The crypto market has had a terrible first half of 2022.
From their peak prices in late 2021, bitcoin and Ethereum have fallen by more than 50%. Despite some minor gains in recent weeks, the cryptocurrency market as a whole is mainly stagnant. Although no one can be certain, several experts believe that cryptocurrency values may fall considerably further before a sustainable rebound.
Multiple new all-time high prices for bitcoin were reached in 2021, followed by significant declines and more institutional investment from significant firms. Late last year, Ethereum, the second-largest cryptocurrency, reached its new record high. However, in June, it fell below $900, its lowest point since the beginning of 2021. The Biden administration and U.S. government representatives have shown an increasing interest in new cryptocurrency legislation.
People continue to be interested in cryptocurrency, and it has become a hot topic in popular culture thanks to everyone, from seasoned investors like Elon Musk to that Facebook friend from high school.
According to Dave Abner, head of global development at Gemini, a well-known cryptocurrency, 2021 was a “breakthrough” in many aspects.
However, the sector is still young and continually changing, which largely explains why any new high for bitcoin can quickly be followed by steep falls.
What will happen in the remaining months of 2022?
Long-term forecasting is challenging, but shortly, industry professionals will be watching developments like institutional acceptance of cryptocurrency payments and regulation to try and gain a better understanding of the new market.
Regulation of Cryptocurrencies
Expect ongoing discussions on cryptocurrency regulation as lawmakers in Washington, D.C., and throughout the world attempt to develop rules and laws that will make crypto safer for investors and much less desirable to hackers.
U.S. government representatives have expressed a strong interest in stablecoin regulation, particularly in light of the recent Terra Luna crash. The stablecoin TerraUSD (UST) debugged from the dollar in May due to the collapse of the cryptocurrency markets, which also brought about the collapse of Luna. This stablecoin was linked to the collapsed cryptocurrency.
As a result, many investors from Terra and Luna saw their money disappear within a short period. Within a few weeks of Terra’s failure, the cryptocurrency market crashed again. As a result of the dire market conditions, several crypto companies announced layoffs and froze withdrawals to reduce costs. Since then, some businesses have declared bankruptcy, including Celsius and Three Arrows Capital.
That had a cascade effect, which later gave federal regulators more ammunition to argue for crypto regulation.
Strict regulation may be coming soon after the disastrous events that have occurred in the cryptocurrency market over the past few months, according to Marcus Sotiriou, a financial analyst at digital asset brokerage GlobalBlock. “The failure of Defi lenders may be the justification policymakers have been seeking to impose harsh regulations on cryptocurrencies.”
Even though there is still more to be done, there have been significant regulatory advancements in 2022. The “responsible development” of digital assets, including stablecoins, is the subject of an executive order that President Joe Biden signed in March and directed federal departments to investigate. In response to President Biden’s executive order on digital assets, the U.S. Treasury Department recently released the first framework outlining how the U.S.
Potential Effects of New Crypto Regulations on Investors
Although the idea of cryptocurrency regulation can be contentious, many experts believe it will be beneficial to both investors and the sector as a whole.
Increased regulation may lead to excellent stability in the famously unstable cryptocurrency market. As long as it hits the appropriate balance, it may safeguard long-term investors, stop fraudulent conduct inside the crypto ecosystem, and offer clear guidelines to encourage business innovation in the sector.
Increasing Institutional Cryptocurrency Adoption
In 2021, mainstream businesses from several sectors showed interest in cryptocurrencies and blockchain technology; in some cases, they even made their investments.
For instance, AMC declared that it would take Bitcoin as payment last year. By enabling customers to purchase on their platforms, fintech businesses like PayPal and Square also place a bet on cryptocurrencies.
Even though the corporation has billions of dollars worth of cryptocurrency assets, Tesla embraces Dogecoin payments and is still undecided about accepting bitcoin payments. Experts anticipate an increase in this buy-in.
What Increased Crypto Adoption by Institutions Means for Investors
While most individuals don’t currently see the benefit of purchasing with cryptocurrencies, the situation may change as more merchants begin to accept them.
Although it may take some time before buying goods or services with bitcoin will be a wise financial move, increased institutional adoption may lead to more applications for regular consumers and affect the price of cryptocurrencies.
Nothing is inevitable, but if you purchase cryptocurrencies as a long-term reserve of value, the greater the likelihood that demand and valuation will rise as it finds more “real-world” applications.
To sum up, crypto may be a cryptic investment, but it has stood the test of time with massive gains since its inception.
If you should get involved, that’s up to you. However, the future of cryptocurrency has a lot of regulations and mass adoption in a few years to come, and to not miss out now would be the best time to hop on.