#ARYBLOG: The future of Bitcoin

To the delight of many Bitcoin opened in 2021 with a strong performance and saw a rapid increase in both adoption and interest throughout the year.

The crypto had many milestones, from the first Bitcoin-linked exchange-traded funds (ETFs) to major companies announcing they would accept it as a form of payment but then rescinding it, in Tesla’s case.

While Bitcoin closed the year lower than many expected and is off to a slow start in 2022, it’s important to note Bitcoin outperformed other assert classes in the previous year including
commodities, stocks and gold.

It is expected that going forward, the prospects of correlations to settle at these new
higher levels are bright as there is no reason to expect them to revert to a zero correlated asset. Like commodities though, despite modest positive correlations, Bitcoin should
still act as a portfolio diversifier.

Bitcoin is continuing to unleash new ways for more people and people who have never had access to banking, to pay and connect with global ecosystems. Because it is a young asset, and because it is only being adopted now in a big way, it is to be expected that there will be correlation with equities but longer term, this adoption will likely play out in a way in which
Bitcoin will be seen as a hedge and thus, the correlation with equities will diminish.

Moreover, Bitcoin, as it continues to grow in adoption, will likely see itself transformed
into a risk-off asset, not unlike digital gold but this will take time and further adoption.

Though there appears to be a tussle between regulators about the matter but it is expected
that finalising an approach to stablecoins will continue to be a major focus for regulation in
2022 and stablecoin regulation is the most likely regulatory action to be seen in 2022.
While, it is unlikely to see a comprehensive legal framework for crypto in 2022 given the
complexities of the issue and a seeming partisan divide, but movement on stablecoins given is expected with laser focus on potential risks.

There is growing support among regulators to address stablecoins and this is an arena in the crypto industry that is likely to receive relatively swift and, hopefully, constructive regulation. Such regulations can include something akin to insurance, not unlike bank deposits, as well as clearer metrics and guidelines for stablecoins to be backed by dollar and dollar-like assets.

The crypto industry would welcome something like this, in general, and so there could be a lot of movement here in a positive direction for the current year. It is often mentioned that many of the cryptocurrencies currently traded should likely be treated as securities. Moreover, Bitcoin lending products may be in scope for securities regulation and that staking a proofof-stake currency may also be in scope.

Bitcoin is most famously known today as a non-sovereign-backed store of value like a digital form of gold. BTC rewards credit cards, which were rolled out by some companies in a
limited fashion at the end of 2020, entered the mainstream in 2021.

‘Get paid in Bitcoin,’ or Bitcoin payroll, has been topical with public figures and professional athletes throughout 2021. It is expected that 2022 is the year that getting paid in Bitcoin can cross the sidelines and be available to the broader public.

2022 is going to be the year for global cryptocurrency adoption as entrepreneurs begin bridging the gap between decentralised currencies and the centralised world through underlying technologies.

Usability is currently a major roadblock in the quest to bring Bitcoin payments to the masses: custody, on-off ramps, difficulty with accessing funds on mobile phones, and interfaces not designed for the target demographic. As the industry rapidly evolves, it is expected that products that provide users with a seamless way to move decentralised, fiat and digital currencies in and out globally without middlemen, eliminating the major barriers to entry that currently exist and allowing the broader public to pay and get paid via cryptocurrency.

What is actually witnessed is an already-regulated space where crypto businesses are required to build out risk-based compliance controls and there is more visibility on financial flows than was experienced before.

This visibility on the block-chain allows law enforcement to trace the flow of criminal proceeds and allows regulators a birds-eye view of their regulated ecosystem.

In 2022, more clarity on regulations would emerge. Bitcoin spawned a revolutionary innovation that is seeing all kinds of novel products coming to market that, in turn, bring tremendous value to people around the world.

Indeed, the rapid rate at which adoption of Bitcoin and other crypto-assets is happening
suggests that, though these are earlier stages of a fast-growing industry that is poised to
experience massive growth over the coming year.