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10 2022 Predictions From PwC’s Henri Arslanian

10 2022 Predictions From PwC’s Henri Arslanian

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2021 was a historic yr for crypto with many milestones. And there aren’t any indicators of the momentum slowing down in 2022!

As per our custom since 2015, listed below are my 10 crypto predictions for the approaching yr:

Fortune 500 corporations within the metaverse

2021 noticed the idea of the metaverse burst into the mainstream. Whilst many Metaverse video games and ecosystems have been round for a few years, from Second Life to Roblox, Facebook changing its name to Meta in late October 2021 introduced this to the forefront. This has put the highlight on the rising metaverse ecosystem. The likes of Decentraland and Sandbox are good examples, every of which has seen tremendous growth. Expect this to proceed in 2022, with each Fortune 500 firm making an attempt to determine their very own metaverse technique.

Twenty years in the past, each enterprise needed to abruptly give you their e-commerce or on-line technique. Now, each Fortune 500 firm will want to consider their Metaverse technique. Expect consulting companies to be throughout this.

2021 was the yr the broader world “discovered” the metaverse. 2022 would be the yr it could go mainstream.

Private banks have crypto FOMO

Last yr we predicted that 2021 would see many personal banks enter the crypto area. And they did. 2021 noticed many personal banks, from Morgan Stanley to J.P. Morgan launch Bitcoin and crypto merchandise for his or her clients.

Such merchandise have been a response to the demand for publicity to digital property from lots of the household workplaces and excessive net-worth people. In addition, these merchandise nonetheless supply excessive charges and excessive margins for personal banks in an atmosphere during which payment compression is changing into the norm.

However, whereas having such merchandise at the moment are seen as a aggressive benefit for these personal banks, we’ll most likely quickly transfer to an period during which not having any crypto merchandise will likely be a stark drawback.

Many massive personal banks disregarded Bitcoin as not a critical asset (not having crypto associated merchandise to promote most likely didn’t assist!). But we should always anticipate most to do a 180 and launch crypto choices in 2022.

Read extra: Pantera’s Paul Veradittakit’s 2022 Predictions

El Salvador conjures up others?

2021 noticed El Salvador grow to be the primary nation on the planet to recognize Bitcoin as legal tender. The constructive results are already being recorded: according to El Salvador’s President Nayib Bukele, extra folks there now have a Bitcoin pockets than a checking account, permitting the 70% of the population that receives remittances to have the ability to achieve this with out the extreme remittance charges, which might balloon as much as 12.5%.

Not surprisingly, each the IMF and the World Bank, each organizations created in the course of the 1944 Bretton Woods Conference during which the U.S. greenback was adopted as the worldwide reserve foreign money, have been very against such strikes, publicly warning El Salvador to reverse course.

Many politicians or coverage makers in different smaller nations, particularly these which are dollarized or de facto dollarized like Panama, or these within the creating world like Paraguay, may comply with El Salvador’s footsteps.

Others might not need Bitcoin per say, however might be desirous about different types of digital currencies. For instance, Palau introduced that it’s launching a authorities backed stablecoin, whil the Marshall Islands is already launching its personal digital foreign money. And this typically goes past rising markets. For instance, with a latest survey discovering that 27% of US residents help making Bitcoin authorized tender.

Expect many different jurisdictions to watch how issues develop in El Salvador carefully. They might not essentially straight comply with of their footsteps and acknowledge Bitcoin as authorized tender in 2022, however anticipate this matter to be mentioned very actively.

Make or break for Ethereum

Ethereum is the most important good contract and layer 1 platform by market cap. However, 2021 confirmed its legacy points, from scalability struggles to exorbitant fees, with average transaction fees starting from round $4 all the way in which to $70.

There is lots of optimism surrounding Ethereum 2.0, which, coupled with latest adjustments like EIP-1559, has pushed the price of ETH from $750 to $4,800 at its peak this yr. Whil Ethereum was the one critical present on the town over the past main bull market of 2017, there at the moment are quite a few Layer 1 alternate options, from Algorand and Avalanche to Solana and Tezos, which not solely present higher scalability but in addition include considerably decrease charges.

The crypto group is affected person and has lots of goodwill in direction of Ethereum. But until the ETH 2.0 improve occurs on schedule, the community dangers shedding lots of its customers, who may finally decide that the grass could also be greener on among the different chains.

Gamers catalyze Web 3

Web 1.0 was the static web, represented by the likes of AOL and Netscape. Web 2.0 is an interesting web, however managed by the massive tech gamers like Meta and Google. Web 3.0 is an web that’s decentralized and permissionless, but in addition one during which customers have management of their knowledge.

The convergence of NFTs, DeFi, and the metaverse is main us in direction of a Web 3.0 ecosystem. And the catalyst right here often is the gaming trade.

There are over 2.5 billion gamers across the globe, and frustration has been mounting in recent times over the outsized management exercised by among the massive gaming companies, from the lack of those gamers to personal their in-game property to the shortage of interoperability with different video games.

2021 confirmed us the facility of DeFi and NFTs in gaming, along with the facility of decentralized play-to-earn fashions like Axie Infinity and its 2 million plus monthly active players. With the quite a few funds popping up which are completely centered within the area, Solana’s $150m Web 3.0 gaming fund being an ideal instance, anticipate this area to catalyze.

NFTs mainstream, however missing accounting, tax and authorized readability

2021 noticed NFTs come underneath the spotlight, with the total sales volume surging previous $12 billion. Several splashy, high-profile gross sales led the way in which, from Beeple’s $69 million jpeg to the quite a few multi million greenback gross sales of CryptoPunks and Bored Ape Yacht Club NFTs.

The euphoria round NFTs (and the sky-high valuations) might fade, however the actuality is that NFTs are right here to remain. Expect them to grow to be extra mainstream and even invisible in everyday interactions.

We ought to anticipate to see NFTs featured in all the things from restricted version sneakers and excessive finish purses to sports activities tickets and in-game collectibles as this medium turns into the usual relatively than the exception.

The huge query right here now surrounds the legal, tax, and accounting issues round such NFTs, that are far from being clear. From a authorized perspective, what are the issues round mental property or shopper rights? From an accounting perspective, do NFTs signify an IP licensing proper or an intangible asset? From a tax perspective, what are the issues round revenues from the issuance of an NFT or the continued royalties?

A latest PwC survey discovered that solely 7% of tax authorities globally present any type of tax steering on NFTs. In 2022, this wants to vary. Guidance will likely be helpful not solely to tax or regulatory authorities however to most people as nicely.

All eyes on China and its e-CNY

2021 was a banner yr for CBDCs. Not solely did we see groundbreaking tasks within the subject of wholesale CBDCs, from Hong Kong’s Project mCBDC Bridge to Singapore’s Project Dunbar, we additionally noticed quite a few retail CBDCs take form, from Nigeria’s eNaira to The Bahamas’ Sand Dollar.

But all eyes in 2022 will likely be on China with the upcoming launch of its e-CNY. The nation has already processed round $9.7 billion in e-CNY transactions by way of its numerous pilots. More than 140 million Chinese residents have already got their e-CNY pockets.

China’s newest cryptocurrency ban and the beginning of the Beijing Winter Olympics in February 2022 pave the way in which for the launch of the e-CNY early subsequent yr. This will likely be a historic second within the historical past of cash.

Centralized crypto exchanges DEX competitors

As we predicted final yr, DeFI continued its fast progress in 2021, with total value locked rising from simply shy of $22 billion on the finish of 2020 to over $250 billion right this moment.

DeFi is indubitably one of the exciting areas in finance right this moment, with new choices from decentralised exchanges and lending to asset administration and even insurance coverage choices being improved every day.

Some of the options of DeFi, resembling composability, give us a possibility to reimagine financial services with a primary rules strategy, one thing that we now have not had the chance to do in a number of a long time.

And that is attracting not solely record levels of property however, most significantly, expertise, with many vibrant minds laser centered on this area.

DeFi will affect not solely conventional financer but in addition centralized exchanges, particularly when buying and selling on DEXs turns into extra consumer pleasant. Centralized platforms will live on and play a giant position, particularly as a fiat on-ramp and for brand new entrants, however they might want to cohabit more and more with DEXs.

The U.S. dominates bitcoin mining and helps ESG

Until July 2021, round 65% of world Bitcoin mining befell in China. Following the ban, nearly all of this exercise moved to nations friendlier to Bitcoin mining, just like the United States, Russia, Kazakhstan, and Canada.

The United States has already grow to be the biggest Bitcoin miner on the globe, with its share of exercise skyrocketing from 4% again in late 2019 to greater than 35% following the ban. With among the regulatory uncertainty in nations like Kazakhstan, we should always anticipate the US share of mining exercise to proceed to develop over the approaching months.

The primary benefit right here is that Bitcoin will grow to be greener. About 57% of Bitcoin mining globally right this moment leverages renewable energies, in response to the Bitcoin Mining Council, an trade group, with this proportion being higher within the United States. Bitcoin mining may finally accelerate the expansion of such renewables, from being a purchaser of final resort to creating renewable power manufacturing extra sustainable. This may additionally assist in relation to addressing the looming ESG debate.

Many initially considered the China ban as a detrimental growth. It might find yourself as one of many greatest constructive catalysts in our trade. Expect to see the constructive penalties play out in 2022.

Crypto M&A flip crypto unicorns into octopuses

As we predicted final yr, 2021 turned out to be a file yr for crypto M&A. According to some data sources, 2021 crypto M&A amounted to over $25 billion in worth.

We ought to anticipate this to proceed in 2022, significantly with crypto unicorns more and more reworking into crypto octopuses by spending a few of their bull market features and buying or investing in companies that provide ancillary companies to their present choices.

In explicit, companies that provide entry to retail communities, ecosystems, content material and/or knowledge must be attention-grabbing acquisition targets for a few of these crypto platforms. Same goes for companies which are regulated in key markets, thus enabling entry and quicker go to market methods.

We also needs to anticipate among the bigger monetary companies companies, particularly those who have been late to embark on their crypto journey, to search for potential acquisitions.

In 2022, the crypto M&A celebration will likely be removed from over!


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