From Memecoins To NFTs, 2021 Was Crypto’s Wildest Year Yet
Bitcoin closes to $70,000, billions of dollars worth of “Memecoin”, a blockbuster Wall Street listing and a sweeping Chinese action: 2021 was the wildest yet for the cryptocurrency, even by the sector’s volatile standards.
The digital asset started the year with a cash rush from investors big and small. And bitcoin and its rivals were rarely out of the limelight, as the language of crypto became firmly established in the investor lexicon.
Here is a look at some of the major trends that dominated cryptocurrencies this year.
1. Bitcoin: Still No. 1:
The native cryptocurrency held its crown as the largest and best-known token – though not without many challengers on its heels.
In mid-April, bitcoin rose more than 120 percent from January 1 to a record high of nearly $65,000. Fueling this was a tsunami of cash from institutional investors, growing acceptance by major corporations such as Tesla Inc. and Mastercard Inc., and growing embrace by Wall Street banks.
Investor interest was bitcoin’s alleged inflation-proof properties – it has a limited supply – as the record-breaking stimulus package fueled rising prices. The promise of quick profits amid record-low interest rates, and easy access through a fast-paced infrastructure also helped attract buyers.
Symbolizing bitcoin’s mainstream embrace was the April listing of major US exchange Coinbase for $86 billion, the largest listing for a cryptocurrency company to date.
“It is a graduate in the field where it is traded by people who bet on treasuries and equities,” said Richard Galvin of the crypto fund Digital Capital Asset Management.
Yet the token remained volatile. It fell 35 percent in May and hit a new all-time high of $69,000 in November, as inflation soared across Europe and the United States.
Prominent skeptics remain, with JPMorgan boss Jamie Dimon calling it “useless”.
2. The Rise of Memecoins
Even though bitcoin remained the go-to for investors dipping their toes in crypto, a large proportion of new – some would joke – tokens entered this area.
“Memecoins” – a loose collection of coins ranging from Dogecoin and Shiba Inu to squid game that have their roots in web culture – often have little practical use.
Dogecoin, which launched in 2013 as a bitcoin spinoff, rose to a high of more than 12,000 percent in May before falling by nearly 80 percent by mid-December. The Shiba Inu, which refers to the same breed of Japanese dog as Dogecoin, has briefly made its way into the 10 largest digital currencies.
The Memecoin phenomenon was linked to the “Wall Street Bets” movement, where retail traders coordinated online to pile in stocks such as Gamestop Corp, squeezing hedge funds’ short positions.
Many traders – often stuck at home with spare cash during the coronavirus lockdown – have turned to crypto, even as regulators warned about volatility.
“It’s all about raising finances,” said Joseph Edwards, head of research at crypto broker Enigma Securities.
“While assets like DOGE and SHIB may be purely speculative in themselves, the money coming in is ‘Why shouldn’t I earn on my money, savings?’ Coming from the trend.”
3. Regulation: The (Big) Elephant in the Room
As money poured into crypto, regulators saw it as the potential to enable money laundering and endanger global financial stability.
Long skeptical about crypto – a rebellious technology invented to undermine traditional finance – the watchdog called for more powers over the sector, warning some consumers over the volatility.
With the new regulations in place, the crypto markets were prepared for the potential risk of a clout.
When Beijing curbed crypto in May, bitcoin fell nearly 50 percent, bringing the broader market down.
“Regulatory risk is everything because they are the rules of the road that people live and die in financial services,” said Stephen Kelso, head of global markets at ITI Capital. “Regulators are making good progress, they are catching up.”
As Memecoin trading went viral, another previously obscure corner of the crypto complex also grabbed headlines.
Non-fungible tokens (NFTs) – strings of code stored on the blockchain digital ledger that represent unique ownership of artifacts, videos or even tweets – exploded in 2021.
In March, a digital artwork by American artist Beeple sold at Christie’s for nearly $70 million, making it one of the three most expensive artworks ever sold by a living artist ever sold at auction.
The sale started the stampede for NFTs.
Sales reached $10.7 billion in the third quarter, up eight times from the previous three months. After volume peaked in August, prices for some NFTs rose so rapidly that speculators could “flip” them for a profit in days or hours.
A surge in crypto prices giving rise to a new group of crypto-rich investors – as well as predictions for the future of the online virtual world where NFTs take center stage – helped fuel the boom.
John Egan, CEO of L’Atelier, a research firm owned by BNP Paribas, said the popularity of cryptocurrencies and NFTs could also be linked to a decline in social mobility, as young people increasingly draw on their potential for profit as rising Prices hold traditional assets like homes. Out of reach.
While some of the world’s top brands, from Coca-Cola to Burberry, have sold NFTs, the still-patchy regulation meant that big investors steered clear of the big deal.
“I don’t see any situation where licensed financial institutions will be actively and aggressively trading[in]digital assets over the next three years,” Egan said.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)