Frederick Jace
Cryptocurrency has had a crazy ride over the last decade. It’s been by far the most profitable asset for investors, overtaking stocks, commodities, oil, and even gold. Almost everyone who has bought into the crypto market in that time has made money.
This excitement has continued in 2021 with things looking more bullish than ever. Cryptocurrency regulation, adoption, environmental issues and even criminal activity have all changed greatly, making the cryptocurrency forecast for the end of 2021 and the beginning of 2022 intriguing. Here’s how each of these changes is affecting investors.
Cryptocurrency Regulation
One of the most important cryptocurrency trends has been in the legal space. Crypto regulation around the world has generally been non-existent or vague up to this point. That’s been great for many small innovative organizations as they are able to operate and gain funding with little or no government oversight. But, it makes things difficult for businesses and individuals that need to minimize legal risk. These groups have been asking for clear regulation around the world, and now governments are starting to deliver.
The US Securities and Exchange Commission (SEC) has now allowed the first bitcoin-linked electronically traded fund (ETF) to launch on the New York Stock Exchange. This is a big step for Bitcoin in gaining legitimacy with US regulators in the US financial system. The launch was accompanied by record highs in bitcoin’s price.
Other countries are also making news in the regulatory space. Australian lawmakers are looking to clarify crypto regulation and turn the country into a Bitcoin innovation hub.
How Does This Change Affect Investors?
Obviously, strict crypto regulations, such as the crypto bans in China, aren’t good for investors. But, overall, cryptocurrency regulation is becoming clearer and more conducive to business in many places around the world. This is great news for investors in the industry as clear regulation creates a healthy environment for business expansion and funding.
Wider Adoption of Cryptocurrency
Another positive aspect of the increasing clarity of crypto regulation is that many more players are entering the game now. One industry executive recently said that crypto entered its fourth stage of adoption in 2021. He called this stage “acceptance”. It followed the first three stages of “exuberance, speculation and utility”.
Bitcoin and other cryptocurrencies are becoming more accepted around the world. Many major companies and financial institutions have started adding to their cryptocurrency portfolio. This big institutional money dwarfs the total amount that small retail investors can put into crypto.
How Does This Change Affect Investors?
At the end of the day, the long-term success of bitcoin and other cryptocurrencies was always going to be about wider and wider adoption. That’s how the price grows with a fixed-supply asset like bitcoin. Thus, adoption around the world is extremely good news for investors. Now that crypto is accepted by the big boys in finance, those already invested should be excited.
Commitment to Solving Environmental Problems
Environmental policy is a big deal in business now. Companies are expected to take environmental issues such as climate change seriously or risk losing customers. This happened in the Bitcoin space in 2021 when Tesla declared it would no longer accept bitcoin due to concerns about climate change. This was due to the fact that the Bitcoin network takes a huge amount of energy to run, and much of that energy is being generated by coal-fired power plants. This has a huge negative impact on the environment.
However, there is now a push to make bitcoin greener. After China recently banned bitcoin mining in the country, taking out 50% of the world’s mining capacity. Many bitcoin miners are therefore moving to the US. With green energy very much on the rise in the US, bitcoin may quickly lose its poor environmental reputation.
How Does This Change Affect Investors?
Bitcoin’s environmental footprint has been a growing problem for years, and it is starting to bite in some places now as organizations boycott bitcoin until the problem is fixed. However, if the miners start to use greener electricity, it will be good news for investors because the coin’s value is expected to rise.
Ethereum’s Growing Dominance
Ethereum popularity has been growing at a blistering pace. It has even outpaced Bitcoin’s growth recently. That is because Ethereum has the capability to deliver on many of the decentralized finance promises where Bitcoin has failed. Things like peer-to-peer lending platforms are quickly becoming a reality on Ethereum.
How Does This Change Affect Investors?
Ethereum has a unique place in the crypto universe. It offers the potential for much more than decentralized payments – its smart contract platform could be the foundation of a decentralized internet. Ethereum’s rise is not a downside for Bitcoin, however, which is still one of the most popular cryptocurrencies. On the other hand, it is proof that cryptocurrency is here to stay and will penetrate many markets.
Decrease in Criminal Use of Cryptocurrencies
For years, cryptocurrency has been heavily linked to criminal activity. It seemed at times that illicit use of crypto outshone its lawful use. But, the tide is now turning. According to blockchain analysts overall Bitcoin-related crime fell in 2020, making up just 0.34% of the total transaction volume.
How Does This Change Affect Investors?
This trend seems likely to continue, and it is great news for investors. Crypto has long been a lucrative channel for criminals, but it’s an avenue that is becoming more difficult to exploit. Investors can be happy with the lower risks and higher legitimacy this change brings.
Conclusion
Cryptocurrency is on a fantastic run at the end of 2021 and that looks set to continue into the start of 2022. Many of the fundamentals, including regulation, are looking good. The long-awaited widespread adoption of cryptocurrencies is undoubtedly upon us. Of course, there are always risks. But, the medium-term cryptocurrency outlook is looking great for investors.
