8 moments that defined crypto in 2021
From El Salvador adopting Bitcoin as legal tender to a $69 million NFT being sold, 2021 was a singular year for the industry.
2021 was a blockbuster year for crypto by almost every measure, growing into a trillion-dollar plus industry and causing a massive wave of financial disruption around the world.
Bitcoin, Ethereum and other “altcoins” all reached new highs beyond their earlier peaks. Institutional adoption accelerated, with a swathe of big-name investors flocking to get in on the action. Non-fungible tokens (NFTs) took the artworld by storm, while decentralised finance (DeFi) projects took aim at revolutionising the financial system.
On the flipside, the meteoric rise of cryptocurrencies put regulators around the world on notice, triggered crackdowns, and increased scamming activity.
Here are some of the key moments that defined the crypto space in 2021:
El Salvador: the first Bitcoin nation
The central American nation became the first country to adopt Bitcoin as legal tender in September after President Nayib Bukele, who has emerged as one of the loudest advocates for the cryptocurrency on the world stage, announced it at a Bitcoin conference in Miami.
Bukele has also shown a commitment to mining Bitcoin with renewable energy from volcanoes, as part of his plan to create a “Bitcoin City” financed by bonds tied to the cryptocurrency.
The NFT bonanza
In March, the digital artist known as Beeple sold his artwork ‘Everydays: The First 5000 Days’ for a staggering $69 million at an auction hosted by Christie’s.
That sale catapulted the concept of NFTs – digital certificates that prove ownership and authenticity – into the mainstream artworld, encouraging artists, creatives and celebrities alike to create their own NFTs.
NFT sales totaled $12 billion over the course of 2021, while NFT marketplace OpenSea surpassed $10 billion in all-time sales in November. With NFTs being an integral part of the Metaverse, they are set to have an even bigger impact in 2022.
Elon Musk and meme coins
Musk made headlines early in February when his electric car manufacturer Tesla announced the purchase of $1.5 billion in Bitcoin and accepted it as payment, only to pull back a few months later out of environmental concerns.
Musk was able to suck up much of the oxygen surrounding crypto through tweets broadcasted to his 66 million followers, which at times ended up impacting the prices of cryptocurrencies, particularly Dogecoin.
For Dogecoin – a meme coin created in 2013 as a joke – it would launch from the margins into the stratosphere, soaring some 5,000 percent over the past year.
When Musk made an appearance on Saturday Night Live in May, the hype surrounding the “Dogefather” sent the token to a record 73 cents before quickly crashing after he dubbed it “a hustle”.
Dogecoin was not the only meme coin that joined the party this year – tokens like Shiba Inu, which briefly topped Dogecoin in market value, came on strong as well.
Coinbase’s watershed listing
Crypto exchange Coinbase’s direct listing on the Nasdaq stock exchange in April was a milestone moment in terms of lending greater legitimacy to the industry, as it became the first company devoted to crypto to debut on Wall Street.
Upon going public, shares of the exchange rose as high as $429, briefly giving it a market value of over $100 billion before it fell back in volatile trading.
Decentralised finance (DeFi) is an umbrella term for financial services on public blockchains, primarily Ethereum, grew in popularity with more sophisticated crypto investors.
Still unregulated and in its early stages of development, DeFi has the potential of contending with the global economy as a parallel system of payments and accumulation of wealth by doing all the things that banks do – earn interest, borrow, lend, buy insurance, trade derivatives and assets – but faster and without third-party interference.
As of November 2020, there was less than $20 billion tied to DeFi projects; twelve months later, DeFi projects were worth over $250 billion – a growth rate of more than 1,000 percent within a year.
Scammers also found ways to profit with new, less savvy users attracted by cryptocurrency’s growth.
According to blockchain analytics firm Chainalysis, over $7.7 billion was stolen in crypto scams worldwide this year, an 81 percent rise compared to 2020.
‘Rug pulls’, a scam where developers abandon a crypto project with investors’ funds, became the “go-to-scam” of the DeFi ecosystem and accounted for over $2.8 billion stolen in 2021, or 37 percent of all crypto scam revenue, compared to just 1 percent in 2020.
The biggest rug pull of the year was Turkish crypto exchange Thodex, whose CEO disappeared in April soon after the exchange halted users’ ability to withdraw funds that were worth over $2 billion.
Increased regulatory scrutiny emerged in the US and elsewhere, as governments were less able to ignore the explosion of digital assets and their use in illicit activities.
China took the strongest steps in its ongoing crackdown, including declarations in September that barred crypto transactions and mining as illegal. India is considering a cryptocurrency ban, while Turkey has implemented measures to block crypto payments.
Meanwhile Central Bank Digital Currencies (CBDCs) continued to pick up steam, with pilots launched in Nigeria, and China’s digital yuan trialed in various provinces.
The Metaverse and Web 3.0
When Facebook announced in October that it was rebranding itself as Meta, it highlighted how much the idea of the Metaverse – part of the internet’s next iteration that’s being called ‘Web 3.0’ – has picked up enthusiasm following the pandemic, as digital and physical worlds progressively merge.
Companies and investors have quickly begun scrambling to gain a foothold in this emerging digital ecosystem, which investment firm Grayscale estimates to be a trillion-dollar revenue opportunity, with revenue from virtual gaming worlds itself growing to at least $400 billion by 2025.
And it’s not just gaming. Leading blockchain project Decentraland, which creates an open-world metaverse where users can play games and purchase NFTs, inked a deal with Barbados in November to declare digital real estate to build what would be the world’s first virtual embassy.
Source: TRT World