2022 has been a challenging year for crypto investors so far. While the crypto market did stage somewhat of a recovery in July, the market value of most cryptoassets and non-fungible tokens (NFTs) is still down significantly year-to-date. Bitcoin, for instance, is down approximately 50% year-to-date at the time of writing. Macroeconomic factors, such as surging inflation, rising interest rates, and lower economic growth, as well as geopolitical crises, have been key drivers of the volatility in the crypto space. Other issues, such as Celsius Network and Three Arrows Capital filing for bankruptcy and Coinbase laying off staff, have also contributed to the weakness across the asset class.
However, despite the recent turmoil in the market, many investors remain optimistic about the future of crypto. Take William Cai, Co-founder and Managing Partner of the New York-based investment firm Wilshire Phoenix, for example. Cai — who previously managed billion dollar portfolios at JP Morgan — says that the latest crash doesn’t necessarily point to the downfall of crypto. He believes that the crypto market has been following economic conditions and the stock market recently, and that when these start to recover, cryptoassets’ performance should improve too.
Another thing that could certainly help crypto going forward is regulation. Right now, lawmakers around the world are looking to establish laws and guidelines designed to make cryptoassets safer for investors and less appealing to cybercriminals. While there’s still a long way to go, we have seen some major progress on the regulatory front in 2022. In the US, President Joe Biden recently signed an executive order that called on government agencies to study the “responsible development” of digital assets, including stablecoins. Meanwhile, in Europe, regulators recently hammered out the final details of a sweeping package of crypto regulations known as “Markets in Crypto Assets” (MiCA). Better regulation should ultimately reduce some of the volatility in the asset class and add a layer of protection for investors.
Further institutional adoption could also bring about more use cases for everyday users, and in turn, have a positive impact on crypto prices. While paying for goods and services in cryptocurrencies does not make sense for most people right now, the situation might be different in the future if more retailers start to accept these payments.
One cryptoasset that has enjoyed a nice bounce recently is Ethereum. It is the second-largest cryptocurrency after Bitcoin and the best-known altcoin in the market. Like Bitcoin, it can serve as a good measure of the crypto market. Looking ahead, the outlook for this digital asset appears to be attractive. In September, Ethereum was set to experience a massive upgrade known as “‘The Merge.” This upgrade, designed to make the network more efficient, faster, and cheaper to use, could boost the cryptoasset’s appeal.
Those looking for exposure to cryptoassets may want to check out Smart Portfolios such as CryptoPortfolio, which weights cryptoassets by market cap, and CryptoEqual, which provides equally weighted exposure to a number of digital assets.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.
This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.