Like it or not, Crypto is changing everything
At the end of March, Vitalik Buterin in an interview with Time Magazine specifically voiced his concerns about the market’s large amount of Ponzi-scheme Defi and NFT protocols and how they’ve hijacked the Ethereum platform and have driven fees sky high.
People’s interest in crypto has skyrocketed among investors and in popular culture, thanks to everyone from like Elon Musk to that kid from your high school on Facebook.
The market is only in its infancy, which is why every new bitcoin high can be easily followed by big price drops. While exact predictions are impossible, this Easter Sunday, I will be looking at some interesting facts and figures for the year’s first three months to understand where we might be headed.
Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet.
It’s been a rocky start and the tremendous upheaval in world financial markets has also affected the crypto industry. Bitcoin has only been above $45,000 for a few short stretches over the past four months.
In the first quarter of 2022, cryptocurrency market capitalization decreased by 4.2%. However, despite the fall observed in January, the market managed to almost fully recover within the next two months and topped the $2 trillion mark again.
But also in the last 18 months, crypto has transformed the world, not just the financial world, growing faster than ever before.
Crypto Hacks
Just because crypto prices are down so far in 2022, doesn’t mean that cybercriminals are easing up their efforts to fill their wallets with as much crypto as possible.
Hacks and scams were actually on the rise. CertiK reported that $1.3 billion was lost to crypto hacks.
While we are still early in the year, it’s very possible that 2022 will set another record in the value of stolen crypto. Security will be the main theme going forward.
Institutional demand
Institutional demand for cryptocurrencies increased in the first quarter of 2022, regardless of market volatility.
MicroStrategy bought 660 BTC for around $25 million in cash, the Luna Foundation Guard purchased 42,410 BTC, El Salvador acquired 410 BTC, and even American senator Ted Cruz purchased $50,000 worth of BTC.
KPMG in Canada allocated Bitcoin and Ethereum to its corporate treasury. Rio de Janeiro’s mayor, Eduardo Paes, also revealed plans to invest 1% of the city’s treasury reserves in cryptocurrency.
A survey Goldman Sachs revealed that over 60% of its clients expect to increase their exposure to digital assets.
Some of the largest tech companies in the world, including Google and Uber, announced they are considering accepting cryptocurrencies as demand grows.
We can expect investors to continue to recognize the importance of buying and holding cryptocurrency assets and big companies, sooner rather than later, to be forced to accept cryptocurrencies, because their customers demand them.
VC Investment
Venture capital investment in crypto continues to be massive. Both Sequoia and Bain Capital Ventures launched $500 million funds focused exclusively on crypto startups.
Venture capital firms invested a record-breaking $12.5 billion during the first three months of 2022, a 220% increase from Q1 of 2021.
NFTs and crypto gaming got the lion’s share of the investment, receiving roughly 36% of all investment deals. DappRadar reported that investors poured $2.5 billion in crypto gaming in Q1 2022.
Funding will continue to rise as funds get bigger and more VC firms continue to jump into the market to take advantage of consumer demand.
Payments, beyond speculation
Strike partnered with Shopify, Blackhawk, and NCR to deliver crypto payments to online and brick-and-mortar stores everywhere.
People will be able to pay for groceries or shop online on bitcoin payment rails, with some of the biggest retailers: McDonald’s, Walmart, Home Depot, Best Buy, Starbucks, Chipotle, El Corte Ingles, Lowe’s, Staples, Woolworths work with Blackhawk and NCR, and more than 2.6 million merchants in the US sell using Shopify.
Earlier this year, Visa revealed that consumers made $2.5 billion worth of transactions using their crypto-linked cards, during its fiscal first quarter of 2022.
This signals that consumers see the utility of using crypto to pay for goods and services, and we will be seeing more people using crypto to make everyday purchases using crypto-linked cards or lightning payments.
Regulation
Many nations are working on new regulatory frameworks to catch up with the digital economy.
Governments around the world are starting to recognize the significant role of cryptocurrencies. Regulation of CBDCs, NFTs, stablecoins, DAOs crypto advertising, and crime is the primary topic of the special report by Thomson Reuters: “Cryptos on the rise 2022 — a complex regulatory future emerges.”
The US is pushing hard on regulations for digital assets. Joe Biden issued the “Executive Order on Ensuring Responsible Development of Digital Assets,” setting forth six main objectives: consumer and investor protection, financial stability, mitigation of illicit finance and national security risks, leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation.
Unsurprisingly, the US isn’t the only nation looking to establish a clear outlook on crypto regulation. The UK and EU have also taken steps recently to set out a more well-defined and consistent approach to the space, albeit with divergent attitudes.
In March the EU voted on a new draft of the Markets in Crypto Assets (MiCA). The framework broadly captures the issuance and trading of cryptocurrencies and promises to make it easier for crypto firms to expand throughout the EU’s 27 member states by facilitating a “passportable” license that would be valid between countries.
The Bank of England has started defining the UK’s first regulatory framework for crypto assets. Also the UK recently announced its intention to become a “global cryptoasset technology hub.”
While crypto has thrived from volatility and anonymity, regulation offers protection and stability. The first quarter of the year marked the beginning of what could push the adoption of cryptocurrencies even further.
CoinMarketCap now lists more than 18,000 cryptos. Almost all will be gone or dormant in a few years from now, but this is a time of paradoxes to navigate. For the average investor, for regulators, and for those attempting to make crypto greener this is a time of big changes.
Regulators will play an important role in shaping the market, but so are big companies that jumped in to fill the void that regulators ignored so far. In 5 years’ time, the market will be as unrecognizable to us, as it was 5 years ago.
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