After record growth in crypto, investors can’t wait to see what 2022 has in store for the still-emerging industry. Bitcoin (BTC) gained 60% in 2021, outpacing major risk assets including the S&P 500, up 27% year-on-year. Looking ahead, investors and analysts remain optimistic about the institutional and individual adoption of crypto. But the rapidly spreading Omicron variant and the tight monetary policies of global central banks have blurred the view on the performance of major crypto assets.
Former Wall Street trader Wilfred Daye, who serves as the CEO of crypto firms Enigma Securities and OkCoin Securities, explains his views and answers questions about the upcoming crypto market.
A brief look at the past year of the crypto market
In the US, the Federal Reserve is expected to cut bond purchases this quarter and potentially raise interest rates in early March, after the highest inflation figure in nearly four decades. This is seen as a big headwind for the crypto market, with some predicting another long downturn.
On the other hand, a growing number of investors are predicting a divergence between Bitcoin and protocol tokens that empower lucrative activities such as decentralized finance (DeFi) and Non Fungible Token (NFT). For example, the native Ethereum token (ETH) has far outperformed Bitcoin with 392% returns over the past year. Other smart contract platforms, including Solana (SOL) and Avalanche (AVAX), also achieved good rewards last year, at around 9,568% and 3,111%, respectively, according to CoinGecko data.
Wilfred Daye’s views on Bitcoin and altcoins
With the market in a sea of red, many are predicting another multi-year crypto winter. How do you make sense of the current market environment?
I don’t see a crypto winter. Recent stock and crypto market actions are the result of macro risk aversion sentiment due to the new Omicron variant of Covid-19 and the Federal Reserve’s hawkish views combined with year-end profits as it enters a low liquidity holiday. Basically, we are seeing significant institutional participation in the crypto market, as evidenced by the growing competition among regional banks launching crypto-related service offerings. NFTs and the metaverse add additional use cases to a blockchain-enabled economy.
What is your market outlook for the next year? Any price predictions for Bitcoin and ETH? What are some credible tokens high on your radar for 2022?
As Ethereum transitions to Proof of Stake in the second half of 2022, I continue to see ETH as a leading layer protocol. As ETH Proof-of-Work (PoW) miners are phased out, I expect the ETH staking yield to rise even higher, providing a more attractive interest-bearing tool for investors. All predictions may be wrong, but just for fun: 85%-90% annual volatility of ETH, $7,500 up and $2,400 down for ETH; BTC’s volatility is lower, with $80,000 up and $30,000 down.
How do you see the Facebook-driven boom on the metaverse base? How about the latest virtual land grab that sees digital land parcels sold for millions of dollars?
I think Metaverse will be a next generation social media, streaming and gaming platform. Total addressable consumer spending to make money is about $8 trillion. Digital collectibles and NFTs like real estate will grow into a next-generation metaverse, but they won’t significantly replace physical items anytime soon.
Considering some recent congressional hearings, crypto regulation has been at the forefront. What do you think should be the focus of legislators and policy makers when it comes to regulating the sector?
Regulation continues to catch up with the ever-evolving cryptocurrency and blockchain industry. Stablecoin regulation is one of the most important areas to focus on. In 2021, stablecoin-adjusted transaction volume on the public blockchain was over $5 trillion. I expect the stablecoin market cap, backed by regulated stablecoins like USDC, to exceed $0.5 trillion by 2022.
What are some key crypto-related themes and events on your radar for 2022?
Spot crypto EFT
Ethereum Mainnet will ‘merge’ with Beacon Chain
Regulation on DeFi and stablecoin asset complex
Issuance and trading of security tokens in the Alternative Trading System
Crypto staking as a consumer product
Crypto company M&A