After a wild 2021, what can crypto investors expect in 2022?

What to watch for in 2022? Inflation, NFTs, mainstream adoption, financial conflict and war.

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Cryptocurrency and Bitcoin outlook for 2022.

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Some crypto investors will be sitting on outsized gains after a wild ride amongst the digital tokens in 2021. Others, of course, will have bought near the highs and sold out during the lows and be nursing some hefty losses.

While volatility continues to be an among most cryptos, there's no denying the strong year many have had.

Bitcoin (CRYPTO: BTC), the world's biggest token by market cap, may be down more than 30% from its all-time highs hit in November. But it's still up 60% year-to-date.

Ethereum (CRYPTO:ETH) is also down from its November all-time highs, and also still up an impressive 420% in 2021, according to data from CoinMarketCap.

But those gains pale compared to the best performer among the world's top-100 cryptos. That honour goes to Gala (CRYPTO: GALA). With a market cap of US$3.6 billion, it ranks as the world's 42nd biggest token. And it's gained a phenomenal 49,543% this year.

Yep. That's no typo.

But that's the year almost gone by.

Returning to our future outlook…

What can crypto investors expect in 2022?

For the answer to that question, The Motley Fool turned to the experts.

Ian Lowe, CEO of crypto wealth platform Dacxi, told The Motley Fool to keep an eye on the growth in mainstream and institutional inclusion:

Cryptocurrency's role is evolving. Our research shows that the vast majority, 56%, of investors in Australia are investing in cryptos with long-term goals in mind, which goes against the grain of popular media coverage which focuses on 'get rich quick' messages.

That said, 2021 was a breakout year for cryptos. The industry tripled its market cap to US$2.25 trillion in 2021 alone.

2022 does have some major milestones for cryptocurrencies to watch carefully. For example, regulation from major markets like the US and closer to home in Australia. As these regulations take shape, Bitcoin and Ethereum will become strong candidates for inclusion in ETFs and other structured products. This will widen the pool of potential investors into the major cryptocurrencies significantly, which is likely to start happening in 2022.

We also reached out to Jonathon Miller, managing director Australia at cryptocurrency exchange Kraken. Miller told us NFTs (non-fungible tokens) could have a growing role to play amongst cryptos in 2022:

Bitcoin and Ethereum both reached all-time highs in 2021 and global adoption from institutions and individuals has been unprecedented. This is in no small part due to the tremendous growth and excitement around a relatively new subset in the cryptosphere known as NFTs. Kraken's latest analysis showed NFTs saw returns of 42% in November despite the market downturn.

I'm hopeful 2022 will see the further adoption of NFTs, a technology that is still in its infancy and offers a lot of scope for content creators and companies to leverage it.

One of the long tail effects of the surge in NFTs over the past year is that a whole new diverse group of people have become familiar with the underlying technology, blockchain and crypto. With these developments, I'm optimistic we will see greater adoption of crypto in Australia in 2022, in particular with groups that research has shown in the past have yet to adopt cryptocurrencies.

Inflation and record low interest rates

Josh Gilbert, crypto analyst at multi-asset investment platform eToro, also pointed to the growth of NFTs, but added some other key elements crypto investors should watch in 2022.

Gilbert told The Motley Fool:

Inflation is still running red hot, with last Friday's US print coming in at 6.8%, the highest level in 40 years. This will continue to support inflation defensive assets such as crypto in the early part of 2022.

It's expected that there will be an acceleration of NFTs, DeFi [decentralised finance] and the Metaverse next year. Therefore, we can anticipate the crypto market will grow further in 2022.

We're also seeing staking playing an important role in crypto. With interest rates at rock bottom, investors will be looking for alternative ways to earn income and this is something that staking can offer.

If history is anything to go by, this could mean that we haven't quite seen the peak for crypto yet and 2022 could be a key year. History also tells us that bull markets don't last forever, which is why it's more important than ever for investors to remember to do their research and diversify their portfolios in order to protect their investments.

We'll leave off with this snippet from Aaron Brown, former managing director and head of financial market research at AQR Capital Management.

According to Brown (quoted by Bloomberg), 2 big potential tailwinds for crypto in 2022 are things we sincerely hope don't occur!

"Crypto's advantages over traditional finance soar in wartime and financial conflict," Brown said. "The best bets for this scenario are the most established coins – Bitcoin and Ethereum – with large holders in all countries, plus crypto with strong privacy protections, such as Monero and Dash."

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum.  The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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