Van’s Note: Van Bryan here, Jeff Brown’s longtime managing editor. At the end of every year, I sit down with Jeff to discuss his biggest predictions for the coming year. Remember, you can always catch up on earlier editions in this series by going here.

Today, Jeff and I discuss crypto. We’ll check in on Jeff’s crypto prediction for 2021, I’ll ask what he sees next for the industry, and Jeff will reveal where he thinks bitcoin will go in 2022.

Read on…

Van Bryan (VB): Jeff, let’s talk crypto. To start, let’s check in on your prediction for this year. You predicted that the institutional adoption of bitcoin would increase.

Jeff Brown (JB): And it did. Just as one example, we saw JPMorgan open managed bitcoin and cryptocurrency funds to its clients. It’s a little ironic when we consider that JPMorgan’s CEO, Jamie Dimon, was one of bitcoin’s biggest critics just a few years ago.

It’s also becoming common to see large companies hold bitcoin or digital assets on their balance sheet. MicroStrategy, Tesla, Square – now called “Block” – and MercadoLibre, to name just a few.

We also saw the launch of several bitcoin ETFs. These ETFs tracked cryptocurrency futures, not the spot price. So, there is some nuance there. But it was still a significant moment.

We also saw an incredible proliferation of accounts opening up crypto trading to retail investors in the U.S. and around the world. And Coinbase – the world’s largest crypto exchange – went public.

Taken together, blockchain technology and digital assets just had a year for the record books.

VB: I’d like to speak about blockchain technology in a minute. But for now, I’d like to stick with bitcoin. Some have argued that bitcoin could be a “safe haven” asset to combat inflation. Do you agree with that?

JB: There’s a nuanced answer to that. Because you’re right, inflation in the U.S. is officially above 6%, a 30-year high. And bitcoin, with its limited supply, seems like it could provide a hedge against this.

Everybody sees that their dollars are losing value thanks in large part to all the money printing. And if inflation stays in the range of 5–6%, then I would say that bitcoin and other quality digital assets will perform well. It’s simply a better place to go for yield and capital appreciation compared to other debt instruments that produce income in U.S. dollars.

The nuance comes if we see inflation go even higher. If inflation rates go above 10% in the U.S., then I think we run into trouble. Investors will quickly become “risk off” and digital assets will be seen as risky.

[Van’s note: In a future edition, Jeff and I will discuss inflation and the economy in 2022 in more detail. Watch your inbox for that.]

With all that said, I do predict bitcoin will be trading higher 12 months from now.

VB: Care to make a prediction how high?

JB: I predict that sometime in 2022, one bitcoin will be worth more than $100,000. I don’t know if it will end the year above that level, but I think we’re going to get there next year.

What we’re seeing right now is the continued adoption of bitcoin and other digital assets in the U.S. and around the world. If you view the adoption of blockchain technology through the lens of active wallets, we’ll see that the adoption of this technology is tracking similarly to the adoption of the internet in the early ‘90s.

And right now, bitcoin is still the reserve currency of blockchain technology. It’s where the big money goes. I think the asset will continue to appreciate.

VB: We’ll keep an eye out for that price target, Jeff. I’d like to switch gears now and ask what other developments in blockchain technology caught your eye.

JB: The big story in terms of actual usage was really around decentralized finance (DeFi). We can think of this as basically the next generation of financial services, powered by blockchain technology. Everything from structured debt, lending, synthetic products, and leveraged futures… It all exists now in the world of blockchain.

And one thing that really shows how bullish industry insiders are on this technology is the value of cryptocurrencies that are being utilized in the world of decentralized finance.

This is not some niche market. People are committing billions of dollars’ worth of assets to these DeFi applications. The total amount locked up in DeFi applications is estimated to be around $245 billion.

And this is happening because these investors know that decentralized finance will continue to proliferate. They understand that it has significant advantages over the way things are done right now. And this is going to continue to grow rapidly in 2022.

It was such an extraordinary market in 2021. It will continue to be next year.

VB: What – if any – obstacles do you see for crypto markets?

JB: The big one is regulation. My view is that the regulatory framework around this asset class is inconsistent and irrational. And it’s slowing down the evolution and adoption of blockchain technology.

One of the strangest things to happen this year was that the U.S. Securities and Exchange Commission (SEC) threatened to sue Coinbase if it launched a new product called “Lend.” The product would have delivered 4% yield to investors who hold USDC – a stablecoin – on Coinbase.

SEC Chairman Gary Gensler suggested that this offering would violate securities regulations, suggesting that Coinbase paying interest on a U.S.-dollar stablecoin makes it a security. That’s insanity.

But what’s really encouraging is that the entire industry is taking a stand. After that incident with the SEC, Coinbase took matters into its own hands and thoughtfully put a stake in the ground to elicit a response.

We’re also seeing prominent venture capital firms like Andreessen Horowitz actively communicating with policymakers to advocate for sensible regulations. The energy is growing to the point where sensible regulations are going to become a single-issue voting item for organizations involved in this space.

The industry is rallying together. And the future of this technology – and this asset class – is still bright.

VB: Thanks for your time, Jeff.

JB: Of course.

P.S. Be sure to check your inbox on Monday to catch the next prediction from Jeff Brown. I’ll ask Jeff about the burgeoning field of non-fungible tokens (NFTs), the metaverse, and why neither is a passing fad.

And as Jeff said, he expects an incredible year for cryptocurrencies in 2022. That’s why Jeff recently launched his dedicated crypto research service, Unchained Profits. To get Jeff’s top crypto recommendations for next year, go right here.

Like what you’re reading? Send your thoughts to [email protected].