US Markets Loading… H M S
This story is available exclusively to Insider subscribers. Become an Insider and start reading now.
- 2021 has been a wild year for crypto; its value surged to $2.3 trillion from under $800 billion.
- Experts expect to see growing crypto adoption and decoupling between bitcoin and altcoins in 2022.
- Insider compiled their price predictions, altcoin recommendations, and key trends on their radars.
By all indications, 2021 has been a wild year for cryptocurrencies, which have seen their total market value surge to $2.3 trillion from just under $800 billion at the start of the year.
Fueled by growing institutional adoption, bitcoin reached a new all-time high of nearly $69,000 as companies including MicroStrategy, Tesla, and Block (formerly Square) added the digital currency to their balance sheets. El Salvador became the first country to adopt bitcoin as legal currency, alongside the US dollar, drawing interests from other nations to pursue the same path.
Celebrities, star athletes, and even the mayors of Miami and New York opted to take some, if not all, of their salary in bitcoin.
But 2021 hasn’t been just about bitcoin. Ethereum, the second-largest cryptocurrency, also soared to a new all-time high of almost $4,900 driven by explosive growth in decentralized finance, non-fungible tokens, and metaverse-related activities on the network.
For the industry, this has been a year of record-breaking milestones. In March, an NFT artwork by digital artist Beeple sold for over $69 million. In April, Coinbase became the first US-based crypto exchange to publicly list on the Nasdaq exchange. In May, the crypto market whipsawed after Tesla CEO Elon Musk stopped accepting bitcoin as a payment method, citing the massive amount of energy spent in bitcoin mining. Along the way, meme coins including Musk’s favorite dogecoin and rival shiba inu coin exploded in popularity.
Over the summer, layer-one protocols such as solana, avalanche, and algorand jumped into the fray of competing to be the fastest, lowest-cost, and most scalable platform for developers. Metaverse-linked Decentraland and the sandbox achieved widespread recognition overnight after Facebook decided to rebrand as “Meta.” Enthralled by the bonanza of opportunities in crypto land, venture capital investors poured a record $30 billion into blockchain companies that are eager to usher in the so-called Web 3.0 era.
Of course, with greater visibility comes greater responsibilities. The crypto industry still has plenty of serious issues to address in the year ahead. In 2021, scammers pilfered $7.7 billion worth of cryptocurrency from victims, up 81% from the year before, according to Chainalysis. Meanwhile, controversies around whether some US dollar-pegged stablecoins are fully backed by their dollar reserves have landed the industry in hot water with US regulators.
While talks of an impending crypto winter have surfaced recently, analysts, investors, and industry executives are expecting to see the continued mainstreaming of crypto in 2022 as stadiums get renamed after crypto companies and NFTs continue to mesh with pop culture.
Insider spoke to nine of them and compiled their predictions below.
James Faris, Kari McMahon, and George Glover contributed to this story.
Hong Fang, CEO of Okcoin
For Fang, 2021 has been a year for builders, and that is a bullish indicator for the year ahead, in her view.
Whether it is through developers building decentralized applications on top of smart contract platforms or artists engaging with NFTs, the crypto industry has enabled a vibrant creator economy over the past year.
Fang said bitcoin is unlikely to hit $100,000 by year-end as she had expected under certain scenarios. With crypto being an emotionally charged market, it is hard to see where the price could go in 2022.
“It is a free market but it is also a market that is driven by human behavior and human behavior is not rational at all,” she told Insider. “So people get ahead of themselves, people get greedy, and then people get scared when things break.”
Over the medium-to-long term, she remains “very bullish” because of the capital and talent that continue to flow into the industry.
“I think 2022 is going to be a year where a lot more talents will come into the space and continue to build across the board in all kinds of different crypto communities,” she added.
She also sees different crypto assets decoupling from each other as institutional and retail investors alike come to grasp the distinctive technologies that each has to offer.
“I continue to believe that bitcoin is the king of crypto just because of its unique value proposition,” she explained. “But at the same time, I think that we will continue to see the decoupling of different crypto assets from bitcoin because investors will start to see different underlying value propositions for different efforts.”
Jesse Powell, CEO of Kraken
Powell had also expected bitcoin to end the year in the six-figure territory. While that seems unreachable at this point, he thinks growing mainstream awareness and increasing regulatory clarity could usher in a better year for the largest cryptocurrency in 2022.
Despite growing talks of a prolonged downturn, he does not think a massive crypto winter is around the corner. He said he would buy more bitcoin if it dips below $40,000.
“You just look at the 10-year chart and that tells you everything you need to know,” he told Insider. “It’s outperformed every other asset in the world.”
He predicts that NFTs will become “a much bigger thing” in 2022 not simply because of the aesthetic values and prestige associated with owning certain NFTs but also due to their use cases such as provenance tracking, borrowing, and lending.
“I think next year is really going to be the year of NFTs,” Powell said. “If I’m thinking as an investor, what are the platforms and the coins that are going to benefit from that? I think it is some of these decentralized worlds.”
Kyle Samani, Managing Partner of Multicoin Capital
In spite of the bearish sentiment clouding the crypto market, Samani is optimistic that “we have not seen tops for BTC, ETH, or SOL.”
But after witnessing all the technological breakthroughs over the past year, he has begun to think about bear markets in digital assets in a very different way.
In his view, the next downturn, whenever that may occur, will not be like the last one that came after the raging bitcoin bull market in 2017. While enthusiasts got overly excited about initial coin offerings backed by nothing but white papers back then, the technologies built in this cycle are being put into real use.
“The hype of 2017 was substantiated on the basis of the fact that nothing worked,” he told Insider. “This time around, that’s just not true. This time around, everything works. There’s real utility and you can see the value of that.”
As a result, he expects the performance of other tokens to decouple from bitcoin.
“I think that you will continue to see bitcoin act differently than the rest of the market. The traditional views of crypto were just that the other assets were levered exposure to BTC or they were just higher beta,” he said. “The thing is now these assets all do different things, and they have different functions, different utility.”
His crypto hedge fund is betting on layer-one protocol solana (SOL), decentralized blockchain helium (HNT), and indexing protocol the graph (GRT) to lead the pack of tokens backed by strong technological fundamentals.
Armando Aguilar, vice president of digital asset strategy at Fundstrat Global Advisors
Aguilar had expected to see bitcoin reach $70,000 but a confluence of macro factors has made him more cautious about the year ahead.
The Fed’s decision to double its pace of tapering and potentially hike rates three times in 2022, combined with the fast-spreading Omicron variant, stagnant supply chain issues, heightened inflation, and the midterm US elections will induce choppiness in the market, he said.
Nevertheless, he expects bitcoin to reach six figures by the first half of 2022 as institutional adoption and inflation concerns persist. Meanwhile, he thinks ethereum will surpass $9,000 driven by the continued growth in decentralized finance, NFTs, and metaverse-related activities on top of the network.
Specifically, as institutional and retail demand drives DeFi to new heights, ethereum is likely to outperform bitcoin. In 2021, nearly 25% of all VC funding rounds or 428 deals worth about $1.9 billion were concentrated in DeFi, he noted.
“Regulation slowed down DeFi investments in the second half of the year, but continued adoption and clear legislation can continue to drive growth in the space,” he told Insider.
Going into 2022, he is keeping six baskets of high-conviction altcoins on his radar.
They include DeFi tokens boba network (BOBA), yearn.finance (YFI), aave (AAVE), and 1inch (1INCH); layer-one protocols such as avalanche (AVAX), polkadot (DOT), kadena (KDA), terra (LUNA), cosmos (ATOM), solana (SOL), and algorand (ALGO); layer-two network polygon (MATIC); infrastructure plays like helium (HNT) and giant protocol (GIC); metaverse-linked token render (RNDR); and the gaming guild platforms in general.
Tony Fenner-Leitão, President at Cambrian Asset Management
For Fenner-Leitão, 2022 will likely be all about regulation, which could bring more clarity and transparency to the crypto industry.
His firm, which manages about $300 million in assets, claims to be the first JPMorgan administration mandate in digital assets and the first digital asset investment manager to be banked by JPMorgan. The crypto hedge fund follows a quantitative systematic model that aims to minimize liquidity and regulatory risks. It does not take directional bets on any particular token.
“The regulatory aspect is important in lots of different ways. It stretches from the trading of the tokens, the custody of the tokens, and the regulation of the companies that are involved,” he told Insider. “All of that is super helpful and gives people confidence that at least they understand and they have a line of sight to the stability of these companies. We would expect a lot of the players to become increasingly more regulated.”
A key regulatory development on his radar is whether the Securities and Exchange Commission will classify certain tokens as securities.
“There are a lot of discussions and speculations about what tokens are. We really see them as very early-stage investments,” he told Insider. “I mean, clearly, they’re not securities, but they’re early-stage projects that are exploring new technologies, new business models, new economic models, and new governance models.”
James Malcolm, head of FX strategy at UBS
Malcolm, a top currency strategist at UBS, recently highlighted to Insider the three main trends that he believes will shape the overall crypto market in 2022.
The double-edged sword of regulation
Regulation has been a heated topic in the crypto industry lately, but Malcolm believes that investors should be optimistic because, ultimately, “resolution is likely to be positive, paving the way for widespread adoption and broader participation.”
“That framework is pretty clear and it’s somewhat unappealing to a lot of players in the space, and so it’s being downplayed at the moment,” he elaborated to Insider. “But it’s pretty clear that stable coin providers, crypto wallets, DeFi exchanges, and so on, according to most of the US regulators, will be regulated more like traditional financial market participants.”
Crypto’s influence will swell
“Whether you like crypto or you don’t like crypto, whether you want to be involved or you don’t want to be involved, it’s actually going to be very difficult to avoid,” said Malcolm, who shared that the number of crypto IPOs will only increase as players keep rising in the market.
Fundamentals will matter
While the big theme that blockchain focused on this year was scaling, Malcolm predicts that “the next big thing” in 2022 will be the idea of blockchain interoperability, which will begin to “break down the remarkably linear relationship that exists between blockchain activity and token prices.”
Because blockchain interoperability heightens blockchain substitutability, he said that it should also “allow more direct comparisons between different coins rather than each coin trading on its own story,” shifting some focus to differing factors like coin supply and ownership structures.
“At the moment, the game in crypto is primarily just about whether it goes up or it goes down, and whether you can guess on the back of news the coins that go up more than others,” specified Malcolm. “In the future, this should be much more about relative value — playing alpha within the space, as opposed to just the beta of what’s going up and down with the overall market.”
Brian Mosoff, the CEO of Ether Capital
Mosoff, the CEO of Ether Capital, forecasts another big year ahead for cryptos in 2022. He recently identified to Insider the five trends he believes will define the market in the next year.
Solana packs on the heat
“I think solana is something still definitely to be watched,” Mosoff said. “There is a huge community rallying around solana. There’s an argument that they use a different programming language, Rust, which may have more flexibility or more developer support from people who aren’t familiar with Solidity, the language on ethereum. So solana, to me, is kind of the forerunner of this batch of ETH competitors.”
A sell-off in ether
“There’s a lot of people who may not have sold into fiat ready to pay those taxes,” Mosoff said, referencing the large taxes that crypto investors may owe after a year of massive gains.
“So in the short term — we’re talking now to the first month or so of next year — maybe there will be a sell-off. Maybe that sell-off is a market that just needed to cool off after so much run-up. Maybe it’s driven by people who literally need to sell to fulfill their tax obligations,” he continued.
‘Regulation’ is the buzzword
While Mosoff says that no groundbreaking regulations about crypto will be made in 2022, he emphasizes that the US’s approach will be closely scrutinized by investors and other nations alike.
“The US wants to get this right, and they recognize that the stakes are higher than ever,” he said. “There’s over $3 trillion of crypto assets alone, aside from just the businesses and those valuations. And so they recognize that there’s an opportunity here to be the leader in the free world for this new asset class.”
The rise of DAOs
“More anonymous, global coordination between developers and DAOs is something you’re going to see,” Mosoff explained regarding decentralized autonomous organizations, also known as DAOs.
“The regulators, in a knee-jerk-reaction way or in an unintended way, end up stimulating or encouraging developers to be more anonymous, to exist outside of a jurisdiction that they can control. That is going to be a very tricky balancing act.”
Staking pays off
Mosoff predicts that staking — committing crypto holdings to the blockchain in exchange for earning passive income — will soar in popularity next year.
“As more investors become confident and comfortable with the asset class as a whole, and that it’s one that’s here to stay, they’re going to be looking for other ways to participate,” he said. “And one of them is going to be taking these historically unproductive commodities and turning them into yield-generating instruments.”
Mike McGlone, senior commodity strategist at Bloomberg Intelligence
McGlone, a senior commodity strategist at Bloomberg Intelligence, believes that cryptocurrencies will dominate in 2022 as the asset class outperforms more traditional investments.
“We expect the US to embrace cryptocurrencies in 2022, with proper regulation and related bullish price implications,” McGlone wrote in a December note. “Compared with broad equities, which haven’t had a 10% correction since the 2020 swoon, the crypto market may have a relative advantage in 2022.”
“Renewed impetus from the Federal Reserve to take away the punch bowl, and declining bond yields may point to a macroeconomic environment in 2022 that favors top cryptocurrencies bitcoin and ethereum,” he continued. “Crypto assets showing divergent strength versus equities near the end of 2021 may portend continued digital-asset outperformance in 2022.”
Besides bitcoin and ethereum, McGlone is also bullish on stablecoins, which he called “crypto dollars.”
“Stalwart crypto dollars, along with bitcoin and ethereum, are poised to stay atop the ecosystem vs. about 15,000 rivals jockeying for speculative leadership,” he said. “Binance Coin, solana, and cardano have replaced XRP, bitcoin cash and chainlink near the top from a year ago.”
Specifically, McGlone believes that bitcoin is in a consolidating bull market, while he calls the ether bull market more “enduring.” And he said that his optimism persists even if a reversal in monetary policy tightening were to occur after a potential stock market crash.
“Bitcoin will face initial headwinds if the stock market drops, but to the extent that declining equity prices pressure bond yields and incentivize more central-bank liquidity, the crypto may come out a primary beneficiary,” he explained.
As cryptos continue to grow in popularity, traditional asset managers will also be forced to participate — one of McGlone’s key catalysts for his bullish view.
“Past performance is no indicator of future results, but when a new asset class outperforms incumbents, naysayers have little choice but to join in,” he said. “We see this process playing a primary role in 2022, as money managers may face greater risks if they continue to have no portfolio allocations to cryptos.”
Alex Svanevik, co-founder and CEO of blockchain analytics platform Nansen
Among the reasons for ethereum’s success this year include the rise of NFTs, or non-fungible tokens. But the blockchain hasn’t been without its obstacles.
“One significant problem for ethereum this year has been high gas costs,” said Alex Svanevik, the co-founder and CEO of blockchain analytics platform Nansen. “Naturally, there’s a spillover effect onto the other chains.”
“Alternative chains have gained a lot of traction, and some of them have millions of users at this point,” he added. “I think you’ll continue to see that world strengthen.”
Svanevik shared with Insider his list of the six top “ethereum killers,” or blockchains that he believes could rival ethereum in 2022.
Top 6 ethereum killers
Amongst the competing layer 2 blockchains, Svanevik highlighted avalanche as a potential threat.
Avax, the native token of avalanche, soared by over 50% in November when developer Ava Labs announced a partnership with “Big Four” accounting firm Deloitte.
“Ethereum is trying to be the world’s largest computer,” said John Wu, the president of Ava Labs in a recent interview with Insider. “They’ve had a head start, but their technology isn’t as good — if they don’t implement upgrades, they’ll end up being MySpace or Friendster, rather than Facebook.”
Svanevik also highlighted Binance Smart Chain (BSC), an alternative blockchain platform, as an emerging rival for ethereum’s throne, and he said he’s also keeping an eye on fantom and polygon, two other layer 2 blockchains.
“The rise of the multi-chain universe could be a huge theme in 2022,” said Svanevik. “The run-up in price for avalanche’s token has coincided with the rise of fantom and polygon, and you could argue there’s a correlation with BSC as well.”
Within the layer 1 blockchains, Svanevik believes that solana and terra are the two biggest competitors.
“These blockchains have lower gas fees, higher throughput, and shorter block times,” he elaborated. “They’re some of the main ones where we’ve seen activity growth.”