The Golden Moments of Crypto in 2021
It’s been a record year for the cryptocurrency markets, which very briefly surpassed $3 Trillion in value in November. What a moment it was for everyone, especially the Bitcoin Maximalists.
Bitcoin, the largest cryptocurrency by market value, and Ethereum, the second-largest, hit their respective all-time-highs, while Alt-coins, like meme-inspired Dogecoin, Shiba Inu surged in popularity.
Other digital assets, like Non-Fungible Tokens, or NFTs, sold for Millions of dollars alongside fine art in major auction houses like Sotheby’s and Christie’s. In addition to art, NFTs representing in-game assets and digital land soared in value as well.
Blockchain-based applications, including Decentralized Finance, or DeFi, garnered interest from both retail and institutional investors, pushing the growth of Web3, which is the decentralized iteration of the internet based on blockchain technology that powers NFTs and underpins cryptocurrencies.
All of this helped push cryptocurrency into the mainstream in 2021.
Though there were countless defining moments this year, here are some key highlights.
Bitcoin surpassed $1 Trillion in market value for the first time
On February 19, Bitcoin hit $1 Trillion in market cap for the very first time. The milestone came after major institutional investors and notable financial companies began to support the cryptocurrency earlier in the year. Companies including Tesla, Square and MicroStrategy started to use their Balance sheets to buy Bitcoin.
Interest in NFTs exploded after Beeple’s $69 Million sale
When Mike Winkelmann, the artist known as Beeple, sold his piece called “Everydays: The First 5000 Days” as an NFT in March, it was historic for a number of reasons.
For one, the sale made Christie’s the first major auction house to sell a fully digital, NFT-based piece of artwork. Also, for the first time, Christie’s allowed ETH as payment for the artwork’s principal price. And the $69.3 Million sale price for the NFT was record-breaking at the time.
This sale prompted mainstream coverage of NFTs that wasn’t seen before.
Overall in 2021, the NFT market had its “best year yet” with over $23 Billion in trading volume, a report by analytics platform DappRadar found. Blockchain-based Metaverses had over $500 Million in trading volume and in-game assets represented as NFTs garnered $4.5 Billion in trading volume.
China banned cryptocurrency — again
In September, the People’s Bank of China confirmed its continued crackdown on cryptocurrency.
According to a Q&A on its website, the PBOC said that all crypto-related activities are illegal in China, including services such as trading digital assets, order matching, token issuance, and derivatives. In addition, overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said.
China’s renewed crackdown on Bitcoin mining throughout the year pushed the market elsewhere, and in October, data from the University of Cambridge showed that the U.S. became the No. 1 destination for Bitcoin miners.
The data stated that 35.4% of Bitcoin’s hash rate, which is the collective computing power of all miners, was in the U.S. as of July, overriding China for the first time. Cambridge also found that China’s average monthly share of the global hash rate in July zeroed out, which was a major reversal from September 2020 when China captured about 67% of the market.
The crypto markets bounced back in a big way within a few weeks itself, leading to Bitcoin and Ethereum posting respective all-time-highs
El Salvador adopted Bitcoin as Legal tender
In June, El Salvador passed a new law to adopt Bitcoin as legal tender, becoming the first country to do so.
The law allows Bitcoin to be used as payment for goods and taxes in El Salvador. Businesses can price their goods in Bitcoin, and exchanges will not be subject to capital gains tax.
Ethereum launched EIP-1559 and prepared for the merge to Eth2
In August, a major upgrade to Ethereum went live. The upgrade, called London fork, included Ethereum Improvement Proposal (EIP) 1559, which changed the way transaction fees, or “gas fees,” are estimated. It also started the reduction of ETH’s supply, thus paving the way for the deflationary tokenomics for ETH
Additionally, Ethereum developers prepared for the network’s upcoming shift to a Proof of Stake (PoS) model through a number of upgrades throughout the year.
Currently, Ethereum operates on a Proof of Work (PoW) model, wherein miners must compete to solve complex puzzles in order to validate transactions. This model gets a lot of criticism for its environmental impact since it requires an extreme amount of computer power. Also, it slows down the transactions and the gas fees go through the roof.
In 2022, Ethereum plans to shift to a Proof of Stake model, where users can only validate transactions according to how many coins they hold, rather than the energy-intensive mining rigs used now. This move is part of the merge to Ethereum 2.0 or Eth2.
Eth2 will be hugely impactful since it will change the Ethereum infrastructure and ultimately make mining obsolete.
Ethereum competitors earn market share
As demand for Ethereum, the most used blockchain network, surged this year, other projects emerged in an attempt to compete.
Two include Avalanche and Solana, both of which launched in 2020 as platforms for smart contracts and the creation of decentralized applications. Each of their tokens, AVAX and SOL, respectively, jumped into the top 10 cryptocurrencies and earned market share among the rest.
As a result of competitors such as these, the total value locked (TVL) on DeFi increased seven times year-over-year, surpassing $200 Billion, DappRadar reported. However, almost 60% of the TVL still remains on Ethereum.
Elon Musk contributed to Dogecoin’s record high
In May, just before Elon Musk made his “Saturday Night Live” debut, the price of Dogecoin began to spike. On May 8, the day of Musk’s SNL appearance, Dogecoin hit an all-time high of about 73 cents, according to Coin Gecko.
But its price quickly retreated from that peak. As Musk appeared on the show, dogecoin fell as much as 29.5% and dropped to 49 cents at one point.
This was representative of the roller-coaster run that Dogecoin had all year, most of which had to do with Musk. The Tesla and SpaceX CEO has been a consistent supporter of the meme-inspired cryptocurrency. Dogecoin’s rally first began in February after a series of tweets from Musk, and since, he has continued to hype up the digital coin.
The first U.S. futures-based Bitcoin ETF launched
In October, the ProShares futures-based Bitcoin ETF made its market debut on the New York Stock Exchange under the ticker “BITO.”
The Bitcoin futures ETF tracks contracts that speculate on the future price of the digital asset, rather than the current or “spot price” of the cryptocurrency itself. As a result, the prices of the ETF and Bitcoin don’t necessarily match.
Nonetheless, the ProShares Bitcoin futures ETF saw one of the biggest first days on record for ETFs.
The first Bitcoin upgrade in four years activated
Taproot, a highly anticipated upgrade to Bitcoin, went into effect in November. It was Bitcoin’s first major upgrade since 2017.
Taproot introduced what’s called Schnorr signatures, which help Bitcoin transactions become more private and efficient, and less expensive. Most importantly, the upgrade better enables Bitcoin to execute smart contracts or collections of code that carry out a set of instructions on the blockchain.
DAOs enter the mainstream
In November, DAOs, or decentralized autonomous organizations, caught the attention of mainstream media after ConstitutionDAO raised over $40 Million to buy a rare copy of the U.S. Constitution at auction.
Though Billionaire Ken Griffin, CEO of hedge fund Citadel, outbid ConstitutionDAO, it brought attention to DAOs, which were previously only known by the crypto community, to the masses and gave a glimpse of what innovations may come in 2022.
Over $600 Million was stolen in a record DeFi hack
In August, DeFi platform Poly Network was hacked. Initially, over $600 Million was stolen.
Experts said that the hacker was able to exploit an issue within the network’s code. Though the hacker ultimately returned the stolen funds, it was one of the biggest cryptocurrency thefts ever.
This kind of fraud was not uncommon throughout the year. Over $7.7 Billion was stolen in cryptocurrency scams worldwide in 2021, according to a report by blockchain analytics firm Chainalysis. That’s an 81% rise compared to 2020.
Rug pulls, a type of scam where developers abandon a project and leave with investors’ funds, became the “go-to scam” of the DeFi ecosystem, Chainalysis wrote in its report. In 2021, rug pulls accounted for over $2.8 Billion stolen, or 37% of all cryptocurrency scam revenue, compared to 1% in 2020.
Metaverse came into the limelight
After Facebook announced the change of their name to Meta, it woke up the sleeping coins – SAND, GALA, MANA, etc. These coins have been around for quite some time but had not picked up any momentum. Ironically, the much-needed trigger from a centralized entity – Facebook.
Immediately after the news, other entities woke up too, including the VC community – which started pouring crazy amounts of money in funding any company which had the word “meta” in their company name or doing anything close to Metaverse. FOMO effect caught with the Venture Capital firms as well.
Does this mean that next year we will buy land in the virtual world and that we will invest our digital assets in buying clothes for our avatars in the Metaverse? This may not come in 2022, but the foundations are being laid for a very exciting new reality, and those pioneering users who offer their support to successful projects will find themselves in an advantageous position in years to come.
New blockchain projects focused on Metaverses will emerge, and we will get to participate in coins that could offer some very interesting and unique investment opportunities
So, that’s it, folks. That’s a wrap on 2021
See you all in 2022 – Have a fantastic New Year with your friends and family.
