Over the past few days, there has been a surprising period of calm surrounding digital assets. This combined with a rapidly approaching year-end has investors now looking towards what the coming year will hold. The following are a few events which have the potential to continue an already impressive run in 2021 well in to 2022, and firmly plant digital assets in the mainstream on a global scale.
Arguably one of most important, and intriguing, events to involve Bitcoin from the past years was El Salvador’s decision to make BTC legal tender. This move, which unsurprisingly proved to be divisive within the existing financial system, was heralded by many as being a precursor of what is to come.
Roughly 4 months later, the endeavor appears to have been pulled off smoother than most would have expected. Yes, there were a few hurdles in the initial launch – along with a necessary educational period for those affected – but nothing has imploded as of yet. In fact, El Salvador has continued to expand on its bold plans with the announcement of a soon-to-be built city founded on both supporting, and leveraging BTC.
Given the success of this adoption, in addition to rumblings out of various nations mulling a similar move, will 2022 be the year in which another country follows the lead of El Salvador and makes BTC legal tender?
For years now, companies and investors alike have been critical of regulations – or rather, a lack thereof – surrounding digital assets. Although various nations have been hard at work to remedy this, the process can be a painfully slow one.
Moving forward, most eyes are on the larger, more influential economies like the United States, India, and Russia – each of which are expected to provide clarity in the coming months. At this point it appears as though the United States will be much more accepting of digital assets than India or Russia, with each hinting at potential total bans.
Will 2022 finally bring the regulatory clarity sought by companies and investors surrounding both the classification and treatment of digital assets?
With the recent approval of a futures-based Bitcoin ETF, it seems inevitable that a spot-ETF will be approved at some point. Per the SEC, the main thing holding it back from giving the greenlight, is continued market volatility and potential for manipulation.
Thankfully, for those in favour of a spot-ETF, it is believed that continued adoption (especially from an institutional standpoint) will diminish both of the aforementioned issues. Luckily, spot-ETF or not, this necessary adoption continues to occur at an increasing pace. However, with the United States boasting what is arguably the world’s most important economy, a spot-ETF has the potential to allow game-changing amounts of capital to enter Bitcoin.
So the question is – despite denying scores of spot-ETF applications to date, will 2022 be the year in which the SEC finally greenlights such a product?
Bitcoin does many things well. Unfortunately, blemishes in its functionality have appeared over the past few years, highlighted by its rapid adoption. These include things like power consumption, transactions fees, and network speed. Recognizing these, many of its supporters have switched to promoting the narrative of BTC acting as a form of digital gold. While this may one day be true, BTC has the potential to be so much more.
With the ongoing development of second-layer solutions such as the Lightning Network (LN), there remains hope that BTC will someday boast the ability to truly function as a currency. Promising signs of this are already occurring with many popular services beginning to support the LN.
Will 2022 see the narrative behind Bitcoin shift from being simply ‘digital-gold’ to being a true currency through LN implementation?
Market Reaction & Metrics
With regards to price action, Christmas weekend proved to be entirely uneventful. While there were a few instances in which it looked like Bitcoin may break through recent support, the top digital asset never saw anything below $49,600.
With only a few days remaining until 2022 officially arrives, it is almost guaranteed that Bitcoin will not be hitting the vaunted $100,000 marker. With that being said, stranger things have happened – however unlikely.
Although $100,000 may be unlikely, the top digital asset looks primed to make up some of the ground it has last in the past month, building on a promising few days. This potential for an upwards trajectory is highlighted in the ‘Fear & Greed Index’, which has steadily risen over the past week from a low of 25 (extreme fear), to a current standing of 40 (fear).