Retail adoption of crypto set to grow in 2022?
In 2021, consumers flooded into the crypto space. According to Grayscale, a digital currency investing and cryptocurrency asset management company, 55% of all Bitcoin investors have got started in the last year. But will this continue into 2022?
We asked our resident Luno experts what we can expect in the new year.
Bitcoin has certainly moved from niche investment and into the mainstream, with adoption increasing around the world and even across the generational divide. Christian Zeiler-Muñiz, Luno’s General Manager in the US, says: “The 50-year-old mom in Arkansas is now interested in crypto as well. She may not have invested yet, but she’s read about crypto. Adoption is getting broader.”
This is perhaps best evidenced by people’s search histories, with Google’s Trends data showing searches for cryptocurrency having skyrocketed over the past year. The number one question, though, is why now? What’s changed?
First, there’s the increased awareness we’ve seen over the last year. A number of established players have been busy making their presence felt in the crypto space, with household names like business intelligence giant MicroStrategy’s CEO Michael Saylor, Tesla CEO Elon Musk, and ex-Twitter CEO Jack Dorsey all banging the drum. These have introduced crypto to a whole new audience. They’ve also brought a new level of credibility and trustworthiness to the space.
Crypto’s success has also become self perpetuating in terms of awareness. It has meant more investment flowing into the space than ever before, helping companies to produce bigger marketing campaigns and spread the word about crypto far and wide. Zeiler-Muñiz notes: “The space is being flooded with capital coming with people spending money on branding and advertising. The impact of this is only just beginning to be felt, with many major campaigns and sponsorship deals yet to even start. These could bring another wave of attention to crypto in 2022.”
Nowhere can this be seen more clearly than in sport, with massive sponsorship deals worth hundreds of millions of dollars, such as for the Staples Center in Los Angeles or FTX Arena in Miami. In tandem, many professional athletes are opting to take their salaries, or at least portions of their salary, in bitcoin, including Aaron Rogers of the Green Bay Packers and Cad Cunningham of the Detroit Pistons. These sponsorship deals and athlete endorsements encourage fans to learn about crypto and get involved. This has all further added to the feeling that this is now becoming a ‘serious’ space.
It’s not just the extra awareness driving crypto’s growth. Much of the reason for cryptocurrency’s rapid growth in popularity this year has been down to societal changes. Luno UK country manager Sam Kopelman says the COVID-19 pandemic and stimulus programmes implemented around the world to neutralise its economic impact has also played a role in people looking to diversify their portfolios and safeguard their savings: “As inflation rates continue to climb following widespread financial stimulus, more people will begin to explore cryptocurrencies as a way to generate and protect their wealth.
“The majority of Brits (48%) save money in individual savings accounts. However, with interest rates at rock bottom, consumers in 2022 will become increasingly aware of the tiny returns they are receiving and will pay more attention to their finances than ever before. Ultimately, consumers will be driven by frustration at traditional financial institutions to explore cryptocurrencies like bitcoin and ether to beat inflation.”
If interest rates stay low next year and inflation rises, could people pivot toward crypto as they look for security?
More countries set to get on board?
The ultimate sign of credibility for many in the crypto space is adoption at a national level, so there was understandable excitement last year when El Salvador made Bitcoin legal tender.
Luno’s VP of product, Alex Koller, however, argues that as disruptive as El Salvador’s introduction of Bitcoin in September has been, Koller isn’t convinced other countries will be rushing to make bitcoin legal tender quite yet. Though it may be the beginning of the beginning.
“If you zoom out, there are little ripples for what is going to come. The Lightning Network has made payments using bitcoin a far quicker and more straightforward proposition. There are also companies like PayPal making it possible to pay in and accept crypto for goods, Twitter enables users to accept tips in crypto, and so on. There was a whole bunch of excitement and some merchants are accepting it, but generally speaking they’re still in the minority. I don’t see cases like El Salvador happening in the next year or so.”
Education, education, education
While awareness and credibility has certainly increased for crypto, for many it’s still a lack of education about cryptocurrency among the public at large that’s holding it back from mass adoption. Kopelman believes one of the biggest adoption challenges to overcome in 2022 is precisely that – knowledge:
“For a successful and long-term transition to these new assets, education will be key. This coming year, the crypto industry will need to focus its attention on crypto education to give people the confidence and conviction in their investments. Barriers must be broken down by providing customers with simple, transparent and easy to understand information.”
Once users gain the knowledge and confidence to get started in crypto, Kopelman says education shouldn’t end there: “It needs to be an ongoing thing. Users need to know how to spot scams, understand the nuances behind environmental concerns, and misconceptions about volatility.”
Onwards and upwards?
2021 has certainly been a turning point for crypto. Luno’s Head of PR, Roopa Ramaiya, explains that “The market has matured from a space that was once solely occupied by early adopters to starting its ascendancy into mainstream adoption. There’s no denying that it has become a dinner party conversation starter.”
At the same time, Ramaiya says crypto will reach adolescence in 2022, with new challenges to overcome:
“Like a teenager, life is getting more complicated for crypto. The promise and hype that came before is starting to become a reality; institutional investors and big tech companies all want to be in on the action, but it’s only blurring the lines of what crypto is and what crypto isn’t.”
What remains to be seen is how long crypto’s teenage years will last. The factors that aided and abetted it in 2021 are not going to vanish on New Year’s Day, and new ones will appear next year. If regulators and educators play their part, perhaps the path will be even less stoney than it was in 2021.