Main Trends in the Blockchain Industry in 2022

The value of 2022 for the entire cryptocurrency industry is hard to overestimate. The passing year has brought many ups and downs. A lot of experts’ forecasts seem disappointing, but the crypto industry keeps gaining momentum.

Let’s capture the key trends in the blockchain industry in 2022 and look at the top trends that came into focus.

Crypto Winter

In 2022, the cryptocurrency market endured one of the biggest declines since 2018. Its cap dipped below $900 million momentarily, shrinking by almost $2 trillion in total. Bitcoin lost more than 70% of its value, and its price plunged below $20,000 before stubbornly striving for new local lows. Following the quotations of the first cryptocurrency, altcoins also expectedly showed a considerable drop in value.

The crypto winter of 2022 was sparked by a number of macroeconomic factors, with rising inflation rates being the main one. Global central banks were forced to raise interest rates and tighten monetary policy. Analysts assumed that cryptocurrencies would help offset losses from inflation and falling stock markets, however, the recession drove the downward trend in the digital asset market. The correlation between crypto and stock markets intensified, with the first cryptocurrency following in the wake of the stock market, falling along with the NASDAQ, S&P 500, and other indexes.

The crypto winter led many large companies to start experiencing significant liquidity problems, getting trapped in their own strategies. For example, lending company Celsius Network LLC relied entirely on high interest rates from lending to other cryptocurrency firms. It ended up bankrupting itself instead.

Other events also exacerbated the situation. The FUD attack on Terra in May 2022 resulted in weekly losses of $20.5 billion for investors. The crisis spilled over to the aforementioned Celsius and crypto hedge fund Three Arrows Capital (3AC), so weekly losses reached $33 billion in June 2022. And a few months later, FTX’s collapse destabilized several other major players, including BlockFi and Digital Currency Group (DCG).

However, some experts believe that in the long term, the crypto winter will have a positive impact on the cryptocurrency market. During the speech at ETHDenver in February 2022, co-founder of Ethereum Vitalik Buterin said that crypto winters are a good thing. According to him, they weed out speculators and help shut down shoddy projects, and developers get to work in peace.

Near the end of the year, Binance CEO Changpeng Zhao spoke in a similar vein. In his opinion, “the industry has become healthier” thanks to this year’s events. However, what’s happening in the cryptocurrency market drew significant attention from regulators, who are now planning to tighten control over the sector. On the one hand, it may lead to some restrictions in the future; on the other hand, it may offer additional protection for investors.

Reserve Transparency

In late 2022, the crypto market passed under the scrutiny of CEXs from users who questioned their security after FTX’s bankruptcy. In November, analysts reported a record outflow of BTC from the accounts of centralized crypto exchanges and an increased demand for crypto hardware wallets.

This prompted representatives of several major trading platforms to undergo public audits to prove asset collateralization and make the state of reserves more transparent. Therefore, Proof-of-Reserve (PoR) appeared to be a new trend in 2022, triggering quite a few contradictory opinions in the cryptocurrency community.

Some experts insisted on the necessity and expediency of using PoR. For example, Vitalik Buterin not only supported the initiative but also proposed to improve the algorithm with zero-knowledge succinct non-interactive argument of knowledge (zk-SNARK). Conversely, Jesse Powell, former CEO of Kraken, called the PoR audit in its current form “pointless” and accused crypto exchanges of misleading users.

Binance was the first cryptocurrency exchange to disclose its reserves audit. Yet, its results only provoked more questions about how PoR can boost investors’ confidence in the crypto exchange’s financial state. Hence, Binance experienced the FUD effect, and fund outflows from the accounts exceeded $3.6 billion in a week. The audit results were removed from the official website of Mazars auditors.

Growing Adoption

Despite bearish trends in the crypto market throughout 2022, the adoption of cryptocurrency initiatives was on a high level. Generally speaking, the adoption rate for the current year is down compared to the results of 2021, which was deemed the most dynamic year for the crypto market. Nevertheless, analysts claim that users remain optimistic.

This year, wealthy people started to actively focus on crypto investments. Studies showed that over 70% of millionaires invest in cryptocurrencies and other digital assets. About a third of the world’s richest people are also cryptocurrency investors.

Asia is the most active in the crypto market, where every second private investor already owns some form of crypto. Family offices and high-net-worth individuals (HNWI) in Hong Kong and Singapore are especially active, with more than 90% of them owning digital assets.

However, it’s not only wealthy investors who recognize the prospects of the cryptocurrency market. The popularity of digital assets among people in different countries grew during the year. This year, the most active were:

Saudi Arabia. In 2022, over 14% of the adult population became active crypto investors, a 76% increase from a year earlier;
The United States. About 43 million U.S. citizens own digital assets as of 2022. About half of young Americans are interested in using crypto as retirement savings;
Australia. More than 90% of Australians are aware of cryptocurrencies, and one in four residents owns some form of digital assets;
Nigeria. The country has 22.3 million cryptocurrency owners, accounting for 40% of all crypto users in Africa;
Mexico. Crypto transfers by Mexicans accounted for 4% of all remittances in the country in 2022, and annual demand for this service exceeded 400%.

As for institutional investors, their interest in digital assets was quite high this year. Many large hedge funds added crypto assets to their investment portfolios in 2022. More than 70% of investors believe digital assets are a good long-term investment.

Venture capital investments in the crypto market passed the $20 billion mark in 2022. Representatives of the traditional financial sector also paid close attention to the crypto market. So, the total value of crypto-assets owned by banks around the world reached ~$9.38 billion this year. Financial giants like Goldman Sachs, Morgan Stanley, BlackRock, and others invested around $6 billion in various blockchain projects. In the U.S., one in ten insurance companies is interested in crypto investments. Payments market giants such as Mastercard, Western Union, and Cash App also expressed their readiness to implement cryptocurrency technologies in their services in 2022.

In 2022, some governments officially allowed their citizens to use crypto-assets. For instance, in April, the Central African Republic became the first country in Africa and the second in the world to accept Bitcoin as a payment tool. In February 2022, Ukrainian President Volodymyr Zelensky signed the law “On Virtual Assets,” which was supposed to be the first step toward crypto adoption in the country. And though it didn’t go further than signing the law due to the military conflict that erupted in the country, Ukraine became a leader in the crypto adoption rate in 2022.

Metaverses

The outgoing year was also crucial for developing Metaverse technologies, whose spheres of application are rapidly expanding. Users are increasingly interested in virtual space. According to analysts, the Metaverse sector could exceed $50 billion in four years, and every fourth person will spend at least one hour a day in virtual space.

The race for leadership in virtual reality intensifies among several countries. The UAE, China, Japan, and South Korea demonstrated the greatest involvement in 2022 in terms of Metaverse development.

In June this year, the authorities of Dubai initiated the Dubai Metaverse Strategy program. The project is designed for the next eight years, during which the UAE plans to take a leading position in the race for first place in virtual space. A month later, the Dubai Metaverse featured representative offices of some government agencies, and the Thumbay Group announced the imminent opening of the first-ever virtual hospital. In October 2022, the authorities of Sharjah declared that they planned to develop the region’s tourism industry using Metaverse technologies.

In the late summer of 2022, the municipal government of Beijing announced a two-year development plan for the Metaverse sector, under which the immersive experience will be introduced in the education system and the tourism sector. At the end of the year, Chinese authorities revealed ambitious plans for the virtual reality industry. Thus, China intends to produce up to 25 million VR devices by 2026, and Metaverse technologies were recognized as a key area for the country’s digital economy.

Japan is also keeping up with its competitors. The government policy for the coming years includes the digital transformation of the country, so Metaverse projects can count on public investment. The development of the Web3 sector in Japan will be addressed by the Ministry of Economy, which launched a specialized training course in virtual space at the University of Tokyo in the summer of 2022. Therefore, the Japanese government plans to address the shortage of qualified personnel in the country.

The South Korean government also noted the potential of Metaverse technologies. In February 2022, it announced its willingness to invest $1.8 billion in creating and launching its own Metaverse. It has already released a special guide to the basic ethical principles for Metaverse project participants late this year.

Metaverse technologies are being developed in other countries as well:

The authorities of Catalonia announced plans to launch their own Metaverse;
The Government of the Central African Republic started working on creating a virtual economic zone in the Metaverse — The Crypto Island;
The Metaverse R&D Center began its work in Australia.

In 2022, the demand for trademark registrations related to virtual space began to grow rapidly. The number of trademark applications in the Metaverse sector increased by 51% in June, and it exceeded last year’s figures by the end of August.

Virtual real estate was the most striking trend of 2022 in the Metaverse sector. In 2021, the volume of the digital real estate market amounted to ~$500 million. In 2022, the volume of land sales in The Sandbox exceeded $423 million, while in Decentraland it was $197 million. Analysts predict that the growth rate will only rise in the next few years, and the real estate market in Metaverses will reach $5 billion by 2026.

The following points should definitely be included among the major trends of 2022: