Crypto became “normalized” in 2021. Here’s what to expect for the economy in 2022

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In 2021, we saw cryptocurrency be used to build generational wealth, companies diversify their portfolios and cash reserves with Bitcoin, and even universities like Penn began to accept crypto for payment of fees. schooling. We’ve heard about Bitcoin mining and NFTs and seen people trying to figure out, “How will blockchain work in space?” The term “metaverse” is back in the air.

As a result, and as we move into the final days of 2021, a handful of faculty from the Wharton School at the University of Pennsylvania gathered on Wednesday to forecast the trends we’ll see in cryptocurrencies, the real estate industry and the economy in general in 2022.

All three areas have seen massive changes in recent years as technology has become more prevalent in our daily lives and the pandemic has changed the way we live and work, they said. The way we look at the world has also become increasingly globalized in recent years, and all three sectors have been affected.

Crypto

One of the fastest growing industries that experienced great maturation in 2021 was cryptocurrency, said Kevin Werbach, professor of legal studies and business ethics. There has been a massive uptick in adoption by retailers, as well as financial institutions such as Square, PayPal, and Robinhood, and this has brought blockchain technology and cryptocurrencies into the mainstream.

“2021 has really been the year of crypto normalization,” Werbach said, with something like half of all cryptocurrency traders in the United States entering the market only last year. . There are now at least 300 million crypto accounts around the world.

As it increasingly gains the attention of the general public, the professor cautioned CFOs and other financial executives against obtaining crypto just for the sake of owning it. Blockchain technology and cryptocurrencies have many advantages, especially for those who conduct global transactions. But the landscape will likely see more regulation in the coming years, as it is also standardized on the institutional side.

We also have no way of knowing its true durability outside of a bubble, Werbach said, amid 80% corrections in Bitcoin and other major cryptocurrencies.

“When you are in a bubble – and we are clearly in a bubble right now – it is impossible to think correctly. It is impossible to recognize that at some point the bottom will fall, ”he said. “And so I don’t know exactly when it’s going to happen, but this shake is bound to happen in the crypto markets and then we’ll see what’s real and what’s not.”

Immovable

The real estate market has also seen two roaring years, as remote working and stay-at-home orders spurred the desire to move to COVID-friendly homes, said Susan Wachter, a real estate professor. While home values ​​have increased by around 15% nationwide, there has also been a push to produce rental housing, she said. Mortgage rates are low, but slowly rising in recent months, and inflation could push rates in 2022 or 2023 towards 5%.

And the pandemic has shown us a clear economic divide between American households. Before the pandemic, people working in non-TV jobs had, on average, about three weeks of cash spending, said Chris Geczy, professor of finance. When the pandemic hit, these households were the most vulnerable, he said. During this time, the majority of those who can work remotely have been able to save money and have extra pocket money.

Inflation

The pandemic and emerging variants of the virus like Delta and Omicron have undoubtedly affected the market, Geczy said. Inflation expectations may still be transitory, although we may feel the effects for a few years.

The professor noted that the challenges of changing supply are certainly at the root of inflation. A survey of CFOs and CEOs found that companies are considering raising their prices because they themselves expect higher prices for the products. We will probably feel the effects of inflation the most in the middle of next year, Geczy said.

“The general and massive improvement in the ‘average’ household balance sheet has been widespread,” Geczy said. “Having said that, one of the areas of concern I continue to have is the rising prices of subsistence products.”

Some striking examples of how these shocks will be felt: The average wage for non-farm workers has risen from $ 28.50 to about $ 31 an hour, while gasoline prices have increased by about 60% during the year. Experts also predict that utilities like energy are expected to increase this winter; The Philadelphia Inquirer reported that local supplier PECO increased its energy load by 6.4% on December 1.

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