Why will crypto adoption continue to grow?
Inevitably, the adoption of cryptocurrency by everyone from individuals to companies to countries will dramatically increase in 2022. There are a huge number of reasons why widespread adoption will occur. We’ve put together this article for you to make these reasons easier to understand. Here, we will cover the top four reasons we believe crypto adoption will continue to grow in 2022.
Let’s jump in!
#1: Scalability Issues Will be Addressed by Smaller Blockchains
We’ll save the details of these issues for another day. In simple terms, Ethereum's blockchain can only handle a maximum of 30 transactions per second (TPS).
But, the expanding market for decentralised apps (dApps) has increased traffic on Ethereum's network, resulting in high gas fees (the cost to perform a transaction). These costs have even reached up to $148, making cryptocurrency even more inaccessible to those not able to afford these gas fees.
Smaller blockchains, for example, Cardano (CRYPTO:ADA) and Solana (CRYPTO:SOL), are here to save the day. By challenging Ethereum’s scalability issue head-on by using proprietary versions of the proof-of-stake consensus mechanism, these newer entrants will start to tackle the gas fee barrier to entry. This allows more people to adopt cryptocurrency affordably.
So, expect these smaller blockchains to gain significant traction in 2022 as developers flock to them. Don't be shocked if ADA and SOL, the native coins of Cardano and Solana, respectively, outperformed Ether this year.
#2: Countries, Corporations, and Banks Will Make Crypto More Mainstream and Stable
Despite regulatory uncertainty, institutions are beginning to find the Decentralised Finance (DeFi) sector highly appealing. These applications can provide better rates and reduced prices because there is no middleman. To comply with banking regulatory standards, institutional adoption would need to ensure that suitable know-your-client and anti-money-laundering procedures are in place.
For instance, banking giants Goldman Sachs and JP Morgan have expressed interest in digital assets in the past year. Also, giant corporations such as Tesla already hold billions of dollars in Bitcoins. In the future, it will be interesting to see how the stock market reacts to these new currencies.
One of the most serious criticisms of cryptocurrencies is that they aren't recognised as credible alternatives to traditional currencies. If this scenario plays out, several cryptocurrencies may lose their value. However, the reverse occurred in 2021, and the pattern continues into 2022. As more companies continue to accept cryptocurrencies such as Bitcoin as legal tender and Bitcoin price predictions as more reliable, the viability and value of cryptocurrencies such as Bitcoin price are expected to rise.
It doesn’t stop there. Even countries will begin to accept cryptocurrency as legal tender. For example, El Salvador became the first country to accept Bitcoin as legal money in September 2021. According to Alexander Höptner, CEO of the crypto exchange firm BitMEX, five or more nations may follow suit and embrace crypto as legal money in 2022. As more countries invest in crypto, the entire market of digital currencies will stabilise. For example, the frequent news of wrong Bitcoin price (BTC price) predictions, Bitcoin hits, and Bitcoin crashes will fade from memory.
If these higher-level adoptions are successful, it is only natural that crypto accessibility for these countries’ citizens will soon grow massively.
Check out the Central Bank Digital Currencies Tracker for up-to-date information on how different countries use crypto.
#3: NFTs, the Metaverse, and Gaming Will Become A Viable Source of Income
Non-fungible tokens (NFTs) and the metaverse were notable last year. Bored Ape Yacht Club and CryptoPunks collections drew much attention and money to NFTs. Plus, Meta Platforms (previously Facebook) is reorganising its whole company to operate in a new virtual environment.
In an increasingly digital environment, leveraging current trends in NFTs and the metaverse – rather than resisting them – will provide certain companies with an advantage in interacting and engaging with customers. As a result, expect to see many more businesses dabbling in this area.
For gaming communities, 2021 saw a watershed moment in "GameFi," with the release of Axie Infinity and the Ronin sidechain. These provided the systems required to let one million active players engage in the Axie Infinity world in August 2021. Plus, Axie Infinity has become a viable source of income for many people, particularly in the Philippines.
The hype of the digital worlds, dubbed “metaverses” that Microsoft and Facebook have unveiled their plans for, will also continue to drive crypto adoption.
On the other hand, expect that these internet behemoths will create a centralised, partially closed system, making value transfers to different digital ecosystems difficult, if not impossible.
The emergence of the multi-chain world can solve this issue. The multi-chain world will involve smooth money transfers between multiple crypto-universes. It will likely spark a fresh wave of adoption, mainly boosting the NFT and blockchain-based gaming economies. Such a linked economy is often called the "meta-metaverse." What appears to be a long way off might become a reality this year, especially in some areas of gaming.
#4: Cryptocurrency Will Tackle Its Sustainability Issues
Exchange-traded products (ETP) issuers, crypto exchanges, mining businesses, and financial institutions are all interested in providing their consumers with environmentally friendly goods and services.
Why? Due to the relatively large carbon footprint of Bitcoin mining, many potential crypto investors have been hesitant to invest. Climate change and environmental ethics are big blockages in large-scale crypto adoption and impact crypto price predictions. Additionally, any interested firms are often subject to Environmental, Social, and Governance (ESG) laws that mean taking the plunge into the crypto world isn’t currently viable.
However, the introduction of Ethereum's ETH2 upgrade this year will shift from energy-intensive proof-of-work to more environmentally friendly proof-of-stake, drastically lowering transaction costs.
Additionally, climate compensation calculations for Bitcoin-based products have emerged for crypto investment providers. For example, Bitcoin transactions and storage may be offset by purchasing emission permits from the European Emissions Trading System (ETS).
Overall, the energy mix utilised to power blockchain network operations is becoming more environmentally friendly. Mining corporations left China after the government's crackdown on the country's mining industry, which has meant they have to turn to more environmentally-conscious laws and regulations. Additionally, these corporations are increasingly interested in the cost benefits that renewable energy sources, such as geothermal or solar energy, provide.
As crypto loses its negative environmental image, more and more people will feel ethically open to adopting these new digital currencies.
Although cryptocurrencies have grown in popularity and value, they are still a long way from being utilised as conventional currencies or payment methods. Even if digital currencies eventually replace or coexist with traditional paper currencies, investors can't forecast which cryptocurrencies will survive. They can't even predict the dominant long-term players.
Nonetheless, it appears that cryptocurrencies will continue to grow in popularity, exposure, and even worth in 2022. While not all of the predictions will come true, a few will, and they will be the rolling catalyst for the widespread adoption of crypto in years to come.
Don’t get left behind. Begin learning the best strategies for investing in cryptocurrencies to be prepared for the inevitable future!