Top 5 Crypto Predictions For 2022

Here are the top crypto predictions for 2022 to know based on market data.

Last Updated January 31st 2022
7 Min Read

Cryptocurrency continues its global rise to prominence, with growing numbers of investors viewing it as an important part of their portfolios. After the ICO (initial cryptocurrency offerings) boom in 2017 and 2018, 2020 and 2021 saw the rise of momentum in two new instruments - NFTs and DeFi.  

Last year, the world recorded 80 million unique crypto wallets. Bitcoin and Ether grew 60% and 407%, respectively, and El Salvador adopted Bitcoin as the official currency. Notably, the NFT market generated $2.5 billion in trades.

In 2021, the market capitalization of cryptocurrencies reached $3 trillion for the first time. At the beginning of 2021, it was less than $800 billion. DeFi recorded a total value locked (TVL) of $100 billion on Ethereum alone. The crypto community had barely foreseen these developments but now anticipates seeing new waves in 2022. As we look ahead to 2022, there are a variety of products that may harvest a good return. 

That said, here are our top five crypto predictions for 2022.

Surged Competition To Ethereum 

Platforms like Cardano and Solana are competing with the second larget crypto protocol.

For a while now, the Ethereum network has endured a scaling issue. As things stand today, the Ethereum blockchain can only process a maximum of 30 transactions per second (TPS). Due to the growing demand for decentralized applications (dApps), activity on the Ethereum network has been surging, resulting in excessive gas fees (the cost to process a transaction) of high as $148. 

Achieving decentralization, security, and scalability in the crypto world is known as the "blockchain trilemma," a pressing problem that has planted the seeds for competing blockchains. Ethereum's ETH 2.0 upgrade, set to release this year, will lead to a transition from energy-hungry proof-of-work (PoW) to more environmentally friendly proof-of-stake (PoS), significantly reducing transaction costs. The addition of shard chains, which spread the blockchain's load between 64 new chains, will boost throughput and lower costs. 

The past two years have seen several new entrants stepping in and competing with Ethereum. For instance, Cardano and Solana are two promising blockchains that compete directly with Ethereum by attacking the scalability issue head-on. Both already utilize proprietary forms of the proof-of-stake consensus mechanism. Cardano's current market value is around $34 billion, while Solana's is about $29 billion.

Crypto analysts expect these smaller blockchains to continue their serious momentum in 2022 as developers flock to them. The community also anticipates the entrance (and rise) of other blockchain networks with advanced offerings.

Rise Of DeFi Among Institutions 

After retail, the DeFi fever appears to be spreading among institutional investors as well.

Decentralized finance (DeFi) protocols allow customers to engage in traditional financial services, like lending and borrowing, without the need for a centralized authority. Projects like Aave and Compound are two popular ones that let customers deposit crypto as collateral and borrow against that balance. Aave has about $11 billion in total value locked, and Compound has just under $8 billion. These figures measure the amount being staked in each protocol, an indication of the supply being secured.

Even though there are regulatory question marks, experts believe institutions will find the DeFi market very intriguing. Because there is no intermediary, these applications can offer better rates and lower costs. However, institutions would need to ensure that proper know-your-client and anti-money-laundering systems are in place to comply with banking regulatory requirements. 

Just as Bitcoin is now starting to gain a sizable foothold among larger institutions after first appealing to individuals, the decentralized finance sector could follow the same path. The booming DeFi ecosystem supports the demand for Ethereum's programmable blockchain, but as mentioned above, other networks seem to want to hop on the DeFi bandwagon. 

Check Out: What Top 10 DeFi Cryptocurrencies Will Explode In 2022?

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Growth Of NFT And Metaverse 

Experts believe 2022 is the year to jump on the Metaverse bandwagon.

The Metaverse is a virtual platform on which people can collaborate and trade economically. These digital economies are hard to imagine without NFTs and blockchain-based infrastructures. The year 2021 represented a turning point in "GameFi" with games like Axie Infinity enabling the throughput necessary to allow millions of active players to participate and collect precious NFTs.

Microsoft and Facebook have announced that they are setting up their own approaches to digital worlds, i.e., "metaverses". These internet giants will likely develop a largely centralized system, which would make value transfers to other digital ecosystems more difficult or even impossible. However, this is opposed to the philosophy of Web3. It focuses on individuals with clearly defined property rights and freedom of action with the help of blockchain.

2021 brought non-fungible tokens and the metaverse front and centre. Collections from Bored Ape Yacht Club and CryptoPunks attracted a lot of attention and dollars to NFTs. Meta Platforms (formerly Facebook) is positioning its entire business to function in a new virtual world, and this forward-thinking will likely spill over to other industries. 

Walmart recently announced that it plans to create its own cryptocurrency and NFTs to sell virtual goods. Nike, already known for its exclusive sneaker drops, also plans to offer customers virtual Nike-branded sneakers and apparel. Even Gucci, a leading luxury fashion house, is set to launch a collection of 250 NFTs with a physical ceramic sculpture made in Italy. 

In a world that's becoming increasingly digital, riding the current trends in NFTs and the Metaverse will give certain brands a leg up when it comes to connecting and engaging with consumers. As a result, the crypto community expects many more businesses to enter this space.

Bitcoin Will Outperform The S&P 500

2022 could be the year Bitcoin takes the financial market by storm.

Despite the threat to the global economic recovery from the COVID pandemic, both Bitcoin and the benchmark index recorded impressive gains in 2021. While Bitcoin jumped 66%, the S&P 500 rose around 27%. 

But given that Bitcoin has behaved more like a risk-on asset, Arcane Research said it would further amplify significant movements of the stock market. "Therefore, if the stock market continues to increase in 2022, bitcoin will likely outperform," the firm said. 

Rising inflation rates make scarce assets like Bitcoins (BTCs) increasingly attractive. Bitcoin is the oldest, most decentralized, and best-known cryptocurrency. In addition, a distinctive feature of BTC compared to other cryptocurrencies is its limited supply of 21 million BTCs. 

Against the backdrop of Bitcoin's institutional adoption and the greater demand that comes with it, it is very much within the realm of possibility that the BTC price will rise to more than $100,000 this year, according to Forbes. 

Don't Miss: What Cryptocurrencies Have Proven To Have A Long-Term Future?

Most Meme Coins Will Fade Into Obscurity

Re-evaluate your plan of investing in memecoins in 2022.

Investors saw meme coins like Dogecoin and Shiba Inu pop left and right in 2021. For example, SHIB rocketed 44,540,000% last year. And SQUID, a digital asset named after the popular Netflix series "Squid Game," jumped more than 75,000% in under a week only to vanish into oblivion soon after. 

Arcane Research noted that it is impossible to summarize the 2021 crypto market "without mentioning the absurd meme coin rally of 2021," adding the phenomena will be "a historical relic of the absurd times that was 2021." Experts believe the hype around these meme coins will likely fade in 2022 as other cryptocurrencies and blockchain networks emerge. 

In Conclusion 

Over the past decade, cryptocurrencies have exploded in visibility and valuation. These digital assets are likely to make gains in usage and valuation in 2022 as well. While not all of the predictions on this list will come to pass, at least a few of them will. 

If you want to participate in this emerging market, investing in cryptocurrencies is one way to become a part of the crypto ecosystem.

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

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