The year 2021 was quite successful for the crypto space. Despite some ups and downs Bitcoin and especially Ethereum showed a solid performance. NFTs and blockchain dapps focused on gaming/metaverse use cases saw spectacular growth in 2021. The adoption of tokenization of (financial) securities was sluggish. Will these trends continue in 2022?
In the crypto asset space we expect a further increase of the BTC price in Q1, after some initial uncertainty. There is a chance that the psychologically important $100k mark will be crossed. The lingering inflation in the leading economies will push new investors into the store of value that is bitcoin. At the same time there are price risks, especially the Fed’s and the ECB’s slowing of bond purchases and the debate about EU-wide banning of PoW mining pushed by renewable-rich Nordic countries.
Healthy demand for crypto investments
While bigger institutions in the EU will avoid direct crypto investments for reputational reasons 2022 will bring massive adoption in the segment of family offices and private banking. In 2020 and 2021 the infrastructure and tools for these investments was not available, which will change in 2022. We expect that every financial advisor and boutique asset manager will allow its clients to diversify into crypto by the beginning of 2023.
The acceptance of traditional assets that are tokenized on (public) blockchains will improve in 2022- but the big breakthrough is only going to occur in the years after 2022. Q1 in Germany will see some issuers emit bonds on a blockchain due to the grandfathering rules for the German Kryptowertpapierregisterführung. As soon as tokenization is extended to investment fund shares additional issuing activities will follow. Shares — mentioned by the new federal government as an asset class that is to be included in the purview of Germany’s electronic securities act (eWpG) — won’t be issued on a blockchain in 2022.
Most market participants will limit themselves to PoCs. Only once a critical mass of the infrastructure pieces shifts to blockchain and all payment streams associated with a security can be moved on-chain tokens can bring real value to capital markets. Without significant volume of emissions the incentives for shifting infrastructure are too small.
The biggest success stories will be written by providers who execute well on high-profile use cases that are relatively isolated and don’t presuppose that the majority of the market has moved to the blockchain. Legislators in Germany and the EU will continue to support a moderate opening of the market towards digitized securities.
NFTs, fan tokens, gaming and metaverse apps will continue to gain ground in 2022. The NFT market will reach a new level of maturity and the price structure will differentiate between high-quality pieces of art and worthless “junk” designed to rip off buyers. Tools that model and calculate the optimal NFT pricing will become a wider phenomenon.
DeFi will grow and there will be more touchpoints (and API endpoints) between CeFi and DeFi. In 2022 this trend is going to be limited to a few bold fintech pioneers that start, for example, offering DeFi savings plans for EUR investors. Given a growing global market of DeFi providers who are leveraging unaudited smart contracts additional hacks, losses and exploits worth hundreds of millions of EUR will be likely, if not inevitable.
Competition between stablecoin issuers and regulatory pressure on stablecoin issuers will intensify and we may see the first CBDCs debuting on a big global marketplace for digital assets.
