As Bitcoin was invented in 2022, the world of cryptocurrency turns 13 this year. That’s right – it enters into teenagerhood. Like any teenage child, cryptocurrencies still have a volatile temperament and experience growing pains.
Venture capital and other financial institutions have stepped up their investment into cryptocurrencies in 2020 and 2021, flooding the major cryptocurrencies with enough capital to send their valuation skywards.
However, most tokens suffer a valuation setback in late 2021. At the time of writing, a Bitcoin is worth $46,330, which is 28% shy of its all-time high ($64,400) set on 12 Nov 2021.
Looking ahead to 2022, investors are considering how the confluence of different trends and factors will play out in the crypto space. Will the total market cap of all cryptocurrencies continue to rise in 2022? And which tokens will be the winners and losers in the dynamic battle between different blockchains and platforms?
In this article, we’ll focus on the trends to predict the most exciting cryptocurrency to look out for this year.
A quick risk warning first: this article isn’t financial advice. Cryptocurrency is a high-risk asset class and you should only invest money into digital assets that you can afford to lose. It’s possible that the value of a cryptocurrency could go to practically zero. Other risks include the risk of theft of your crypto held at a third-party exchange or the loss of the key to your crypto wallets. You may have no recourse in such scenarios, and you could suffer irrecoverable losses due to the lack of oversight from a centralised regulatory authority. These risks are accepted by the investors who understand cryptocurrency and invest with their eyes wide open to the potential upsides and downsides of holding cryptocurrency.
Best use case – Ethereum
The long-term value of any serious cryptocurrency is intrinsically linked to its use case. The use case of a cryptocurrency refers generally to the number of practical uses for the currency, and the likelihood that those uses will be adopted en-mass.
Remember, the relatively high valuation placed upon leading cryptocurrencies such as Ethereum (ETH), BNB – the crypto that powers the Binance chain ecosystem – and Bitcoin (BTC) is derived from the expectation investors hold as to how much of the world’s monetary supply will be redirected into those cryptocurrencies.
Cryptocurrencies with exciting and credible use cases will receive a higher valuation because they have a higher probability of achieving a reasonable ‘market share’ of the monetary base.
Ethereum has arguably the best use case. Its blockchain is designed to be a universal database and digital enforcement pathway to allow business, data and transactions to be hosted in a decentralised manner. Ethereum allows for ‘Smart Contracts’, which are executable programs hosted on the chain, which could be used to assure two parties of the outcome of a more complex transaction than just a payment.
Defence against critics
Ethereum was created in 2015, and therefore 2022 will be its seventh year of existence. Critics wonder why more of Ethereum’s objectives haven’t been achieved in this time. Isn’t seven years insufficient time for a tech to prove itself to be practical and useful?
They point to high transaction costs and low adoption in the wider world. After all – its blockchain is still underutilized by businesses and smart contracts have not become a key part of real-world contracting.
However, the same criticism could be lobbied at virtually all other crypto projects.
Ethereum has the comparative advantage when defending against this claim because it’s being used to a greater extent than any other crypto project.
By ‘use’, we aren’t referring to simplistic transaction volumes on crypto exchanges, where each day $billions of BTC and ETH are transferred between speculative investors. These transactions are merely a change of the owner and don’t reflect any underlying good or service being ‘bought’ by the payer.
As an example of ‘use’, the Ethereum blockchain hosts Non-Fungible Tokens (NFTs) which have become a speculative craze in their own right. The ability of Ethereum to act like an operating system for other distinct crypto projects is giving investors confidence in its permanence (even dominance) in the crypto landscape in 2022.