What does 2022 hold in store for crypto? Prediction roundup

What does 2022 hold in store for crypto? Prediction roundup
Cryptos are expected to trade more independently of each other in 2022. (Shutterstock)
Short Url
Updated 31 December 2021

What does 2022 hold in store for crypto? Prediction roundup

What does 2022 hold in store for crypto? Prediction roundup
  • Crypto decoupling, stablecoin regulation and China's central bank digital currency on the agenda

LONDON: If 2021 was the year that cryptos went mainstream, what next for digital assets?

There are as many predictions for the price of bitcoin and other major cryptocurrencies as there are days of the year, so we won’t even go there but, if previous years are anything to go by, expect more volatility.

Bitcoin more than doubled in price from January to early November, reaching a record $67,554, but has had a torrid time since and was trading on the last day of the year at $48,276, yet still 66 percent higher in 2021.

Crypto decoupling

A trend that has been predicted by numerous industry observers is crypto decoupling, i.e., the idea that not all coins will follow bitcoin up and down but will trade independently based on their own value.

“Different crypto sectors have different value drivers,” according to Messari’s Crypto Theses for 2022. “We’ve gone from ‘everything is a cryptocurrency’ to ‘actually, there’s currencies, fat protocols, DeFi apps, distributed computing platforms, NFTs, work-to-earn markets…’. Discerning investors increasingly look at the actual usage and underlying microeconomics of various networks and trade around their unique growth drivers.”

Bitcoin mining becomes more concentrated

Arcane Research has predicted more bitcoin mining bans in 2022, particularly from countries with weak grids or low energy production capacity, meaning more mining will be pushed to countries with robust grids and plentiful energy supply.

One of the upsides is that producing bitcoin will likely become less of an environmental drain as countries with cleaner grids take up the slack. Downsides could include a less well-distributed mining network.

Stablecoins face regulation

Regulatory attention on cryptos generally and stablecoins in particular has been ramping up in 2021 and 2022 is likely to be a year of action on that front.

Stablecoins, such as Tether and USD Coin, maintain a one-to-one value with fiat currencies, such as the dollar, and are backed by low-risk assets in those currencies. At least, that is what investors had assumed. In October, Tether agreed to pay a fine of $41 million to the Commodity Futures Trading Commission for falsely claiming its tokens were fully backed by US dollars.

Later that month, a major customer of Tether, Alex Mashinsky, told the Financial Times the company lends out new stablecoins in return for cryptocurrencies, further calling into question Tether’s founding promise that it uses only real dollars to issue its tokens.

In June, Eric Rosengren, the president of Federal Reserve Bank of Boston, named Tether as a possible challenge to financial stability. Earlier in 2021, the New York attorney-general, Letitia James, said Tether had lied in the past about its reserves and called its founder and his colleagues “unlicensed and unregulated individuals . . . dealing in the darkest corners of the financial system.”

More countries adopt cryptocurrencies

El Salvador became the first country in the world in 2021 to recognize bitcoin as legal tender. Already more El Salvadorians have bitcoin wallets than bank accounts, according to the country’s president, allowing them to send and receive remittances at lower costs.

While the International Monetary Fund and the World Bank have warned against such moves, citing a risk to financial stability, many other countries are said to be considering similar moves, particularly in South America, such as Panama and Paraguay. They might not adopt bitcoin specifically, but instead introduce a stablecoin or a central bank digital currency, known as a CBDC.

China to launch digital currency

China is planning to launch its CBDC, the e-CNY, in time for the Beijing Winter Olympics in February, and more than 140 million Chinese residents already have an e-CNY wallet, while $97 billion has been transacted in the digital currency through various pilot programs.

Major central banks around the world will be watching closely. While US Treasury Secretary Janet Yellen and the Federal Reserve have expressed no immediate need for a digital dollar, expect a sudden change of direction if the e-CNY seems to be giving China greater influence over global capital markets.


TASI gains momentum as oil prices strike 7-year high: Closing bell

TASI gains momentum as oil prices strike 7-year high: Closing bell
Getty Images
Updated 10 sec ago

TASI gains momentum as oil prices strike 7-year high: Closing bell

TASI gains momentum as oil prices strike 7-year high: Closing bell

RIYADH: Saudi Arabia’s main stock index was up for the eighth consecutive day as benchmark oil prices surged to seven-year highs.  

OPEC on Tuesday stuck to its forecast for robust growth in world oil demand in 2022 despite the omicron coronavirus variant and expected interest-rate hikes, predicting that the oil market would remain well supported through the year, Reuters reported. 

Brent crude jumped to its highest level in seven years, reaching $87.3, and US WTI crude oil traded at $85 per barrel as of 3:30 p.m. Saudi time.

TASI edged up 0.2 percent to close at 12,194 points, whereas the parallel Nomu market was down 0.5 percent to 26,058 points.

Alwasail Industrial Co. and AME Co. for Medical Supplies topped Nomu’s gains on debut, up 30 percent each.

On TASI, real estate developer Red Sea International Co. led the gainers, up nearly 10 percent.

Next, Tadawul group, owner of the Saudi Exchange, added 5.4 percent to reach an all-time high of SR169 ($45).

In the financial sector, Riyad Bank and the Saudi British Bank, or SABB, recorded gains in the range of 4 to 5 percent. However, Al Rajhi Bank, the Kingdom’s largest bank by market value, dropped 1.2 percent.

Shares of Mouwasat Medical Services Co. recouped early morning losses, up 3 percent. This followed the board’s recommendation of a SR2.75 dividend per share for 2021.

Aldrees Petroleum and Transport Services Co. ended the session 0.7 percent higher after posting profits of SR177 million in 2021, a 46-percent leap from a year earlier.

The Gulf’s largest miner, Ma’aden, saw the highest losses in today’s session, down 2.6 percent to SR88.6.


Kuwait discusses ways to cut emissions as temperatures rise

Kuwait discusses ways to cut emissions as temperatures rise
Getty Images
Updated 20 min 26 sec ago

Kuwait discusses ways to cut emissions as temperatures rise

Kuwait discusses ways to cut emissions as temperatures rise
  • The EPA can coordinate with the ministry of finance to allocate the funds needed

RIYADH: The Kuwaiti government has ordered a review into plans to reduce emissions from government projects, Bloomberg reported.

The cabinet told the Gulf state’s Environment Public Authority, EPA, to work on ensuring the implementation of Kuwait’s commitments and international agreements, according to a statement issued late on Monday evening.

The EPA can coordinate with the ministry of finance to allocate the funds needed, it said.

Kuwait has pledged to reduce greenhouse gas emissions by 7.4 percent by 2035, a target far short of the 45 percent reduction needed to achieve the Paris Agreement's expanded target of limiting global warming to 1.5°C by 2030.

Parts of the country could warm by 4.5°C in the period 2071 to 2100 compared to the historical average, according to the Environment Public Authority.

Kuwait is one of the largest carbon emitters per capita and among the hottest countries in the world.


OPEC expects a supported oil market in 2022 despite omicron

OPEC expects a supported oil market in 2022 despite omicron
Updated 30 min 10 sec ago

OPEC expects a supported oil market in 2022 despite omicron

OPEC expects a supported oil market in 2022 despite omicron
  • OPEC maintained its forecast for robust growth in world oil demand in 2022 despite the omicron coronavirus

LONDON: OPEC maintained its forecast for robust growth in world oil demand in 2022 despite the omicron coronavirus variant and expected interest-rate hikes, predicting that the oil market would remain well supported through the year.

In a monthly report, The Organization of the Petroleum Exporting Countries said it expected world oil demand to rise by 4.15 million barrels per day this year, unchanged from its forecast last month.

“Monetary actions are not expected to hinder underlying global economic growth momentum, but rather serve to recalibrate otherwise overheating economies,” OPEC said in the report.
“The oil market is expected to remain well-supported throughout 2022.”

World consumption is expected to surpass the 100 million bpd mark in the third quarter, in line with last month’s forecast. On an annual basis according to OPEC, the world last used over 100 million bpd of oil in 2019.

“While the new Omicron variant may have an impact in the first half of 2022, which is dependent on any further lockdown measures and rising hospitalization levels impacting the workforce, projections for economic growth remain robust,” OPEC added.

OPEC and OPEC+ are gradually unwinding record output cuts put in place last year. At its last meeting, OPEC+ agreed to boost monthly output by 400,000 bpd in February, despite concern about the new variant.

The report showed OPEC output in December rose by 170,000 bpd to 27.88 million bpd, a smaller rise than OPEC is allowed under the deal.


BlackRock CEO defends pushing for value more than profits

BlackRock CEO defends pushing for value more than profits
Updated 47 min 14 sec ago

BlackRock CEO defends pushing for value more than profits

BlackRock CEO defends pushing for value more than profits
  • Larry Fink, chief executive of the world’s biggest asset manager BlackRock Inc. has defended its focus on the interests of society as well as on profits as business sense

BOSTON/LONDON: Larry Fink, chief executive of the world’s biggest asset manager BlackRock Inc. has defended its focus on the interests of society as well as on profits as business sense, but drew criticism from campaigners for not going far enough.

Asset managers increasingly analyze corporate performance on environmental, social and governance-related issues, to bolster returns as policymakers push for greater action over issues including climate change and diversity.

In his annual open letter, Fink built on themes he has raised in previous January missives to CEOs, calling on them to find a purpose and to take account of issues including climate change as part of stakeholder capitalism, whereby companies seek to serve the interests of all connected to them.

“Stakeholder capitalism is not about politics,” Fink said in the letter late on Monday, entitled The Power of Capitalism.

He said it was not 'woke' and did not have an ideological agenda, but was capitalist in that it was based on mutually beneficial relationships.

Fink, 69, defended BlackRock's stance in engaging with companies on the transition to a low-carbon economy rather than divesting, saying the companies cannot be the “climate police” but should work with governments.

"Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero,” he said. “And BlackRock does not pursue divestment from oil and gas companies as a policy.”

While Fink had used previous letters to announce concrete actions by BlackRock, including the introduction of a tougher threshold for some funds to invest in coal, the dirtiest fossil fuel, campaigners said the latest letter was a missed opportunity.

“There’s not much to see here other than more hot air from a would-be climate leader,” said Ben Cushing, Fossil-Free finance campaign manager with the Sierra Club.

“Larry Fink’s latest letter to CEOs is just another rehashing of the same vague rhetoric, without any meaningful new commitment to actually help lead the necessary transition to a climate-safe future," Cushing added.

Nevertheless, overseeing $10 trillion as of Dec. 31, BlackRock is one of the most influential voices in U.S. and European boardrooms, making Fink’s annual letter a must-read.

In Monday’s letter, Fink unveiled plans to launch a Center for Stakeholder Capitalism to create a “forum for research, dialogue, and debate.” The center will help to explore the relationships between companies and their stakeholders, he said.

Fink also said that BlackRock is working to expand an initiative for investors to use technology to cast proxy votes.

“We are committed to a future where every investor – even individual investors – can have the option to participate in the proxy voting process if they choose,” he said.

After years of criticism from activists focused on climate and other ESG issues, BlackRock changed course in 2021 and cast a much more critical set of proxy votes such as backing calls for emissions reports or the disclosure of workforce diversity data.

At the same time the fund manager has faced challenges from conservative U.S. politicians. On Monday, West Virginia State Treasurer Riley Moore said his agency would no longer use a BlackRock liquidity fund, where it kept $21.8 million as of Jan. 6.


Short term US yields surge above 1% for first time since Feb 2020

Short term US yields surge above 1% for first time since Feb 2020
Updated 18 January 2022

Short term US yields surge above 1% for first time since Feb 2020

Short term US yields surge above 1% for first time since Feb 2020
  • Two-year U.S. Treasury yields, which track short-term interest rate expectations, rose above 1 percent for the first time since February 2020

SYDNEY: Two-year U.S. Treasury yields, which track short-term interest rate expectations, rose above 1 percent for the first time since the start of the pandemic in February 2020, as traders positioned for the possibility of a hawkish surprise from the Federal Reserve that could end with four rate hikes this year.

Benchmark 10-year yields rose over 6 bps to 1.855 percent in early trade whereas Fed funds futures dived as markets baked in a hike in March and three more by the end of the year.

The Fed meets next week after a lead-in of comments by officials taken as fairly hawkish by markets, highlighting the central bank’s readiness to act in the face of stubbornly high inflation.

“There appears to be an outside chance that the Fed may want to act a tad more aggressively in the early part of the tightening cycle,” said Eugene Leow, senior rates strategist at DBS Bank in Singapore in a note.

“This could come in the form of ending quantitative easing completely in January, instead of waiting till March. Back-to-back hikes (something not seen since the 2004-2006 hike cycle) may also come into play,” he said.
Today’s moves extend a sharp Friday sell-off, following a market holiday on Monday. The two-year yield is already up 30 bps in January, set for its biggest monthly rise since December 2009.