ICYMI: The Block Research’s Analysts: 2022 Predictions
The Block Research team has grown to 32 analysts in 2021, representing a 300% growth from the previous yearOne of the consensuses is that the Layer-2 ecosystem will experience a higher growth rate than Layer-1s
Arbitrum, Optimism, Starknet, and zkSync all release their tokens in H1 2022, and they will outperform similarly to Layer-1s in 2021. Token incentives will cause the Layer-2 ecosystems to amass a large TVL, and cross-L2 liquidity bridges will make the disadvantages over more centralized L1s more manageable. Optimistic rollups will be adopted much faster initially due to EVM compatibility.
The U.S. Securities and Exchange Commission will approve a futures-based Ethereum ETF but will not approve a spot-based BTC ETF. The SEC will also put pressure on lenient listing practices for U.S.-based exchanges like Coinbase. The overall market structure continues to mature, with centralized exchanges of developing countries having a big year. Option volumes continue to grow as more banks incorporate crypto offerings into structured products.
'Security through obscurity' will continue to be the main reason for the small number of exploits on non-EVM chains. However, it will be long until attackers come in and successfully attack projects on WASM and other VM chains due to insufficient security experts. Many narratives like liquidity mining or prediction markets will disappear, as happened with gambling and decentralized computations in 2018. A possible market drop will somewhat dampen developers' interest in overhyped topics and allow them to return to creating truly innovative products on blockchains.
Geo-blocking will become a norm for centrally hosted DeFi frontends, whereas an increasing number of protocols will develop alternative frontends with decentralized hosting solutions. As crypto native investment firms continue to raise nine to ten-figure funds, expect token launch, unlock, and major exchange listing dumps to intensify following the shift in dominance to institutional capital. Successful new protocols will adapt by being more creative about airdrop and access qualifications, enforcing stricter lockups from early investors, and generally being more diligent around decentralization and distribution to earn community support.
Ethereum will also see increased institutional inflows compared to Bitcoin, primarily led by the shifting ESG narrative with the transition to PoS. New institutional players enter the stablecoin race. USDC supply flips USDT supply. Macro turbulence spills over into crypto as long-term rates rise. Regulatory concerns come back into focus in H2 2022.L2s will begin to dominate the space once their token launches. ZK-rollups are likely to dominate over optimistic rollups from Q3 2022 onwards, considering the relative maturity of both technologies currently.
We will likely see a macro environment with tighter monetary and fiscal policy than 2020 and 2021, leading to rotation away from high-risk assets and tempered price action in crypto. Increased commoditization of L1s and L2s will mean that winning protocols will be those that can truly differentiate in terms of user experience, fees and security.
While gaming will be a leading trend for 2022, many developers will realize how different and challenging game design is . As a result, projects who bandwagon into"gaming" will struggle to match expectations. Further, other projects will struggle because there is a big difference between a DeFi project with a game as a secondary component and a more traditional game with blockchain aspects built into it, for example, item ownership via NFTs or P2E aspects as core game mechanics.
Subsequently, there will be an emergence of 'middle-man' protocols that act as brokers and land appraisers between land sellers and buyers, owing to the high information asymmetry due to on-chain illiteracy. A US-based spot Bitcoin ETF will not be approved in 2022. The SEC will delay decisions on spot Bitcoin ETF applications dragging out the approval process and ultimately rejecting all spot Bitcoin ETF applications in 2022.
People will start to see ETH as the token and currency of Web3, creating upward price pressure. But the structural shift in activity from Ethereum to L2s as well as sidechains will create downward price pressure on ETH. L1 protocols that showed astronomical growth in 2021 would now have to undergo competition with the L2 protocols.The overall crypto market may suffer during Q1 2022 due to the rapid tapering and risk-averse attitude of investors. However, I think that the market will return to a bullish environment before Q3 2022 with the recovery of the macroeconomy and NFT technology overwhelming the narrative of the market.
Overall, tokens will start decoupling, and crypto will see sector rotation similar to global equities. The NFT market will resurge out of its lull, with monthly NFT trading volume surpassing its previous ATH in Q1 2022. In the process, capital will rotate back to"blue chip" NFT projects, such as Art Blocks or CryptoPunks. In addition, NFT trading activity will continue to proliferate across chains, bolstering the relative strength of burgeoning NFT ecosystems on other chains.
ETH2.0 will happen in 2022. Ethereum hashrate will continue setting new records after passing the 1 PH/s threshold until a firm deadline for the proof-of-stake switch is decided. Before that actually happens, Ethereum will remain the top option for GPU mining. There will be a dump for graphic cards around the time of the switch on the secondhand market, but other proof-of-work coins could also see a big boost of hashrate.
NFTs volumes continue to trend down overall, and the hype for"metaverse" projects turns out to be premature. However, a new use case for NFTs will become the dominant portion of the market, dethroning collectibles and gaming.
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