2022 has been a roller coaster ride for the Cryptocurrency Market. Hopes of reaching another all-time high have not been realized, instead, we were forced to accept that we are indeed in a bear market. Several big crypto companies folded one by one and a lot of investors lost interest in the space.
It did not help that several big names in cryptocurrency, including Celsius and FTX, failed. Nobody can guarantee that we are out of the woods, but the foundation of the next bull market is being built at the moment. Let us try to explore some news that might help pump the market. At the same time, let us also look at some developments that we must be cautious about in 2023.
Oil-Rich Saudi Arabia Blockchain Adoption
The Kingdom of Saudi Arabia is an oil-rich country in the Arabian Peninsula. Its economy is largely based on having the world’s largest oil reserve and the country also holds about one-fifth of all known reserves. According to the latest World Bank figures, Saudi Arabia garnered 19th place in the 2017 Gross Domestic Product (GDP) ranking. Its GDP is estimated to be nearly $700 Billion.
In May 2022, Kucoin released a survey that revealed that a big portion of the Saudi population is adopting cryptocurrency. Around three million citizens are found to have engaged in crypto trading or investing in the last six months. This number represents about 14% of the population aged between 18-60. The survey is also showing that an additional 17% are curious about the digital asset space and could potentially be future crypto investors.
News also came out that the Saudi Central Bank hired former Accenture Director Mohsen Al Zahrani to head its virtual asset and central bank digital currency program (CBDC). This is an indication that the rich gulf state is serious in its plan to explore investment opportunities in cryptocurrency and blockchain technology. In early 2022, it was announced that the country will invest $6.4 Billion in future technologies to secure Saudi’s position in the digital economy.
Kazakhstan Tightens Regulations on Cryptocurrency Mining
Kazakhstan ranks 2nd in Bitcoin (BTC) mining, second only to the United States. Any cryptocurrency development within the country should spark the interest of investors.
The country is set to pass new legislation that will impose corporate taxes for BTC miners and will also restrict crypto mining’s power consumption. This new proposal is worrisome because additional taxes means less profitability for miners. This will make Kazakhstan’s miners less competitive globally.
Power allocation for miners will also be capped at 500 megawatts. Miners will only be able to buy from the grid when there is an excess. The power consumption of miners is estimated to be around 1000-1,200 MW. If passed, the law will help ease up the load on the country’s electrical grid but will burden BTC miners.
Cryptocurrency as Part of Retirement Savings
In April of 2022, Fidelity Investments gave customers the option to put Bitcoin in their 401(k)s, despite appeals from lawmakers. This is good news for the cryptocurrency space since it is a mark of approval from a trusted financial institution.
Fidelity has about $9.6 trillion in assets under management and is no stranger to investing. The company started to study blockchain technology in 2014 and established Fidelity Digital Assets in 2018
In 2020, Microstrategy announced that it will offer Bitcoin in 401(k)s with the help of Fidelity.
This move from a financial giant is going to get a lot of interest. We have to watch out if another company will follow in Fidelity’s footsteps. If other companies follow, then this could raise cryptocurrency’s market capitalization.
Proof-of-stake Digital Assets could be classified as Securities
According to a WSJ report, SEC Chairman Gary Gensler said that proof-of-stake cryptocurrencies could be classified as securities under the Howey Test.
Several top crypto projects are based on the proof-of-stake model. Just recently Ethereum (ETH) transitioned from proof-of-work to proof-of-stake (PoS). Solana (SOL) and Cardano (ADA) are also using PoS.
The cryptocurrency space sees The Securities and Exchange Commission (SEC) as a government agency that likes to overreach into the emerging digital asset class. The notion that a big chunk of crypto assets are securities, thus under the purview of the SEC, is enough to give shivers to investors.
Investors would rather have digital assets be classified as commodities and be under the Commodity Futures Trading Commission (CFTC), which is seen as more crypto-friendly. Until regulatory clarifications are released, this is something that we should keep an eye on.
Possible Cryptocurrency Adoption by South Pacific Countries
Fiji, a South Pacific country of more than 300 islands, may adopt BTC as a legal tender. The prediction came to light when Lord Fusitu’a, a member of the Tongan Parliament tweeted that the new Fijian Prime Minister Sitiveni “Rambo” Rabuka is pro-Bitcoin.
Tonga, Fiji’s neighbor, has plans to mine BTC using the country’s geothermal energy. In doing so, they project that the proceeds of the mining can be used as gifts for their citizens. El Salvador is also using power harnessed from a volcano to mine BTC.
Tonga also expects to have BTC as a legal tender in quarter 2 of 2023. This development is similar to El Salvador’s BTC adoption playbook. If all goes, well the 2 countries will be the 3rd and 4th countries to make Bitcoin legal tender.
Will 2023 be a Better Year for Cryptocurrency?
By the looks of it, a lot of countries are slowly trying to ease their way into cryptocurrency. The Kingdom of Saudi Arabia’s (KSA) adoption of digital assets will surely be seen as a good sign. Aside from its wealth, the KSA is also known to be very influential in the Middle East. Fiji’s and Tonga’s plans are also developments to look forward to.
On the Flipside, Kazakhstan’s proposed tighter BTC mining law threatens the profitability of miners within the country. The stability and security of the BTC network can be compromised if there are too few miners left.
As the cryptocurrency space matures, it will be a target for regulatory agencies. We can only hope that sensible and pro-crypto regulatory clarity is reached within 2023.
Fidelity’s confidence in offering BTC retirement savings is a good indicator that traditional financial institutions are slowly seeing the value of digital assets. Other big names investing in crypto and blockchain technology are something that we should watch out for.
Predicting how crypto will fare in 2023 is hard. A lot of investors thought that BTC will reach $100k before the end of 2022, but instead, the price dropped to $15k. The best thing to do is to keep our eyes and ears open to developing stories. With the right knowledge, we can all make intelligent guesses on what our next moves should be.
Image source: Unsplash (edited)
