What Are the 3 Biggest Obstacles to Crypto Adoption in 2022?

Looking Back at 2021

The year 2021 felt like a Web3 and cryptocurrency turning point. As a community, we’re unpacking the term, insofar as it describes the most recent transition of the internet, and we now know that internet native money is a key pillar to its success.

There is, unsurprisingly, tension amongst factions of Web3 around what it is, what it could be, and if it has utility beyond the realm of venture capital (VC). Both sides have a point. The Web3 community believes in the potential power of blockchains like Ethereum (assuming they can reduce cost while increasing speed), and the Bitcoin community thinks that decentralized finance (DeFi) isn’t nearly as decentralized as it claims to be. What seems to be happening in the crypto community is a fundamental disagreement between the merits of Proof of Stake (Pos) blockchain projects and Proof of Work (PoW).

Many of you have likely noticed that the eponymous Jack Dorsey is now free from his leadership role at Twitter, and is now staking his claim as a Bitcoin heavyweight.

Let’s briefly take a look at 2021 through the lens of retail and institutional investment in the cryptocurrency space. From there, we will better understand what we need to accomplish in 2022.

Retail x Institutional

We onboarded thousands of new users to the Bitcoin network, ENS domains (.eth) seemed to be everywhere, blockchain based play-to-earn gaming reached new heights, NFTs started to show signs of mainstream adoption, and some of the cryptocurrency sector heavy-weights (productively) testified in front of congress.

In the Bitcoin markets, one fascinating 2021 development was that the number of BTCholders with less than 10 BTC continues to rise dramatically. For those who were concerned about Bitcoin’s wallet concentration, this is good news for an increasingly robust network, as more small retail users continue to invest what they can in the asset.

Obviously, we still have significant whales in the space, but identifying more wallets with smaller sums coming on to the network is great. On-chain analytics became big business this year!

If we zoom out and look at the adoption curve more broadly, the story is the same. Much has been made of the comparison of cryptocurrency adoption to the speed of the adoption of the internet itself.

In the chart below, you could draw a parallel between our moment right now in crypto and the internet of 1998 by total users. Note the growth trend. It’s almost identical. If we want to look ahead, we need to understand where we are right now. Put yourself in 1998. We’re still so early.

Institutions got involved in 2021! Whether it is major TradFi (traditional finance) players offering crypto custody services, the approval of ETFs (the only spot approval we saw was in Canada!), putting Bitcoin on the balance sheet, or throwing their hat into the ‘metaverse,’ ring, it was a big year for institutional recognition of everything the crypto space stands for. What they’re latching onto is experimentation, creativity, and an industry that is still in it’s exciting infancy.

Three Big Obstacles for 2022

Although the cryptocurrency space (yes, I’m talking about DeFi and Bitcoin) has seen an explosion in relevance and adoption in 2021, the story is far from over.

Questions like, “Will we have the same year in 2022?”, remain. Is the trend line still up-and-to-the-right? Maybe the explosive growth of 2021 in spot price, isn’t actually what we will see in 2022, but more the legitimacy and mainstream-ism of the industry as a whole.

It begs the question, are there obstacles or milestones we’re looking for in 2022?

Let’s take a look at three interesting obstacles to navigate over the course of 2022.

Obstacle #1: Is Bitcoin’s 4-Year Cycle Over?

I recently listened to PlanB and Willy Woo debate whether or not Bitcoin’s 4-year cycles were, in-effect over, on the Blockware Intelligence Podcast by Will Clemente. It was totally fascinating. One side of the argument (the former) suggests that it is Bitcoin’s very nature to ebb and flow as per the halving cycle, and the other (the latter) suggests that with ‘mainstream-ism’ comes an evolution of the asset, such that the halving cycle doesn’t affect spot price as much as it has, or as predictably as it has, historically.

There’s evidence to suggest that Willy may be correct here. November and December 2021 will be the first two months where the, now infamous, Stock-to-Flow (S2F) model from Plan B will fail. Does that floor-price miss signal the end of an era or will the model continue to function as it has in the past?

Of course, the halving cycle itself will continue, as baked into the core DNA of the Bitcoin protocol, but the point of debate is whether or not spot price will continue to ebb and flow in those same terms. Either way, 2022 could be a turning point for Bitcoin.

Obstacle #2: Are the Institutions Here?

Two prominent members of the Bitcoin-Twitter community had a public disagreement around whether institutions would be announcing major Bitcoin adoption in 2021.

Regardless of what happened in 2021 (behind the scenes or publicly) Mike Alfred is almost certainly going to be correct in 2022 (he may have been right all along).

In 2022 we’re looking for more TradFi players to offer crypto custody services, more ETFs and investable funds offered to their clients, major private sector businesses putting crypto on the balance sheet and more companies joining the blockchain-based ownership space, like NFTs. It’s going to be fascinating to watch.

Obstacle #3: Where Does Legislation Go Next?

It was fascinating to see the crypto brass testify in front of congress. Yes, fascinating in the sense that each public servant would likely need a translator to understand the gigabrain of Sam Bankman-Fried, are likely intimidated by Alesia Hass, and were subsequently schooled by Brian Brooks (who I believe ‘won’ the day). But even more fascinating in that the day was so productive!

Legislation, to many, equals legitimacy and public recognition of an industry that is going nowhere. It will be fascinating to see where regulation goes in 2022.

Happy New Year!