Cryptocurrencies: Ethereum will challenge Bitcoin’s hegemony

At the end of 2021, a new cryptocurrency emerged that seemed to come straight from a science fiction novel. Worldcoin offered free digital tokens to anyone willing to have their eyeball scanned. More than 100,000 people have registered. Demand suggests that 2022 could be the year alternative coins challenge Bitcoin’s supremacy.

In today's column we make a series of predictions for the coming year.

Bitcoin remains the largest and best-known cryptocurrency for now. According to CoinGecko, it has a market cap of $887 billion. This is about twice the size of the second largest aether. Amid the usual volatility, prices reached new heights in 2021 on hopes of greater mainstream adoption. In April, cryptocurrency exchange Coinbase listed in the US. The first Bitcoin exchange-traded fund was launched in the US in October. The price of Bitcoin jumped above $67,500 in November before falling back below $50,000 this month.

The uneven price development will continue. The company's interest in alternative currencies is not yet uniform. Tesla explained that holding Bitcoin as an alternative to cash proved its liquidity. It then sold its stake and decided that Bitcoin could no longer be used to purchase its electric vehicles.

The future of all digital tokens still lies with regulators. The U.S. Securities and Exchange Commission has approved a Bitcoin ETF to continue because it holds futures contracts traded on a regulated exchange and not Bitcoins directly. The world's largest crypto exchange, Binance, remains unregulated and unlisted. It has clashed with regulators in Singapore. China announced in September that crypto transactions were illegal. SEC chief Gary Gensler has warned that without further oversight, investors could be hurt.

As watchdogs sidestep, institutions worried that blockchain and cryptocurrencies could eliminate their expensive third-party services will continue to stake a claim on the sector. Governments will continue to promote their own central bank-managed digital currencies.

Both should spur more interest in Bitcoin's rival Ether. Ether is used to purchase non-fungible tokens – now a $15 billion market – and is at the heart of decentralized finance. Their technology does not rely on typical financial intermediaries such as banks.

In 2022, the Ethereum network, where Ether is used, will be upgraded and is expected to be converted to proof of stake verification. This change requires far less energy than verifying Bitcoin's proof of work.

The move was intended to appeal to environmentally conscious crypto fans and encourage them to switch. The long-term bet to win crypto followers favors Ether, not Bitcoin.