- But a successful year Ethereum did it a lot better
- Custody is critical
- There are dangers to safety
- Control: the most important issue for governments
- Cryptos are here to stay, but it could be a bumpy ride
At the end of last week, it was trading nearby $ 50,000, with the contract trading above $ 4,000 just a week from the end this year. While prices have fallen from the record highs of November 10th, everyone who hits December 31st, 2020 has the leading edge Cryptocurrencies owned and held it year round, made impressive returns.
A little over a decade ago, there was no cryptocurrency. The development of this technological and financial revolution brought about Blockchain and cryptos. In an almost perfect bullish storm, declining belief in fiat currencies led a growing number of individuals and businesses to accept cryptos and reject fats.
The bullish price action in cryptos has fueled a speculative frenzy in the emerging asset class. While some are adopting digital currencies for ideological reasons, many are showering them with love over the past few years due to their price volatility and bullish trends. The rising price is a strong and magnetic force that has increased the appeal of cryptocurrencies.
The asset class is now closing the books in 2021, and followers believe it will continue to grow in 2022. Critics believe the coming year will mark the end of currencies flying below or above the radar of regulators and government officials. The asset class as a whole will face a variety of problems over the next year.
This is what awaits you in this article
But a successful year of Ethereum has done a lot better
Anyone who held tokens on December 31, 2020 without trading or selling them in 2021 had the value of their computer wallets last year, YTD.
The graph shows the increase in Bitcoin from USD 28,986.74 on December 31, 2020 to USD 50,818 on December 27, 2021, an upward movement of more than 75% in 2021 with only a few days left in the year.
Ethereum fared even better, rising from $ 738.912 at the end of 2020 to $ 4,060 on December 27, 2021. The second largest cryptocurrency brought investors a return of over 449% in one week in 2021.
Ethereum Bitcoin in 2021 as its protocol is faster and more efficient. While Bitcoin is a cryptocurrency and medium of exchange, Ethereum is a protocol that supports many of the other of the 16,000+ cryptocurrencies. In addition, Ethereum 2.0 will be a far more environmentally friendly sign since the Proof of stake the 2.0 version requires far less energy than the proof-of-work design of Bitcoin.
As we head into 2022, several factors are likely to lead to persistent volatility in the cryptocurrency asset class.
1. Custody is crucial
Keeping cryptocurrencies in computer wallets isn’t a problem for those in the asset class, but that’s not the case in the much larger potentially addressable market. Horror stories of the loss of millions and billions of dollars worth of crypto, hard drives thrown away or passwords lost, have prevented many market participants from opening computer wallets.
In late 2021, Jack Dorsey stepped down as CEO of Twitter to focus on his payments company formerly known as Square. Mr Dorsey was a vocal supporter of cryptocurrencies, saying the asset class will “unite the world.”
He changed Square’s name to Block (NYSE 🙂 to signal that cryptos will dominate the future of payments. Block is obviously a reference to the blockchain. Mr. Dorsey’s company is working on a tough computerWalletto solve the problem of crypto custody. From the perspective of market participants and regulators, custody is a key factor for the success of the asset class.
In 2021, the SEC approved based on futures prices as the CFTC controls the futures arena. However, the SEC has not approved any physical cryptocurrency ETF products. Improving the custody issue would do a lot for regulators.
The FDIC also insures dollar deposits with financial institutions. A system of insured crypto deposits would dramatically increase the addressable market. Many market participants want to diversify their portfolios with some exposure to cryptos. When financial institutions offer custody solutions to their customers, the asset class will grow.
2. There are dangers to safety
Computer hacks were problematic in 2021. The Colonial Pipeline and JBS Meatpacking Hacks were two of many events that put security first. The fear, Cryptocurrencies losing to hackers who find their way into computer wallets or exchanges that hold tokens for many customers has been an obstacle for many potential market participants.
Security is another problem the asset class will face in 2022. A major crypto hack could bring prices down significantly in the months and years to come.
Solving the security problem requires collaboration between exchanges and government agencies keeping an eye on hackers to develop robust methods of preventing token theft.
3. Control: the most important issue for governments
Safekeeping and security are important issues, but they are technical. Control is ideological. Governments around the world draw their power from their military and purse control. Governments can expand and contract the amount of money to their hearts’ content to pursue a political agenda.
US Treasury Secretary Janet Yellen and ECB President Christine Lagarde both warn of the shameful use of cryptocurrencies. U.S. Senator Elizabeth Warren recently said she wanted more regulation of the cryptocurrency asset class as its growth could mean:systemic risks“To the global financial system. Other government officials have made similar comments, and China completely banned cryptocurrencies in 2021.
In the meantime, government regulators are likely to be far more concerned than any other issue of losing control of the money supply.
Cryptocurrencies are a libertarian medium of exchange that takes government power over the value of money and returns it to a collective of individuals who set prices based on buying and selling in the market. The ideological divide is likely to be the most difficult to bridge in 2022 and beyond. Expect government concerns with that Market capitalization asset class will increase.
Cryptos are here to stay, but it could be a bumpy ride
With a level of $ 2.38 trillion late last week, the market cap of cryptocurrencies is more than three times what it was at the end of 2020. In 2020, market capitalization was almost four times higher than at the end of 2019, over 1.5 times higher than Moved at the end of 2018.
If the asset class’s market cap doubles in 2022, it will be near the $ 5 trillion mark. The higher it rises, the greater the likelihood that a significant decline will trigger systemic effects that spread through the markets across all asset classes. Expect government officials and regulators to ring the alarm bells if the growth rate continues.
Meanwhile, the world has embraced blockchain and fintech. The rise in cryptocurrency prices is a call to governments to issue digital currencies. At the end of 2021, China appears to be the leader, and the US, home of the world’s reserve currency, is.
The more companies and individuals adopt crypto, the greater the pressure on governments and regulators to put the asset class on a leash. I believe the breaking point can be quantified. It is a function of the value of the asset class. At over $ 5 trillion, panic could trigger a sudden reaction.
I am optimistic about cryptos as we move into 2022. I could see Bitcoin climb to the $ 100,000 mark or higher. However, as Ray Dalio pointed out, governments have the power to “kill“The asset class.
So I’m going into 2022 with open eyes and expect the incredible volatility to continue. I will only invest capital in the asset class that I know is 100% at risk.
I wouldn’t call the rise of cryptocurrencies a bubble; I describe it as a threat to the status quo of government control of the money supply and the traditional banking and financing hierarchy. The ideological obstacles could give the asset class a bumpy ride.
Source: Crypto News Deutsch