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Whether you are a longtime crypto aficionado, or just interested in what the future of cryptocurrency has in store for you, you will want to be aware of the most important issues that will affect the industry. These issues include: institutional involvement, regulation, the rise of stablecoins, and the emergence of cryptocurrencies as legal tender.
Ethereum's price has the potential to climb tremendously
Despite the fact that it has been criticized for its lack of upward potential, there is no doubt that Ethereum's price has the potential to climb tremendously. The crypto's price has already surpassed its elder sibling, Bitcoin, on a few key metrics.
However, it is still unclear how much the price will rise in the coming years. There are many factors that can influence the price of ETH. For example, international regulatory frameworks have not always consistently backed cryptocurrencies. And in an inflationary environment, investors tend to stay away from riskier investments.
Nevertheless, the rise of the decentralized finance industry (DeFi) has led to the increased popularity of Ethereum. Developers have started to use the crypto for the development of applications and NFT sales.
ETH's price has the potential to go up tremendously, if the market can find the right catalyst. This could be the introduction of the Ethereum 2.0 upgrade, which will dramatically alter the functional capabilities of the network. The upgrade will improve security, speed, and interoperability. And it will make Ethereum more sustainable.
It could also be the increased adoption of decentralized stablecoins, which are non-custodial financial products. These products are expected to become a big part of the Ethereum ecosystem.
However, the price of ETH is expected to fall by year end. In fact, it could fall to the 800 USD level. And even lower, it could reach the 4200 USD level. That's the psychologically significant level. However, if the market can find a bullish trigger, it could rise to the $2,000 level.
The market will be forced to decide whether to try a stress test for buyers. It will also decide whether to try to retest its historical high.
Bitcoin and Litecoin are likely to become legal tender in the U.S.
Litecoin and Bitcoin are both cryptocurrencies, which means they are not physical assets but digital representations of value. They use sophisticated encryption to keep their value secure. Their transactions are managed by a network of users who participate in the transaction. There are no central banks or governments backing these cryptocurrencies.
Cryptocurrency transactions have increased recently. Although they are not recognized by the U.S. government as legal tender, several states have passed laws related to cryptocurrencies.
Wyoming has passed legislation that will allow for the creation of a new type of bank. This type of bank can act as both a custodian and a merchant, allowing businesses to hold digital assets safely. The bill will exempt the virtual currency from ad valorem taxation and allow state agencies to accept cryptocurrencies as payment.
Oklahoma has passed a bill that will allow for crypto-focused banks to operate in a fiduciary capacity. This is in addition to the digital currency innovation lab pilot project that will extend until a digital currency licensure program is enacted.
In addition to these laws, several state governments have passed bills that have been prompted by the technology behind cryptocurrencies. Some states hope to leverage this technology to stimulate their local economies. Other states are working to create laws that will protect the interests of their citizens.
The Office of Financial Resilience is working to study the potential for economic empowerment zones. It will also develop programs to promote resilient financial models. The office has already issued warnings about cryptocurrencies to several states. It will create a regulatory sandbox to allow for the study of cryptocurrencies.
There are several factors that will affect the price of Litecoin. However, it is projected to increase in price over time. Some factors include halvings, more Litecoin being issued, and a wider variety of uses.
Regulations will be a key issue in 2022
Several states have passed laws pertaining to the blockchain technology. These laws may have the potential to change the way the cryptocurrency market operates. A new regulatory framework could offer companies clear guidance on innovation and how to avoid fraudulent activity.
A consultation is underway for the UK's Law Commission. The consultation paper provides provisional proposals to amend the law on digital assets. The consultation will run until 4 November 2022. The Law Commission is considering whether to classify cryptoassets as a legal asset. It will also consult on how to define and categorise these assets. The proposed changes would classify cryptoassets as a new form of personal property.
The UK government has indicated that it wants the cryptocurrency market to be regulated in the UK. It also appears to be encouraging its use. This could mean that the market will continue to grow in the years ahead.
Regulations will likely be a key issue in the future of the cryptocurrency in 2022. This could mean more stability in the volatile market.
The future of the cryptocurrency in 2022 will also depend on the public perception of the technology. Publicised "crashes" could harden the market's views of cryptocurrencies. In addition, institutional adoption could also impact the price of cryptoassets.
Regulations will likely require regulators to issue policy statements and announce other measures. It is likely that the final legislation will take some time before it is passed. However, the regulatory landscape in the future of the cryptocurrency in 2022 may change depending on the outcomes of the midterm elections. Several states have issued warnings about the crypto market.
Some states have chosen to fast-track crypto regulation. In some cases, the laws are intended to attract companies back into the market. In others, the hope is to leverage the investment of cryptocurrencies to boost local economies.
Stablecoins could be affected by the new legislation
Earlier this year, Chairman of the Securities and Exchange Commission (SEC) Gary Gensler called for tighter regulations on stablecoins. Stablecoins are digital assets, usually backed by traditional currency. They promise investors that they will be stable in value. However, their lack of basic disclosures makes it difficult to gauge risk.
Stablecoins are often issued by nonbank entities. They have raised concerns about financial stability and the ability of consumers to easily convert them to cash. They also lack basic investor protections. The recent market decline has raised questions about the quality of these assets.
In November, the President's Working Group on Financial Markets (PWG) released a report recommending that government agencies strengthen oversight of stablecoins. The report also laid the groundwork for direct federal regulation. However, direct regulation faces opposition from stablecoin issuers and Republicans in Congress.
The PWG report took three months to produce, and the timing of the report suggests that Congress will have a long wait before stablecoin regulations are enacted. There is some disagreement over whether nonbank stablecoin issuers should be permitted to issue stablecoins. The Blockchain Association, which includes Ripple and Circle, opposes this potential designation.
The Financial Stability Oversight Council (FSOC) could designate nonbank stablecoin issuers as systemically important financial institutions (SIFIs). SIFIs are regulated by the Federal Reserve and subject to consolidated supervision. The FSOC includes members of the SEC, the Treasury Department, and the CFTC. Its members must vote to designate an entity as SIFI.
Aside from the Treasury Department and the Federal Reserve, several state-level regulators have taken steps to regulate stablecoins. These include the New York State Department of Financial Services (DFS), which imposes similar requirements on limited purpose trust companies that engage in virtual currency business activities.
Institutional involvement threatens digital currencies' ability to operate outside of traditional finance
Increasingly, the institutional involvement of cryptos is threatening their ability to operate outside the traditional financial system. In fact, this could amplify existing financial stability risks, causing new systemic risks to emerge in some countries.
One of the key challenges for financial regulators is to balance financial innovation with risks to overall financial stability. Typically, entities operating in financial markets are granted a limited scope to undertake specified activities.
Digital innovation is changing the way money is produced, manipulated, and used. Some payment technologies have the potential to supplant central banks.
While some digital technologies are useful, they can also be exploited by governments to expand their reach and increase their powers. Digital technologies may also enable governments to intrude more into private lives. This may intensify concentration of economic power, which could reshape the structure of society.
A key challenge for financial regulators is to balance financial innovation and risks to uninformed investors. Regulatory certainty is critical for the protection of investors.
Ultimately, a coordinated global response is essential to ensure a level playing field. This will require comprehensive implementation of regulatory measures. In addition, the evolution of digital technologies may draw the unbanked and uninsured into investment opportunities, as well as the wealthy into more lucrative returns.
The rise of cryptos has captured the public imagination. However, a market capitalization of just over $2.5 trillion may not fully reflect their economic value. Rather, it may reflect a frothy environment of stretched valuations. The technology underpinning cryptos is relatively difficult to cover by traditional financial regulation.
The digital asset ecosystem could unlock untapped economic value and increase efficiency in transactions. However, the ecosystem would have to be tokenized and a central bank-backed medium of exchange would need to be developed. The market will need to address payment risks, lending risks, anti-money laundering risks, and securities fraud risks.