It's official: Cryptocurrency has gone mainstream in Australia.
Buoyed by the turmoil of COVID-19 and the enormous economic damage caused by global shutdowns, investors poured cash into crypto assets as a form of decentralised finance – or DeFi – hoping that it would be protected from external variables.
Take Bitcoin for example: In January 2021 one Bitcoin was worth just over $38,200. By December 2021 that figure had exploded to $72,300 – an increase of almost 90 per cent.
But the extreme danger of cryptocurrency is its volatility: daily swings of much as 10 per cent are not only common, but expected.
So what does 2022 hold for the future of cryptocurrency? Market analyst at eToro Josh Gilbert told 9News.com.au that he expects to see a continuation of this year's bull market.
"Global adoption of cryptoassets is accelerating at an extraordinary pace and we can expect this trend to continue well into 2022," Mr Gilbert said.
"We're currently in an environment where it's more important to invest when we consider the inflation print experienced in the US.
"Bitcoin has been labelled an "inflation hedge" by some, but the cryptoasset is still in its infancy, and hasn't been tested during a recession, therefore can't be considered as a hedge against inflation for now."
According to Mr Gilbert, cryptocurrency's ascendancy to the mainstream is likely to remove some of its infamous volatility.
"Crypto critics often argue about the real-world use cases and utility for some cryptoassets, however, it's becoming increasingly apparent that they are now hitting the mainstream by entering and gaining a solid foothold in multi-billion dollar industries such as music, gaming, sports and art," Mr Gilbert said.
"In early November 2021, the Reserve Bank of Australia (RBA) referred to crypto and DeFi as the 'future of payments,' highlighting crypto's rapid innovation and technology. They acknowledge that crypto and DeFi can revolutionise the financial industry, whilst democratising finance for the whole world, not just here in Australia.
"I think it may take crypto many years to solidify its place in the overall financial industry, but it's already laying the foundations."
New research shows that more than a quarter of Australian investors now own some kind of cryptocurrency asset as COVID-19 and worldwide inflation concerns push many to invest in decentralised finance – otherwise known as DeFi.
According to the Independent Reserve Cryptocurrency Index (IRCI) 28.8 per cent of Aussie investors now hold some form of cryptocurrency in their portfolio, having increased dramatically from 18.4 per cent in 2020.
The proportion of Aussie women who own cryptocurrency has also doubled, rising from 10.1 per cent in 2020 to 20 per cent in 2021.
"Although Australian regulators and government agencies may have taken a while to get their heads around cryptocurrencies and other digital assets, Australians themselves have sped ahead and we're really seeing that in past year, as an asset class, crypto has gone from the fringe to the mainstream," Independent Reserve CEO Adrian Przelozny said.
"Our IRCI results this year support this, with 28.6 per cent of Australians who don't currently own crypto telling us they would invest if there were better consumer protections in place.
"Another 26.6 per cent said they'd buy crypto if industry regulation was improved."
But like all investments, there's always the chance that riches could turn to rags almost overnight.
"In 2013 and 2017 we saw crypto bull markets and have now experienced this again in 2021. Nevertheless, I don't think we've yet to see the dramatic price action we saw during these periods," Mr Gilbert said.
"If history is anything to go by, this could mean that we haven't quite seen the peak for crypto yet and 2022 could be a key year.
"In the same breath, investors should remember that we may then experience a 'crypto winter'."
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