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Cryptos to continue garnering investor interest despite recent price declines

With the interest in cryptocurrencies becoming more and more mainstream, Bitcoin's rise has been stunted somewhat by the emergence of rival currencies, among other factors

2022 may not be as successful a year for Bitcoin as 2021 proved to be In 2021, globally, more than $20 billion was invested in crypto exchange-traded products through to November Regulatory attention on cryptos ramped up in 2021 and 2022 is likely to be a year of action on that front

With the interest in cryptocurrencies becoming more and more mainstream, Bitcoin’s rise has been stunted somewhat by the emergence of rival currencies, among other factors.

Bitcoin fell short of the analysts’ prediction for the beginning of 2022, below the $100,000 mark.

There is the shift in the US Federal Reserve’s monetary policy which is causing some consternation amongst Bitcoin enthusiasts. It announced that they would be winding down their bond-buying program at a faster pace and this ensured that the projected interest rates rose significantly for 2022, which may add pressure to Bitcoin in the short term.

Preliminary models suggest that, on the whole, 2022 may not be as successful a year for Bitcoin as 2021 proved to be.

Some experts have predicted that there could be a sharp decline in Bitcoin value in the first months of 2022. Throwing caution to the wind might be good policy to start the year.

Bitcoin was on pace to close out December with a 19% drop. On New Year’s Eve, it fell as much as 3.5% to trade at $45,658, but Bitcoin ended up trading on the last day of the year at $48,276, 66% higher in 2021.

“We’re seeing a little more volatility,” Chris Gaffney, president of world markets at TIAA Bank, said in an interview. “It’s a speculative asset.”

In 2021, globally, more than $20 billion was invested in crypto exchange-traded products through November, a record, according to ETFGI, a research and consultancy firm.

Assets increased roughly 550% year to date, up from $3.1 bn at the end of last year.

Bitcoin has had a rough time since hitting an all-time high of near $69,000 in early November. Partly, analysts say, it’s being buffeted by concerns over greater regulatory scrutiny around the world. But it’s also losing dominance to other lesser-known upstarts that have gained in popularity as the crypto ecosystem expanded this year. Among the biggest cryptocurrencies, Binance Coin posted the best return, adding roughly 1,300% in 2021.

Looking ahead, many investors are expecting prices to recover and eventually reach new highs.  

Crypto decoupling

Crypto decoupling, the idea that not all coins will follow bitcoin up and down but will trade independently based on their own value, is happening.

“Different crypto sectors have different value drivers,” according to Messari’s Crypto Theses for 2022. “We’ve gone from ‘everything is a cryptocurrency’ to ‘actually, there are currencies, fat protocols, DeFi apps, distributed computing platforms, NFTs, work-to-earn markets…’.”

“Discerning investors increasingly look at the actual usage and underlying microeconomics of various networks and trade around their unique growth drivers.”

Also, regulatory attention on cryptos has been ramping up in 2021 and 2022 is likely to be a year of action on that front as more countries adopt cryptocurrencies.

El Salvador became the first country in the world in 2021 to recognize bitcoin as legal tender. Already more El Salvadorians have bitcoin wallets than bank accounts, according to the country’s president, allowing them to send and receive remittances at lower costs.

While the International Monetary Fund and the World Bank have warned against such moves, citing a risk to financial stability, many other countries are said to be considering similar moves, particularly in South America, such as Panama and Paraguay. They might not adopt bitcoin specifically, but instead introduce a stable coin or a central bank digital currency, known as a CBDC.

China is planning to launch its CBDC, the e-CNY, in time for the Beijing Winter Olympics in February, and more than 140 million Chinese residents already have an e-CNY wallet, while $97 billion has been transacted in the digital currency through various pilot programs.

Paying in Bitcoin and crypto

Some businesses are considering attracting people to join their firms by paying in Bitcoin and cryptocurrencies.

Young people see cryptocurrencies as a YOLO (you only live once) trade that could make them rich quickly. 

Burdened with heavy college tuition debt payments, exorbitant apartment and home prices, coupled with an alarming inflation rate raising the prices of everything, digital assets seemed the only way to get ahead financially.

If you get paid in US dollars, as inflation increases, the value of your paycheck decreases.

Miami Mayor Francis Suarez said he would take a paycheck “100% in Bitcoin,” and will also offer cryptocurrencies to public employees too.  Eric Adams, the new mayor of New York City, similarly announced that he’s looking into paying people in Bitcoin and other digital assets, and will accept his first three paychecks in Bitcoin.  

With the ascendancy of remote work and employees now doing their jobs across the U.S. and world, companies are turning to third-party providers to help deal with payments, taxes, and compliance with local jurisdictions. Alex Bouaziz, co-founder and CEO of Deel, a company that manages these matters,  offers to pay employees and contractors with crypto. Deel can deliver payments directly to bank accounts, digital wallets including PayPal, Payoneer, and Revolv, or directly to the person.

If you accept a salary in cryptos, you have to have a strong stomach and be comfortable with seeing strong gains along with scary plunges in value. Payment in cryptocurrencies is not without risk. There is a lot of volatility in this space.

In 2021, the price of Bitcoin hit $67,000 and subsequently plunged to under $30,000, and then bounced back again. Ethereum saw record highs of around $4,800 on Dec. 1 only to see it trade lower at around $3,600 to $3,900.