Major themes and developments in NFTs, DeFi, Web 3.0 and more.
2021 will retrospectively be seen as one of the key years of crypto adoption as for many it made click that crypto and decentralized protocols were not a short-lived bubble but are here to stay and change the world. Regulators started to understand crypto and create new laws and frameworks, financial players created crypto desks to explore offerings and more and more people started using applications instead of sole speculative investments. We will see the continuation of these trends and much more in 2022.
Continuing with my tradition of crypto forecasts, I am happy to share with you my forecasts for 2022 in the crypto & blockchain space. As I was pretty accurate with my last year’s predictions the bar is quite high to be right for 2022 too. Let’s check in 365 days.
I hope you enjoy this crypto forecast, and it helps you set the right focus for 2022!
Regulated DeFi (RDeFi)
A theme that we have seen starting in 2021 and that I expect to continue in 2022 is the emergence of RDeFi which stands for regulated DeFi. Examples are Aave Arc and Compound Treasury who offer regulated versions of Aave and Compound for institutional investors that follow KYC and AML requirements. As the regulatory focus will further increase, I expect to see more such products and services on the market. On the one hand we will see crypto players offering regulated versions of their applications such as Aave, Compound and 1inch. On the other hand offerings that are regulatory compliant from the beginning such as the German DeFi platform Swarm Markets. This will attract institutional investors who before avoided DeFi due to missing regulatory compliance.
According to Linda Xie’s great introduction social tokens “are tokens issued by individual creators or communities that enable community members to collaborate and share ownership in the value created together.” I expect decentralized social media applications to become one of the new trends in the crypto space for 2022 and their respective tokens. There are already some projects out, such as Friends with Benefits or Rally, but a lot more is coming. For example DeFi giant Aave is working on their social media platform which should be some sort of decentralized Twitter on Ethereum. Further we will also see more traditional social media players to offer crypto features such as Twitter in 2022. This goes hand in hand with the Web 3.0 narrative that picked up in 2021.
2021 was also the year of blockchain-based games such as Axie Infinity. Leveraging blockchain technology in one or the other form brings many advantages for developers studios and gamers. As the space is young most blockchain-based games in 2021 were simple card games and not very sophisticated. By 2022 I expect to see more games to be launched that offer a better gaming experience and that traditional gaming studios will launch games that leverage blockchain technology such as providing in-game items as NFTs or creating tokens for in-game currencies.
2022 will be the year of Ethereum. On the one hand the long-awaited Ethereum 2.0 update which will change Ethereum’s consensus mechanism from PoW to PoS besides other scalability improvements will happen. On the other hand, I expect many investors who started with Bitcoin in 2021 to invest in Ethereum in 2022. Traditionally investors start their crypto journey with Bitcoin and after some time go into Ether which I expect to happen for institutional investors in 2022. I believe that Ethereum will manifest itself in 2022 as the settlement layer for most existing and future layer 2 applications. While I usually do not make price predictions, I expect Ether to pass the $10,000.- price mark this year.
Usable & Non-Image NFTs
2021 was the year of NFTs while the general market had a break in May and corrected NFTs constantly grew in popularity and usage. While I expect this to continue, we will see more usability for NFTs as the space matures. I expect two developments in the NFT space in 2022. Firstly, they will become more usable. In 2021 NFTs were primarily cool-looking art that one could use for its profile picture on social media or within a certain community. In 2022 I expect to see more examples where the NFT can be used as the in-game avatars and within DeFi as there have been many applications launched which offer numerous services with NFTs such as lending & borrowing. Secondly, I expect to see an increase in the popularity of non-image NFTs such as audio files as NFTs. The beauty of NFTs is that they can prove ownership of any type of digital file and I believe that many will realize not only to limit this to images.
In 2017/2018 many companies used the term DLT which stands for distributed ledger technology instead of blockchain, to prevent negative associations due to cryptos “bad reputation” at that time. I expect the same to happen with the term Web 3.0 in 2022 but for another reason. The term Web 3.0 is very intuitive since people associate it with the internet. Many new and old applications will be named and marketed as Web 3.0 in 2022. I really like the term Web 3.0. It implies the broad use of decentralized protocols beyond financial applications and its promise to make our current web more democratic, transparent, and efficient. Who knows maybe next year I will call this post “Hot Topics in Web 3.0 2023” 😉
No Metaverse (Yet)
The metaverse was one of the buzzwords of the second half of 2021 in crypto after Facebook announced changing its company name to Meta and focusing on building the metaverse. We will see many developments in the metaverse space in 2022 such as more traditional and crypto-native projects exploring it. Still, most usable applications will be blockchain-based games that have some sort of metaverse characteristics such as being open world. To experience the full metaverse we will still need to wait another 5–10 years I believe. Products like VR glasses as from Oculus are still too expensive for the retail even though I expect the prices to decline in the future enabling mass usage of the metaverse. Also the technology to allow massive sclaing and millions of users in the same space is still being build besides other critical infrastructure.
In last year’s forecast I predicted the increasing usage of stablecoins and expect this to continue in 2022. There will be a lot of developments in the stablecoin sector especially algorithmic stablecoins which are not backed by an asset such as the USD or gold. Stablecoins are very usable and essential for DeFi applications. The issue with centralized stablecoins that create dependencies and lower levels of transparency such as USDT has been solved with algorithmic stablecoins that are decentralized. I expect to see many projects both centralized and decentralized to launch in this area. Just at the time of writing it was revealed that PayPal is potentially launching their own stablecoin.
Institutional Crypto Offerings
For 2022 I expect a great increase in the number of crypto offerings from traditional finance players. There is nearly no major financial payer who has not set up a crypto desk in 2021 and I expect to see the launch of many offerings in 2022 that have been built during 2021. The crypto offerings will range from simple brokerage and custody of cryptocurrencies to sophisticated DeFi products and services that are whitelisted and fulfill regulatory standards. This goes hand in hand with the first forecast of RDeFi. 2022 will be the year where we will see a lot of traction for institutional crypto offerings.
Increased M&A Activity
In 2021 we saw a lot of M&A activity in the crypto space and I expect this to continue in 2022. Especially traditional players who want to get into crypto must decide if they want to build up their capabilities in-house or acquire a crypto startup/company. I believe that while in the long-term big players will build up their own crypto teams in the short-term we will see a lot of acquisitions. Acquiring a crypto-native company brings multiple benefits as being faster on the market and having access to talent which is rare. Also I expect to see M&A activitiy between crypto-native companies in 2022.
I hope you have enjoyed reading this year`s forecast. I am convinced that 2022 even though its bumpy start will be another great year for crypto & blockchain adoption and more and more of our dreams will become reality.