The following are my personal views and don’t reflect the opinions of MoonPay. The opinions reflected below should not be construed as financial advice. Corey Barchat also contributed to this article.
By Geoffrey Lyons
Published on Jan 24, 2022
Last modified on Aug 30, 2024
The following are my personal views and don’t reflect the opinions of MoonPay. The opinions reflected below should not be construed as financial advice. Corey Barchat also contributed to this article.
2021 may have been the biggest year for crypto to date. In just the first quarter Bitcoin’s market cap reached the $1 trillion milestone and Beeple’s Everydays sold for $69 million at Christie’s.
In June, 62 legislators passed a law to make El Salvador the first country to adopt a cryptocurrency as legal tender. In November, a small grassroots organization’s dogged attempt to purchase a copy of the US Constitution “showed the power of the DAO”.
Above all, it was the year of the NFT: record-breaking sales made headlines; dozens of celebrities and artists lined up to get their hands on a CryptoPunk or Bored Ape; the very abbreviation “NFT” seeped into everyday language. Collins Dictionary even made it word of the year.
Crypto is still in its infancy, so a lot can happen in a short span of time. Nobody can say for certain what 2022 will bring, but overall it will likely be even more eventful: the longer crypto proves its value the more people it will attract, generating more buzz, more activity, and so on in a virtuous cycle.
Here are some of my best guesses as to what might occur over the next twelve months.
The first bona fide cryptocurrency and by far the largest by market capitalization has always been the star of the show (in just the last year, BTC, which is one of over 80 cryptocurrencies that MoonPay offers, accounted for nearly half our transaction volume). But despite its dominion over a crowded field of more than 8,000 cryptocurrencies, it’s can be easy to overlook Bitcoin in favor of the latest trending altcoin.
Wherever BTC goes after today's current slump, much of the market will trend in the same direction. “Contrary to popular belief,” explains Reddit user u/Zarkorix, “the inherent value of cryptocurrencies is not primarily derived from USD or USDT, but rather BTC”. Cryptocurrencies generally play to the tune of Bitcoin, and that won’t change in 2022.
A few NFT projects have earned a coveted label that’s given only to the most promising ventures. Widely used in investing circles, “blue chip” originates from poker: chips that are blue typically represent the highest value. According to trading provider IG group, blue chip stocks are “shares of companies that are reputable, financially stable and long-established.”
But there is no “long-established” in the nascent world of NFTs. The technology is new, which means there’s ample opportunity for overnight success.
Look no further than CloneX: in just over a month of being live, the 3D avatar collection leapfrogged over community favorites like ZED RUN and VeeFriends to rank in the all time top 20 NFT projects on OpenSea. Expect more of this in 2022. Cool Cats and Art Blocks won’t go anywhere, but they’ll have some fresh competition.
Since the NFT space is still young, it’s simply too early to say which NFTs will have staying power. Plus, not everyone can afford the high price tag of today’s top projects.
The good news is there are new collections minting every day, and while it may be hard to discern which of these have potential, one way to separate the wheat from the chaff is to look for projects with a battle-tested developer team, a passionate and active community, and a clear roadmap. There’s a huge market to exploit in affordable NFTs, so expect the field to become especially crowded in 2022.
Who said space was the final frontier? There’s plenty to be explored right at our fingertips in virtual worlds that are, as The Economist describes, “unencumbered by something as pedestrian as physics”.
Plots of digital real estate are currently being scooped up for thousands, sometimes millions, of dollars in what some are calling a virtual land rush. At the end of last year, even Big Four accounting firm PwC got a piece of the action so they can “leverage [their] expertise to advise clients who wish to embrace the metaverse”. Others have less lofty ambitions and just want to be neighbors with Snoop Dogg.
Motives aside, the numbers point to a steady increase in land sales in virtual worlds like The Sandbox. 2022 could see a real estate boom the likes of which has never been witnessed.
As we patiently await Ethereum 2.0 and its promise to reduce the network’s carbon footprint, transaction times, and gas fees, Ethereum competitors are clamoring to accumulate more market share. Networks like Solana, Avalanche, and Algorand are trying to solve the blockchain trilemma of transaction speed, security, and scalability. They’ve developed their own fully-fledged DeFi and NFT ecosystems and have cheaper and quicker transactions than the Ethereum mainnet.
It’s difficult to say who will eventually emerge as the true “Ethereum killer”, but it won’t happen this year. Ethereum’s greatest challenger may not have even launched yet. The long-term success of ETH2 will also play a huge factor in establishing the ultimate victor.
In the Chinese zodiac, 2021 was the year of the ox. But for the crypto community, it was the year of shiba inu. Two memorable moments from the last 12 months (both celebrated and despised, depending on who you ask) were when Dogecoin made it to the top 10 cryptocurrencies by market capitalization, and Shiba Inu, its spin-off and self-proclaimed crypto rival, surpassed it.
Unless the internet suddenly abandons its penchant for meme humor, expect either the rise of another joke-turned-overnight-success to make headlines (there are spin-offs of the spin-offs waiting in the wings) or a considerable rally of one of these top two canine coins.
More big names in finance will get in line behind Goldman Sachs, BNY Mellon, Morgan Stanley, Wells Fargo, BlackRock, and others who have already embraced crypto to one degree or another.
“Banks want to compete in this new world and profit from it,” wrote Emily Flitter of the New York Times. “Their approach is two-pronged: experimenting with cryptocurrency offerings and lobbying regulators to create rules that work in the banks’ favor”.
There will probably be some notable conversions, too. Billionaire investor Ray Dalio went from calling Bitcoin “not very good as a store-hold of wealth” in 2020 to “one hell of an invention” in 2021. Just last month he said it’s “very impressive” that crypto has held up for so long.
This is the Lindy effect at work: the longer something lasts, the more likely it is to stick around in the future. As crypto continues to stand the test of time, a steady drip of the Who’s Who of finance will seize on its potential, however reluctantly.
Last October saw the launch of the first Bitcoin exchange traded fund (ETF). But ProShares’ Bitcoin Strategy ETF doesn’t actually track Bitcoin prices directly, as some may believe. It instead tracks BTUSD prices through futures contracts traded on the Chicago Mercantile Exchange.
As CNBC’s Ryan Browne explains, tracking futures prices could be too risky for beginner investors, which leaves a massive appetite for an ETF tied directly to Bitcoin’s spot price. Some are predicting the first of these will emerge later this year, although nobody is saying that with much conviction. After all, it took eight long years for the SEC to finally authorize a Bitcoin ETF in the US, so don’t hold your breath.
Last year, Axie Infinity drew the most attention among play-to-earn games with over 2.8 million daily active players and $3.6 billion traded in its marketplaces. A character-collecting game similar to Pokémon, Axie allows users to earn their native AXS token simply by battling with other characters called “Axies”.
The game has developed a remarkably elegant player hierarchy, complete with “scholarships” awarded to hopeful players in countries like the Philippines, who can’t afford to assemble a team of their own Axies.
But Axie Infinity is far from the only option out there. The space is incredibly new, yet there are thousands of crypto games to choose from across many different blockchains. And although most games are no more than a year old, the combined market capitalization of all play-to-earn tokens has already surpassed $23 billion.
Yes, the field is already crowded, but more Pokémon-inspired play-to-earn games will emerge this year. It may come as no shock that Niantic, the creators of Pokémon Go, have even launched their own crypto game in which players can earn rewards in the form of Bitcoin. Now it’s just a matter of time before Nintendo releases their own official Pokémon NFT game.
Because of all the enthusiasm for projects like CryptoPunks and Bored Ape Yacht Club, NFTs have practically become synonymous with PFP avatars. But they’re much more than that—at least they could be.
As we wrote in July, just because digital art is the prevailing use case for NFTs doesn’t mean it’s the only one: the technology can be used to authenticate wine, disrupt event ticketing, and ‘tokenize’ property rights, among other things. In just the last few weeks, MoonPay has partnered with NFT marketplaces for music and luxury liquor. As the year progresses, even more creative use cases will emerge, taking NFTs to places few could have imagined.
Self expression is a strong human desire even in the metaverse. In a groundbreaking study, Nick Yee & Jeremy Bailenson of Stanford showed that the characteristics of a virtual avatar can actually shape people’s behavior. For example, “participants assigned taller avatars behaved more confidently in a negotiation task than participants assigned shorter avatars.”
As Lisa Gibbons of CryptoSlate writes, “walking around Decentraland, one Avatar can’t help but be envious of the style on display, from branded capes to a little bit of bling.”
Decentraland certainly has no shortage of adjustable features: helmets, jackets, earrings, and tiaras are just some of the items you can wear in the game. But when it comes to customizability, the sky’s the limit. Oculus avatars, though not on the blockchain, boasts over one quintillion permutations (1 followed by 18 zeros) for its “digital representations of self”.
In 2022, more NFT projects will approach this range, and we’ll likely see more sophisticated secondary markets where features and wearables can be bought and sold.
A decentralized autonomous organization (DAO) is a collective where members have voting and governance rights to decide the project’s direction. DAOs are common in the crypto space because they’re permissionless and decentralized, just like cryptocurrency.
Perhaps the most notable example of DAOs affecting real world change was when ConstitutionDAO nearly bought a copy of the United States Constitution at a Sotheby’s auction in November. The goal was to raise enough Ethereum donations from DAO members to place the winning bid. In return, everyone who donated would receive rights to decide what the DAO would do with the copy.
ConstitutionDAO was unfortunately outbid (participating members were duly refunded their crypto). They did, however, leave a lasting impression on what DAOs can offer. As core member Jonah Erlich explained, a DAO is essentially “a group chat with a bank account”, so their potential is practically limitless. They’re poised to achieve much more in 2022.
Ethereum alternatives like Solana aren’t the only ones trying to edge out the competition. Layer-2 solutions are also providing cheaper and quicker transactions but with one slight difference: they’re built on top of and work in conjunction with the Layer 1 mainnet. The way they do this is by validating transactions off-chain where there is significantly less congestion than the underlying blockchain.
In 2021, ImmutableX launched as the first Ethereum Layer-2 for NFTs, allowing users to trade these collectibles with zero gas fees. Layer-2 blockchain Polygon also experienced skyrocketing volume as users sought alternatives to paying high gas fees for slow transactions. OpenSea saw a corresponding boom in users on the Layer-2 chain: many NFT projects have chosen to launch on Polygon to give their community greater accessibility to their collections. Just like Ethereum, there are art collections, play-to-earn games, Bored Ape derivatives, and trading card NFTs built on Layer-2 blockchains.
With ETH2 loosely scheduled to be completed in 2023, this leaves Layer-2 scaling solutions like zkSync plenty of time (and market share) to handle over one million Ethereum transactions per day.
If you have any predictions for 2022 and would like to contribute to MoonPay’s blog, email [email protected].
