As we reach the final weeks of December, the chaotic year of 2021 is already coming to an end.
For Cryptocurrency, this astonishingly successful year drove the industry’s evolution to what is now a multi-trillion-dollar asset. It is hard to believe that just one year ago, Bitcoin was valued under $30k and its runner-up, Ethereum, was only around $700. Not only did cryptocurrency prices skyrocket, but the industry had a breakthrough year for its progression towards institutional adoption and global mainstream recognition. 2021 has been a revelation for the immense possibilities of Web 3.0 and a decentralized world in years to come.
With the explosive adoption of NFTs, the introduction of crypto ETFs, and the emergence of legitimate legal frameworks in many countries, 2021 has set a great tone for the upcoming year. In this article, we will talk about the year in review, going over key events that influenced the industry and get a sneak peek of the most anticipated events for 2022.
Image Source: Wall Street Journal
Setting aside the records that crypto has accomplished this year, it is important to go back in time and see how it all happened. If you are new to crypto, you may not have experienced the bear market in 2018 when the price of Bitcoin dropped more than 80%. Back then, no one really knew the future for Bitcoin and there was a lot of doubt surrounding its recovery. Some labelled it as a FAD and others kept their hope. Although 2019 saw small gains, the real spark came in 2020 when the COVID-19 virus became a pandemic.
While our lives were changing by the day, the transition to digital communication brought public attention to many digital commodities like cryptocurrency. Although our society was destined to become fully digitalized, the pandemic fast-tracked it and the utility of blockchain technology led the charge. With all this attention, the world’s most successful investors and hedge fund managers like Fidelity, Goldman Sachs and JP Morgan started to get in on the action. Even companies like Tesla and Square started to buy Bitcoin and include it on their balance sheet. By the end of 2020, Bitcoin was at its new all-time high and kept marching upwards. This year, Bitcoin started at $40,000 in January, and we saw it climb to a heaping $85,000 in November reaching a market cap of more than $1 trillion for the first time. Bitcoin’s price increase resulted in all-time highs for many other existing cryptocurrencies and sparked the creation of many more.
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While non-fungible tokens (NFTs) may be confusing to many, one thing that is clear is its explosive growth in popularity this year. Before getting into statistics, if you would like to get a better understanding of NFTs, visit this article on our blog page. All-in-all, NFTs introduced the possibility of preserving the value of digital items. If you are an avid follower of mainstream media platforms, you have seen more than enough on NFTs but let’s look at some main projects and events in 2021 that led them to what they are today.
Starting in March 2021, we saw a critical turning point in the NFT movement when Beeple’s project blew up on social media and sold a collage of 5,000 NFTs for a whopping total of $60 million USD. Following this event, other digital artists like Beeple started to gain massive followings creating hype and value for their projects. As well, many well-known companies caught onto the trend and got in on the action creating their very own NFTs. An example of this is Coinbase’s upcoming project. At the time of writing, we see more than 1000 NFTs created a day and anywhere between 15,000 to 50,000 per week. On average in 2021, NFT sales have ranged between $10 million and $20 million USD per week with a couple noteworthy weeks hitting almost $200 million. Overall, the NFT trading volume soared to over $11 billion in 2021 which grew from only $41 million in 2018.
As the year ends, the level of FOMO trailing the NFT craze is at an all-time high, but there are no indications that the market will be slowing down any time soon. Another thing to keep an eye on is the growth of NFTs on the Solana network which immensely lowers fees and may totally change the market in 2022.
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In October 2021, the Bitcoin Strategy ETF became the first U.S exchange-traded fund (ETF) based on Bitcoin futures from the Chicago Mercantile Exchange (CME Group) and approved by the Securities and Exchange Commission (SEC). On October 19th, The Bitcoin Strategy ETF began its listing on the New York Stock Exchange (NYSE) and was available for anyone to trade.
This event attracted a record amount of institutional capital and a big jump in crypto prices. Since then, more crypto ETFs have been introduced to the American market, and they are just starting to make a debut in Canada. On November 30th, A Toronto-based money manager unveiled three new funds coming to the Toronto Stock Exchange (TSX) which will be the first crypto assets trading on a stock market with a monthly yield pay out.
As cryptocurrency continues to transform from a speculative investment to a balanced portfolio stablemate, governments around the world remain divided on how to regulate the asset class. There are many reasons why regulations are being added to the crypto industry, but some include preventing illegal uses of the currencies, cybersecurity/fraud issues and protecting those with low investor awareness. In Canada, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have clarified that crypto trading platforms and dealers in the country must register with provincial regulators. On December 1st, Bitbuy received registration approval from the Ontario Securities Commission (OSC), making it the first registered marketplace in Canada that is also a brokerage of crypto assets. To learn more about Bitbuys regulations, visit this article on Financial Post.
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Another huge step for the crypto industry this year was the talk and execution of Bitcoin as a legal tender in many countries. The first country to fully execute this was El Salvador. For the first time ever, El Salvador acknowledged the capability of Bitcoin to function as an alternative to fiat currency and has put the infrastructure in place to allow its citizens to adopt the digital currency. The goal is to make everyday usage of the blockchain viable for payments such as coffee and so on. This change gives Salvadoran businesses the ability to accept payment in Bitcoin or the U.S. dollar. Known as Bitcoin Beach, a city in El Salvador by the name of El Zonte, aims to become one of the world’s first solely Bitcoin economies.
El Salvador’s President, Nayib Bukele, says it will help Salvadorans save $400 million a year on commissions for remittances, while giving access to financial services to those with no bank account. In the run-up to the launch, the government installed ATMs that allow Bitcoin to be converted into dollars and withdrawn without commission from their digital wallet. While the world is watching, El Salvador will act as the first true test for Bitcoin second layer and may lead to the adoption from many other countries in coming years.
2021 was a defining year for crypto and the listed events above were only the tip of the iceberg for how much the industry has evolved. With January 2022 just around the corner, let’s look at some of the most anticipated events for the industry and discover what crypto’s future may look like.
The first event that we are going to go over is Ethereum’s transition to a Proof-of-Stake (PoS) Model. This transition is set to take place mid 2022 and means the Ethereum Mainnet system will merge with the new Beacon Chain. When Ethereum replaces Proof-of-Work with Proof-of-Stake, there will be the added complexity of shard chains. These are separate blockchains that will need validators to process transactions and create new blocks. The plan is to have 64 shard chains, with each having a shared understanding of the state of the network. This transition should be a huge boost, not only for Ethereum, but the entire market.
With regulations widely discussed in Canada, you can expect conversations about it in America and Europe early in the year. Lawmakers in Washington D.C. and across the world are trying to figure out how to establish laws and guidelines to make cryptocurrency safer for investors and less appealing to cybercriminals. “Regulation is probably one of the biggest overhangs in the crypto industry globally,” says Jeffrey Wang, head of the Americas at Amber Group, a Canada-based crypto finance firm. Once regulations have been put in place, institutions can finally breathe easy knowing that their cryptocurrency is safe, and transactions are regulated by law.
The next topic that may have big news in 2022 is Stablecoins. Governments continue to see the threat and competition for CBDC in Stablecoins, and Tether is still issuing new USDTs without distinct collateral. 2022 has hopes of seeing these Stablecoins come out from the gray zone and become a staple in the industry.
2021 was a whirlwind of a year and yet set a great tone for amazing things to come in 2022. With an adoption rate twice as fast as the internet, doubling year-on-year, crypto is already moving into the early majority phase. Experts say that the crypto market is on track to reach mainstream adoption of 1 billion users by 2025.
