Crypto is the future.
Some enthusiasts think crypto will transform everything. Others think it’s a get-rich-quick scheme and that NFTs are just JPEGs. What’s the big deal?
The big deal is this: institutional adoption is rising and bigger players in finance (and government) are starting to pay attention. Earlier this year, the Biden Administration and the White House publicly announced a new focus on crypto.
And the US isn’t the only nation thinking about crypto — 100+ other countries are exploring the idea of developing their own Central Bank Digital Currencies, “CBDCs” for short. Because crypto moves so fast, it’s hard to keep up with the trends that matter.
But we’ve our best to lay out 3 trends we’re paying attention to in 2022:
- Institutional adoption
- Bitcoin spot ETF approval
- More crypto regulation from governments
Let’s dive in …
Institutional crypto adoption
It’s only a matter of time. 2021 was a record year for crypto and it’s easy to focus on retail adoption. However, there was just as much action at the corporate level too.
Last year companies like Meta and Microsoft set their crypto strategies, taking massive bets on the metaverse. Even non-tech companies like Nike have set their strategies, with Nike even developing their own “virtual products.”
While these companies seek out revenue opportunities in crypto, institutional investors see the promise in crypto too. Many are considering adding crypto to their portfolios as an asset. This past September, experts surveyed global institutional investors. They found that 62% of those with no crypto exposure planned to start investing in the coming year.
This would follow a private markets trend from 2021 when VC firms put almost $30 billion into crypto — more than all previous years combined.
As for 2022: watch for more of these 3 trends on institutional adoption:
- Public companies setting crypto strategies
- Institutional investors adding crypto to their portfolios
- VC firms backing more crypto projects
Bitcoin spot ETF approval
October 2021 was a monumental moment in crypto. ProShares launched the first Bitcoin futures ETF on the New York Stock Exchange under the ticker BITO. It was a strong signal that investors have long-term interest in crypto.
While some were excited for the moment, it left others wanting. Yes — a Bitcoin futures ETF allows investors to gain exposure to Bitcoin through traditional exchange. But it’s not quite what investors are asking for.
What they really want is a “[Bitcoin spot ETF](Bitcoin ETFs Explained)”, which would tie directly to the current trading price of bitcoin.
Up to now, the SEC has received plenty of applications for ETFs based on the price of bitcoin and other cryptocurrencies. To date though, it hasn’t approved any of the applications. But as institutional interest grows and applications continue to pour in, 2022 could be the year that investors could trade bitcoin on a regular exchange.
Time (and the SEC) will tell. March 2022 Update: the SEC continues to delay their decision on Bitcoin spot ETFs.
More crypto regulation from governments
Regulation isn’t always a bad thing. For professional investors, it might mean a cleaner tax code, opening up additional revenue possibilities.
For other market participants, it might mean more security for their own wealth because trading tools and cryptocurrency apps would have to adhere to safer regulations. Both of these would boost adoption and bring more people into the crypto economy.
There’s good news too: the SEC, CFTC, and Treasury Department are paying attention and calling for new regulations. Even the White House has prompted organizations to examine crypto and find a useful way forward.
On March 9, they published this fact sheet on White House website. Here’s the high level details:
“President Biden will sign an Executive Order (EO) outlining the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.”
Specifically, the EO will focus on these areas:
- Consumer and investor protection
- Financial stability
- Illicit finance
- U.S. leadership in the global financial system and economic competitiveness
- Financial inclusion
- Responsible innovation
What does this mean in practice? We don’t know yet. But one thing is clear: crypto has caught the eyes of the largest economy in the world.
Staying up to date with crypto trends
At Allocations, we’re trying our best to keep up with crypto too.
We recognize the role that crypto plays in the work of a solo capitalist. Specifically, we see possible a near future where:
- solo capitalists use crypto payments for settlement
- fund managers raise and deploy crypto-native funds
- crypto funds use platforms like Allocations for their fund administration
Right now, we’re in the research phase but we’re excited to launch crypto products tailored to fit the modern solo capitalist’s needs.
Until then, follow us on LinkedIn for:
- Allocations product updates as soon as they launch
- The latest trends in private markets
- Helpful content for solo capitalists
And for further reading on crypto, check out Coindesk’s Crypto Explainer+ — where beginners can get up to speed about crypto.
Disclaimer: The information provided in this document does not, and is not intended to, constitute legal, tax, investment, or accounting advice; instead, all information, content, and materials available are for general informational or educational purposes only and it represents the personal view of the author. Please consult with your own legal, accounting or tax professionals.