impact on the crypto industry.
Predictions and realizations for 2021
Back in November 2020, industry insiders predicted that the implementation of encryption regulations in 2021 would be fragmented. This is largely the case, with most countries still appearing to be debating and consulting on cryptoassets, with exceptions such as Ukraine, Cuba and El Salvador.
Additionally, they believe that the US will introduce comprehensive encryption regulations in 2021. While some states have introduced their own statewide bills, the federal government has held back on actual progress.
Regulation may move toward better treatment
Skirmantas Januškas, CEO of DappRadar, said in an interview that in 2022, the encryption industry may continue to be subject to different regulatory measures in different countries. For him, this is mainly because crypto assets are often driven by bottom-up demand.
“This bottom-up demand tends to be greater in countries with fragile economic models, high inflation, or limited access to global markets.”
Ian Taylor, executive director of CryptoUK, expects the differences in regulatory approaches to be further reflected in 2022, with the main divergence being between East and West.
“Western countries are not banning crypto markets as they see other countries actively banning crypto markets, suggesting that different regulatory stances may stem from the different uses of crypto assets we see in different parts of the world. For example, Bitcoin (BTC) is mainly used as an investment in Western countries. While in Asia and other developing countries, the use cases are more inclined towards payment instruments, especially remittances.”
As for which countries will implement new crypto regulations in 2022, Skirmantas Januškas believes that it will be the smaller countries that will increase their efforts to attract crypto-related economic activity.
Although some countries may adopt restrictive measures on the encrypted market, industry sources estimate that the general trend of regulation will be more acceptance of encrypted assets under the premise of imposing safeguards.
Etherisc’s Chief Legal Architect Jan Stockhausen believes: “As far as blockchain technology is concerned, I believe that regulators will soon realize that the technical certainty based on blockchain smart contracts can play an important role in investor protection and fraud prevention. Achieving the same effect as complying with regulations—sometimes even without regulations. Whether this will happen as early as 2022 remains to be seen, but industry players are working hard to educate regulators on the opportunities presented by blockchain technology.”
The Evolving Complexity of the Crypto Industry
As one of the specific areas of the crypto industry, stablecoins are gaining attention around the world, with the US, UK, and EU particularly committed to regulating stablecoins.
According to Ian Taylor, most jurisdictions are already quite advanced in terms of policymaking and many laws on stablecoins are likely to be passed by 2022.
“Effective stablecoin issuers in the UK will be considered electronic money institutions,” he said.
In the European Union, the Crypto Market Regulation (MiCA) will introduce similar treatment to stablecoin issuers as in the UK. In the U.S., regulators have been vocal about stablecoins, with the President’s Task Force on Financial Markets saying several times last year that they need to strengthen oversight of stablecoins.
Besides stablecoins, another area that will receive attention in 2022 is NFTs, which now represent a multi-billion dollar industry that, like DeFi, has grown too big to ignore.
Skirmantas Januškas believes: “I would like to see interesting debates about whether NFTs are securities, whether transactions of NFT items in games should be taxed, whether income from playing games can be considered income. P2E-based blockchain games and gamification Finance currently accounts for half of Dapp usage, and in countries like the Philippines, their contribution to GDP per capita can already get these debates started.”
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The above predictions show that the encryption industry cannot be fully covered by just a few regulations. Given that it often overrides traditional financial and legal constraints, it may be some time before lawmakers fully enact regulations that provide the regulatory clarity the crypto industry has been expecting for years.
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Venture Capital Trends for 2022
The crypto industry is very dependent on funding. Not only the various Token issuances and private fundraising forms of funding that we have seen, but also the indirect funding of investors buying crypto assets, thereby increasing the value of funds for blockchain platforms and their developers.
We’ve seen the evolution of crypto funding over the past few years, with the initial token offering (ICO) wave in 2017 and 2019 giving way to more traditional venture capital (VC). In 2021, many traditional venture capital companies and funds will turn to encryption and blockchain, and they will focus on Web3 vertical fields such as Metaverse, DeFi and blockchain games.
More venture capitalists step into the crypto market
2021 may be a bumper year for crypto assets in terms of market activity, but it's also a record year for more traditional venture capital.
For all of 2021, venture capital funds invested about $30 billion in crypto and blockchain-related companies, according to PitchBook data. That's more than four times the record set in 2018 and more than all other years combined.
This breakthrough amount created a new model for the industry, and the total amount of US$30 billion also surpassed the record amount raised by ICOs in 2018 (approximately between US$11 billion and US$22 billion). Given the SEC’s lawsuit against Ripple for an alleged unregistered securities offering, 2022 could see more projects seeking venture capital funds for investment.
According to Mark Jeffrey, general partner at Boolean Fund and co-founder of Guardian Circle: “Established venture capital firms now realize that crypto is the next great technology wave, just like the internet. They have to invest — they have no choice.”
“It would be disastrous for a VC firm to miss out on the next Google, Amazon or Facebook, especially when they already missed out on Ethereum (ETH)’s ICO, which could be one of the biggest investment opportunities in history. So, by In 2022, interest from venture capital firms will certainly accelerate.”
Analysts working in the crypto industry agree that this year will see many traditional investment firms making their first forays into the crypto market.
“Yes, we will see more traditional funds entering the crypto world, especially family offices and wealth funds,” said Anndy Lian, chief digital advisor at crypto exchange BigONE.
Targets: Metaverse, chain games, NFT, DeFi
Assuming more traditional investment funds and companies will participate in the crypto market, what types of projects are they mainly targeting?
Kerner believes: "The metaverse is the hottest area right now, and this trend is likely to continue into 2022 and beyond. But the entire crypto industry is still in its infancy, and investment in every area should see growth, including blockchain. Gaming, L1 and L2, DeFi and NFTs.”
Although Mark Jeffrey also hinted that the metaverse will become the biggest target of investment companies in 2022, he believes that the current projects related to the metaverse need to improve the social function of the platform, so as to really attract the attention of big funds.
“If you go into the virtual world of Decentraland, you’ll see 500 to 1,000 people online — but none of them are talking to each other. They’re all wandering around, looking at the scenery, and of course buying land and clothing accessories, but only That's all."
Jeffrey predicts that unless it becomes more social, with people able to spend hours communicating online, as they do on social media platforms like Twitter and Facebook, this model won't be sustainable.
“I hope that there are developers who pay more attention to metaverse social media, and one of the products will explode. Once realized, this will create a huge opportunity of hundreds or even hundreds of billions of dollars in the NFT and crypto market.”
Associated with the metaverse, blockchain games are likely to become another hot field for VC in 2022.
regulatory issues
An important question remains: Will the increasing participation of venture capital funds in the crypto market incline the US SEC to treat crypto assets as securities? As VCs buy native tokens in anticipation of platform growth, this does seem to satisfy the Howey test.
(The Howey test is used to determine whether a vehicle qualifies as an "investment contract" under the Securities Act: "a contract, transaction, or plan by which a person invests his funds in a profits from their efforts.”)
For Anndy Lian, this is a difficult question to answer because it depends on several variables.
According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.
source:
Cryptonews、Wikipedia、Beincrypto
risk warning:
According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.
