Since my last post, "How I manage my time investments," in early December, lots has changed regarding the crypto market and current sentiment. We have seen blue chips like Bitcoin and Ethereum drop around 40% since their last all-time high. This leaves the market in a painful area between expensive compared to last year and extremely cheap compared to all-time-highs, leading to confusion and commotion throughout investors. This post will be going through some of my expectations for the 2022 cryptocurrency market, my hopes, my fears, and where I expect the field to be by the end of the year.
For followers of the blog, I hope you've spent the last couple of months building rather than investing. Last December, I felt that the market had gotten too crazy with the number of projects releasing and that logically, being the builder carried less financial risk than being an investor. If you had taken my advice, you should be involved in a handful of communities now, hold a low percentage of volatile assets, and hopefully secure a paid position in a crypto project. If this is the case, congratulations, you have managed to avoid the majority of the "crypto crash," connected yourself to a community of long-term creators, and established a sustainable lifestyle for yourself.
For those in our situation, we are now standing before an intersection, do we invest in crypto assets during this year? There are many ways to do research regarding this topic. For example, we could decide to rely on on-chain metrics, social media conscientious, or other ways to have some "data" to run off of. If we are looking for an easy-to-grasp data chart, the crypto fear & greed index does what we need it to; it analyzes volatility of Bitcoin, momentum, social media, dominance, and trends from Google trends. However, it provides an indecisive answer of "46/100" even when using this tool. Based on the logic that one needs to buy during fear and sell during greed, "46" does not tell us much other than most people feel undecided.
Data will only take us so far. I am sure you can relate when I say that data is only part of why we decide to invest. I have found that when data is unclear, narratives begin to take over the conversation when determining value. This is a situation where you will have to decide for yourself if you are comfortable enough to invest during times of narrative. The rest of the article will be my thoughts regarding future narratives in what they could mean for the market during 2022.
HOPE: NFTs are crypto's shining light
Crypto made a huge splash in 2021 with Bitcoin, DeFi, and even the dog coins got to have their time to shine. NFT's were a large part of the conversation too, bringing in a new audience, A tier celebrity endorsements, and an explosion of artistic creativity. I foresee the hype behind crypto is fall greatly during 2022. Last year, I was being approached during parties to talk about crypto - think about that. The same people who could not give a damn about index funds, 401ks, and/or any other types of investments were suddenly incredibly interested in learning about crypto.
I've met all types of people from people who invested in bitcoin, doge, or some other random coin but at the end of the day, the field is not ready for full public adoption. For example, take one look at Ethereum gas fees and everything you believe about decentralization falls flat for general consumers. Ordinary consumers already are unhappy to pay for shipping when it comes to real life items, the concept of paying for "gas" on networks like Ethereum in which swapping on Uniswap may cost >$50 is inconceivable. This is not to say I see no future in DeFi but rather that networks will need time to evolve and customers will need time to see the value of trading on decentralized platforms.
I expect volatile crypto assets to generally trend down during the bulk of 2022. NFTs however, I expect to continue chugging and slightly trend up by the end of 2022. Community is crypto's strongest aspect, and it's what I believe to be keeping projects from unraveling from FUD. With the constant evolution of profile pic projects, PUNKS -> BAYC -> NOUNS -> ?, I see the potential for new and novel smart contracts to continue the rise of community utility. The rise of NFT prices and utilization will only open up the market for more new comers and keep the TVL in NFTs healthy.
My expectations for the "winners" of 2022:
- Those investing in novel, utility NFTs that are community based and aim towards bringing in more value.
- If current blue-chip NFTs are able to adapt and evolve with the times, this could be a major "safe-haven" for ETH during times of market drawback.
FEAR: Greedy hands grasp for liquid money
Government policy and the future of stable coins are my greatest fears for 2022. I realize that "government policy" is extremely broad, this is because currently, the US government is eyeing crypto without any strong figures to lead them down a certain direction. The United States has a difficult question to answer. Will the rise of cryptocurrencies undermine the power of the dollar and with that the influence of the United States across the world? Or is cryptocurrencies the next form of "tech" for the United States to adopt and push across the world? How the government decides to view crypto will determine how they tax, regulate, and operate within crypto.
Although there is a possibility that this will lead to a net gain for the crypto community, I foresee much more cons than I foresee pros. The possibility of unreasonable taxes, demand of KYC, and/or a control of American based crypto companies puts the entire space at risk. If you recall, XRP was investigated by the US government and lead to a major depression of the price, on the bright side, the coin remains one of the most traded in the ecosystem, which rings positive for the future of crypto even when collaborating with countries across the world.
If investigated by the government, some things would most likely be better for the crypto space. One of those things are stable coins. With a lot of criticism of organizations like Tether for irresponsible money printing and doubts regarding their ability to be "backed," this has led to USDT becoming a cancerous bubble that needs to be popped/deflated if we want crypto prices to be legitimate. However, although I call for an investigation, undoubtedly, if the US government tackles this too harshly, it may lead to a cascading crash of all prices.
My expectations for the "losers" of 2022:
- Those heavily investing in the current day "blue chip" crypto tokens as I expect the price to trend down as government intervention and stable coins get "cleaned up."
- Retail investors as taxes for cryptocurrencies become more clearly defined by the government.
END-OF-YEAR: Humbled, stronger, and wiser
After a bombastic 2021, I expect that we will experience a consolidation of investments, a drop in "hype boi" culture, and a refocus on "value" when it comes to picking projects to invest in. My general advice for this year is to continue building on your talents, helping others in your community, and to focus on the long-term. Build steadily during the year and you will see major benefits in 2023 while others are preoccupied with being distressed about the lack of "moon opportunities". Good luck Anon. I'm rooting for you.
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