It’s near the end of May at the time of writing this post and it is abundantly clear that with BTC down 57% along with the daily dollar volume for NFTs falling by 71% from their highs, we are in a bear market. This begs the question, what events could possibly save the Crypto and NFT markets this year, or potentially even drive them further down into new lower lows?
First, I’d like to quickly mention that all of the events that I review in this article are specific to Crypto as opposed to NFTs, because if money flows back into crypto assets, then it’s only a matter of time before that capital then flows into the NFT space.
Now for the events that could make or break Crypto & NFTs in 2022, you’ll probably want to keep your eyes on the SEC’s approval or rejection of Grayscale’s spot BTC ETF taking place on July 6th, the Merge upgrade for Ethereum that’s “supposed” to happen in August and the SEC’s lawsuit against Ripple that is rumored to end sometime near the end of the year.
If Grayscale’s spot ETF is approved this would send Bitcoin, all of crypto, and subsequently NFTs back into a bull market as it would enable BTC to be exposed to the $24T and $35T that are locked away in mutual funds and pension plans by institutional & traditional retail investors. Now other BTC ETFs have been approved, but most of them have been futures ETFs which only expose investors to the price action of Bitcoin and do not actually remove any BTC from the supply, which is what a spot ETF does. There have been spot ETFs approved in Germany, Switzerland, Canada, and Australia though, but they aren’t nearly as impactful as approval would be in the United States, because the US equities markets manage almost 60% of the world’s wealth. So, approval would mean we’re all driving Lambos soon. But, what about rejection? Would that send us into a selling frenzy? Probably not. The SEC has rejected quite a few spot BTC ETFs, which markets largely ignored when it came to price action surrounding these announcements. Although there is no denying that markets are incredibly fragile right now with the Crypto Fear and Greed Index showing extreme amounts of fear, it’s not too crazy to imagine the denial of Grayscale’s ETF in July creating a selling event as hopes for Bitcoin’s resurgence this year get dashed again.
In news that isn’t related to Bitcoin, I’m personally expecting big things for Ethereum with its Merge upgrade, which will transition it from a Proof-of-Work blockchain into a Proof-of-Stake blockchain. This’ll reduce its energy needs by 99.95% and drastically change its tokenomics by reducing the annual issuance of ETH by 90%. When combining this with Protocol EIP1559 which burns a portion of all ETH used in any transactions, Ethereum could actually become a deflationary asset class if the number of people using it continues to grow. Basically, think of the positive impact that the Bitcoin Halving has had on BTC’s price action over the years, but then imagine that the next halving was 3x as powerful as the previous ones. This is essentially what is going to happen to Ethereum with the Merge happening in August. Although, I do need to add that Ethereum is notorious for delaying their upgrades, so take the timeline with a pinch of salt, we have gotten some positive statements from the ETH development team that we’re actually on target for that August timeline! This would be a huge positive shakeup to the tokenomics of the 2nd largest crypto in the space, meaning that it may be able to “raise all tides” across crypto, which has typically only been something that Bitcoin has been capable of. With ETH having never singularly led crypto markets back into a bull market before, this does make this event a bit more speculative when compared to how sure we’d be that markets would rise if a BTC spot ETF got approved, but with ETH’s market cap & influence over the space, it’s definitely possible. This event does come with some risk though because if the Merge upgrade has issues and Ethereum is compromised in any way, we could see markets absolutely tank as we watch the majority of Dapp’s collapse…so we’re rooting hard for Vitalik and the team!
Lastly, we have the SEC vs Ripple lawsuit that could either act as a shield for the crypto industry from regulatory attack if Ripple wins or set the SEC up to more easily attack the crypto industry with even more lawsuits. I won’t go into the details of the court case in this article, although you can find a great summary of it here, its outcome is incredibly important to the crypto space. If Ripple wins, there will finally be more regulatory clarity around which cryptos are securities and which ones are not. This would make large institutional investors feel more comfortable pouring their money into the space which would help the market, protect crypto developers as they continue to build out this space, and probably result in a large pump for XRP as it gets relisted to centralized exchanges. On the flip side, an SEC win would embolden regulators to attack other crypto projects, teams, and companies in gusto which could really hamper growth and slow down institutional investors from getting into the space with their trillions of dollars.
These are the events that I have my eyes on in the Crypto space for 2022 that could bring back the bull market or push us further into the jaws of the bear, but remember that crypto isn’t alone anymore. It’s now a part of the global economy which has its own host of potential macro events that could make or break the Crypto and NFT markets in 2022/2023.