Virtual cryptocurrency representations are placed on US banknotes in this illustration from November 28 (Image: Reuters)
The year 2021 saw an exponential growth for cryptocurrencies and digital assets, which remain one of the most risky assets and one of the most promising growth opportunities in 2022.
To get gains from a growing asset class, brokers recommend investing 5-15% of the portfolio in digital assets or cryptocurrencies. Younger traders are advised to invest a higher percentage, according to their risk appetite, brokers said.
According to data from the Securities and Exchange Commission (SEC), cryptocurrencies, mostly Bitcoin and Ethereum, are the best performing asset class in 2021 and are likely to continue generating high returns next year.
Ethereum, the second most popular digital currency, has recorded the highest growth rate this year, rising 417% year-on-year as of December 13. Other high-performing assets include XRP (Ripple), with a gain of 226%. coal (a 104% increase), bitcoin (60.1%) and oil (a 46.9% increase), the Securities and Exchange Commission said.
Cryptocurrencies have proven to be a popular investment trend as the Covid-19 outbreak and the ensuing global economic slowdown have led to a flight to alternative investments, providing huge returns amid the international recession.
With another pandemic wave of the Omicron strain approaching and some countries reconsidering their shutdown mandates, the global economy may not achieve its target growth in 2022 and beyond, analysts warn.
Aekkarat Srisupavichakit, Head of Risk Management and Research Specialist at Zipmex Thailand, said that the coming year will bring a lot of changes to the digital asset industry, both from the point of view of technology, user expansion and new topics.
A customer pays for the meal with Bitcoin at Lim Lao Ngow, a noodle shop in Siam Square One. (Photo: Pawat Laopaisarntaksin)
Five ways to play
Zipmex Thailand has identified five topics for the digital asset industry in the coming year that should be considered to invest safely in cryptocurrency.
The first topic to follow is the metaverse. Originating from movies and books, these virtual virtual worlds are being developed to allow people to openly and securely exchange value or property via cryptocurrencies or non-fungible tokens (NFTs), representing a step forward from the Internet and its limitations.
Global tech giants like Meta (formerly Facebook) anticipate a functioning metaverse by 2022. This theme is a highlight for 2022 as several other companies push for their own virtual world, including Axie Infinity, The Sandbox, Enjin, Chiliz, GALA, and MANA .
The second topic is blockchain infrastructure, which is the technology behind all cryptocurrencies. Blockchain acts as a secure ledger in a decentralized setting and allows access to its information freely.
Instead of trusting an intermediary organization, blockchain allows its users to trust the technology reliably.
As cryptocurrency becomes more widely adopted for investment and new use cases, all crypto-related innovations must use the blockchain infrastructure, says Zipmex Thailand.
Some new applications have seen significant growth this year, such as smart contracts. Ethereum is one example of a cryptocurrency that uses such a service, but there are many others that offer it, including Solana, Cardano, Polkadot, Avalanche, Terra, and Algorand.
The third topic is NFTs. After entering the spotlight in the first quarter of 2021, when it traded at high prices and sparked public curiosity, NFT has since introduced new use cases.
Large companies are increasingly incorporating NFTs to generate additional income, expand businesses, create new opportunities, and build new customer bases.
Zipmex Thailand said the emergence of the metaverse will boost more interest in NFTs in 2022.
Another theme on which NFTs are available is Game DeFi (GameFi), which is a play-to-earn game platform that offers players true ownership of digital units within games, such as Axie Infinity and Enjin.
Games were mainly for entertainment and excitement in the past. Items that could be obtained were available via in-game missions or by paying real money.
However, players cannot truly possess the items because the video game company has retained full ownership rights, and they will be lost forever if you close the game.
GameFi proposes placing such in-game items on the blockchain, ensuring that players take ownership of the digital units. Zipmex Thailand said this new gaming model is an important trend for 2022.
Some platforms like GuildFi offer cryptocurrency in play models to earn.
The company said that Defi 2.0 presents both opportunities and hurdles, and invites us to adapt and prepare for its arrival to make better use of cryptocurrencies and their evolution. Important DeFi 2.0 projects include AAVE, Maker, Curve, and Yearn Finance.
Cryptocurrency prices are displayed on an electronic board at the Bitkub booth at Money Expo 2021. (Photo: Chanat Katanyu)
Suppakrit Boonsat, president of the Thai Digital Asset Association, said that digital assets can be divided into three categories: bitcoin, altcoins, and digital currencies from the project’s ideas.
Since the launch of Bitcoin in 2009, the token has led the cryptocurrency pack in terms of market capitalization and popularity.
Mr. Suppakrit said that since Bitcoin is established, stable and running on a decentralized system, every investor interested in digital assets should include it as a core component of their portfolios. He said that its goal as a fiat-like intermediary gives it the lowest degree of risk among other types of digital assets.
Subakrit said that altcoins should be included in portfolios, but they have a higher investment risk.
This group consists of digital currencies focused on creating a blockchain infrastructure or implementing smart contracts such as Ethereum or Binance Smart Chain.
The third type is digital tokens that are project ideas on the blockchain, which are related to the previous group. He said that these have the highest risk because nearly 90% of the coins in this pool fail, and they also have the highest potential for scams.
There are over 15,000 coins of these project ideas on the market, making it one of the biggest investment trends in 2022 along with NFT, GameFi, DeFi and the metaverse.
In addition, apart from analyzing the risks of each digital asset, investors should also monitor global economic conditions as they can spread positive and negative impacts on asset prices, Subakrit said.
For example, rising inflation may be a boon for digital assets, prompting many countries to implement tight monetary policies that reduce liquidity in global stock markets. He said that low liquidity in traditional assets will convince investors to seek returns in the digital asset markets.
Subakrit said that regulatory risks such as the Chinese government’s crackdown on digital assets could have a direct impact on the prices of Bitcoin, DeFi and other digital tokens.