It’s fair to say that Bitcoin and other cryptocurrencies have not had the best start to the year.
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A massive flash sale has seen the value of digital currencies slump by more than $300 million.
But the crypto faithful remains unconvinced that Bitcoin and other digital assets will recover to zoom to new heights in 2022.
That’s the opinion of 6,000 investors taking part in a global LinkedIn poll asked which is likely to give the best financial performance out of Bitcoin, other cryptos or non-fungible tokens (NFTs).
Almost a third (30 per cent) believe a rival cryptocurrency to Bitcoin will yield the best investment return, while one in four (25 per cent) plump for a mix of Bitcoin and NFTs and one in five (20 per cent) stick to stock and shares.
Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advice firms which ran the survey, finds the poll results surprising.
“Stocks, which have always traditionally made up the bulk of successful investors’ portfolios, are falling out of favour as a way to create and build wealth, with digital assets taking over,” said Green.
“It’s surprising investors believe that other cryptocurrencies and not the dominant Bitcoin will make more money than any other investment this year.”
He reckons the findings have three key explanations.
“First, investors are predicting that the markets in 2022 will perform in a similar way to 2021. That’s to say that cryptocurrencies, even despite the slump in December, will have another remarkable year,” said Green.
“Bitcoin ended the year up almost 65 per cent, meanwhile, the US Standard & Poors 500 – the benchmark index of the world’s largest economy – managed around 28 per cent growth and gold was down around 7 per cent.
“Second, rising prices from supply-chain bottlenecks and a shortage of qualified workers continues to push inflation up, which is a major concern for investors who can see their spending power eroded by inflation.
“Bitcoin and other digital currencies are widely regarded as a shield against inflation mainly because cryptocurrency is in limited supply not influenced by price.”
“Lastly, investors are increasingly confident that digital currencies are the inevitable future of money. In our increasingly tech-driven, globalised world, it makes sense to hold digital, borderless, decentralised currencies or other digital assets, such as NFTs.”
That mysterious other cryptocurrency likely to do better than Bitcoin is probably Ethereum, says Green.
“More people understand the intricacies of crypto,” he said. “I think that when people taking the survey cited that they believe ‘another cryptocurrency’ would produce better results this year than Bitcoin, they were probably thinking of Ethereum, the second most popular crypto and Bitcoin’s main rival.
“Ether has a higher level of real-use potential as Ethereum – the platform on which it is the native cryptocurrency – is the most in-demand development platform for smart contracts, thereby highlighting that network’s value not only as a platform for developers but as a worldwide financial utility.
“There’s also massive enthusiasm for the game-changing transition to ETH 2.0, a software upgrade which makes the Ethereum network considerably more scalable, sustainable and secure. These upgrades represent a major boost not just for Ethereum but for blockchain technology itself.”
The survey also suggests that NFTs are being increasingly perceived as a future-proof asset class. NFTs are unique digital collectibles grafted onto a blockchain – the same technology on which cryptocurrencies run – creating a unique digital watermark showing ownership and the digital rights to that collectible.
Over the last year, many major global sports franchises, fashion brands and household-name artists and musicians have launched NFTS.
A long-time and high-profile tech advocate, Nigel Green reaffirms that portfolio diversification is the best way for an investor to grab opportunities and smooth risks.
“This poll may be just a snapshot of current sentiment, but it does signal that investors are ready to embrace future-focused digital assets that they believe will continue to outperform other assets in 2022,” he said.
Meanwhile, a separate study by Web3 and blockchain early-stage venture firm Electric Capital Developer looked at how the development of crypto assets is developing.
In a burgeoning sector, the report revealed 18,000 developers were working on crypto projects each month in 2021. Two-thirds of them started work in the year.
Most were working on Ethereum, Polkadot, Cosmos, Solana, and Bitcoin, the five largest blockchains.
The number of developers was up 42 per cent for Ethereum, but only 9 per cent for Bitcoin.
But Polkadot, Solana, NEAR, BSC, Avalanche and Terra are all ahead of Ethereum development at the same point in their existence.
“Ethereum, Polkadot, Cosmos, Solana, and Bitcoin were the five largest developer ecosystems in 2021. Solana broke out with 5x growth, while NEAR moved up to sixth with 4x growth. Polygon, Binance Smart Chain and Cardano all more than doubled their ecosystems in 2021,” said the report.
“Ethereum has the most tools, apps and protocols, with a developer community almost three times the size of the next largest ecosystem and attracts one in five new crypto developers.”
The tiny Central American republic of El Salvador has entered the history books as the first country to adopt Bitcoin as legal tender.
The country was pegged to the US dollar but ditched those economic shackles in June last year.
Now, President Nayib Bukele has hinted that two more countries are ready to move to a Bitcoin economy.
He also announced he believes Bitcoin will shatter the $100,000 price ceiling during 2022 and that he wants to build a Bitcoin city at the foot of a volcano. The city will harness the volcano’s geothermal power for mining more Bitcoin.
The value of Bitcoin and other cryptocurrencies has plummeted this year – starting with a price of $47,196 on January 1. The current price is $43,994 and falling.
Bitcoin hit a record $67,549 on November 8, 2021, and has climbed from a recent low of $29,795 since July 2019.
So far, El Salvador has bought 1,241 Bitcoin valued at $63.21 million since September 6, 2021. Experts reckon the country’s treasury has lost around $10 million on the transactions thanks to the crumbling price of Bitcoin since November.
“What has been called ‘The Bitcoin Experiment’ is nothing more than the world watching how mass adoption changes a country’s economy. If it’s for the good, it’s game over for fiat money. El Salvador is the spark that ignites the real revolution,” said Bukele.
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