What’s shaping the future of the institutional crypto market?

2021 was a large twelvemonth for cryptocurrency. El Salvador became the archetypal state to adopt Bitcoin (BTC) arsenic ineligible tender. In November 2021, the terms of Bitcoin hit an all-time high approaching the psychologically important people of $70,000. And, each on the way, manufacture influencers similar Elon Musk person been tweeting their enthusiasm astir cryptocurrency much broadly.

I expect 2022 volition proceed to beryllium an adjacent bigger twelvemonth for integer currencies arsenic the market grows to reach 1 cardinal people. Here are the 5 astir salient trends that I spot connected the skyline for the twelvemonth to come.

Institutional trading measurement volition grow

2022 volition beryllium a twelvemonth successful which organization and retail cryptocurrency adoption, and trading successful particular, volition proceed to grow. Fintech stalwarts PayPal and Square — on with mobile stock-trading level Robinhood — person each made it easier to buy, merchantability and commercialized crypto. And nationalist companies similar MicroStrategy, Tesla, Galaxy and Square each added important amounts of Bitcoin to their equilibrium sheets successful 2021.

What’s driving this growth? Aside from upward wide momentum, 2 pieces of grounds bespeak the ongoing maturity of the organization crypto market: marketplace headdress and infrastructure.

In 2015, the full crypto marketplace headdress was astir $5 billion. As of December 2021, it’s grown enormously to supra $2 trillion. Bitcoin’s marketplace headdress unsocial was $3.6 cardinal connected Jan. 4, 2015, and its existent marketplace headdress is astir $900 billion. Even the marketplace headdress of fig 2 crypto, Ether (ETH), which has a bigger ecosystem of endeavor applications, is around $400 billion, which is adjacent to Visa oregon JP Morgan Chase.

Even 5 years ago, halfway infrastructure was overmuch little developed successful crypto. Institutions were struggling to recognize however to custody, commercialized and wide and settee crypto transactions successful a reliable, compliant way. There weren’t immoderate existent premier brokers successful crypto. Now the infrastructure is overmuch much developed and institutions person a amended knowing and comfortableness level with the crypto landscape. As such, I expect organization trading volition proceed to grow.

Even so, spot crypto trading volume, particularly Bitcoin, is inactive highly fragmented.

Institutional adoption volition besides accelerate the maturation of the crypto derivatives market. More regularisation volition travel too, which volition beryllium a precise affirmative improvement arsenic agelong arsenic it involves nationalist sermon and is tailored for manufacture products to let for adoption and innovation portion besides gathering regulators’ needs.

Related: What should the crypto manufacture expect from regulators successful 2022? Experts answer, Part 1 and Part 2

In July 2021, Treasury Secretary Janet Yellen urged regulators to enactment quickly to make a regulatory model for stablecoins. Since then, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has besides called for regulation successful this abstraction and indicated this is connected the SEC’s agenda.

More organization work providers and tools volition travel to market

Still, institutions person a captious request for the close services and tools. There’s been a flurry of enactment among startups looking to supply enactment services, specified arsenic crypto plus storage, information and absorption and concern products, arsenic good arsenic mining hardware and bundle and outgo infrastructure.

Multiple companies had raised backing rounds of astatine slightest $300 cardinal by August 2021, including Blockchain.com, BlockFi, Fireblocks, Ledger and Paxos. I expect this to proceed arsenic caller companies look to supply much accessibility into the crypto marketplace than ever before. This, successful turn, volition unfastened caller doors for tiny and medium-sized funds.

Altcoins volition go much popular

Next twelvemonth I besides expect to spot altcoins turn successful popularity arsenic enthusiasts larn adjacent much astir their assorted usage cases. Ether (ETH), for example, is driven by DApp improvement with a robust ecosystem. However, owed to Ethereum’s scalability issues and precocious state fees, it has besides go challenged by blockchain upstarts similar Solana (SOL), Cardano (ADA) and Avalanche (AVAX). Investors spot immense maturation opportunities, portion traders spot volatility and cross-pair arbitrage opportunities.

More broadly, I expect altcoins volition go much fashionable arsenic investors question ways to diversify their crypto portfolios. A study from Nasdaq noted that arsenic of October 2021, determination were much than 100 altcoins valued astatine much than $1 billion, which “[implies] a flourishing integer ecosystem.” While altcoin prices tin beryllium likewise volatile — and investors should bash their probe archetypal — galore altcoins, including Solana and Polkadot, proceed to apical lists of cryptocurrencies with the astir imaginable to go the adjacent large thing.

Related: When and wherefore did the connection 'altcoin' suffer its relevance?

Volume volition displacement distant from Bitcoin into the altcoin Ether and is adjacent present starting to shift. For further proof, look to integer currency plus manager Grayscale Investments, which precocious expanded its portfolio of concern products to include a spot focused connected Solana.

“We person had a beforehand enactment spot to the mainstream acceptance and adoption of crypto and progressively find that investors are diversifying their vulnerability beyond integer assets similar Bitcoin and Ethereum,” Grayscale CEO Michael Sonnenshein said successful a caller statement, adding:

“Our household of Grayscale products volition proceed to grow alongside this breathtaking plus class, arsenic we stay committed to offering investors opportunities to entree the integer economy.”

Regulated DeFi for institutions is coming

Decentralized finance, oregon the emerging ecosystem of fiscal applications that usage blockchain technology, volition person a large twelvemonth successful 2022. The full worth locked (TVL) successful DeFi grew importantly successful 2021.

To date, institutions person remained connected the DeFi sidelines due to the fact that counterparties successful DeFi transactions are mostly unknown. Whether an instauration wants to beryllium a liquidity supplier (LP) oregon commercialized connected a decentralized speech (DEX), regulatory clarity and compliance are paramount. This is wherefore Aave launched a permissioned DeFi platform, Aave Arc.

In astir DEXs, LPs bash not person to walk compliance checks specified arsenic Know Your Customer and Anti-Money Laundering requirements. Looking guardant to 2022, I expect DeFi maturation to accelerate. Two challenges volition apt beryllium addressed: deficiency of regulatory clarity and deficiency of counterparty compliance checks.

Related: From DeFi twelvemonth to decade: Is wide adoption here? Experts answer, Part 1, Part 2, Part 3

More regulatory clarity is apt to look arsenic the SEC and different regulatory bodies supply caller guidance. And caller DeFi platforms for institutions volition summation traction. These platforms volition necessitate LPs and traders to walk compliance checks and volition supply capable liquidity for institutions.

With much clarity and the close platforms successful place, much institutions volition participate the DeFi space.

Security solutions volition go much prevalent

Hacks person agelong been a portion of crypto’s history. In 2014, for example, Bitcoin speech Mt. Gox filed for bankruptcy aft hackers reportedly stole millions of U.S. dollars. Four years later, hackers stole from different cryptocurrency exchange, Coincheck. And successful August 2021, DeFi level Poly Network mislaid $600 million to hackers. MonoX Finance, different DeFi platform, lost $31 million adjacent much recently.

Related: Report connected crypto speech hacks: 2011–2020

Now, crypto exchanges are starting to marque moves to support themselves and thin to spouse with qualified custodians to negociate custody risks. For example, Coinbase acquired cryptographic information company Unbound Security successful November 2021 to heighten its multi-party computational capabilities. PayPal besides acquired different integer plus information provider, Curv. I expect to spot akin deals passim 2022.

The crypto manufacture moves accelerated with galore twists and turns. But 1 happening is sure: The signposts for 2022 constituent to continued growth.

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.

The views, thoughts and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.