As 2021 draws to a close, some are disappointed that Bitcoin hasn’t hit the $100,000.00 mark that PLAN B promised us, and others are celebrating the biggest year crypto has ever seen.
- 2021 was a pivotal year for crypto!
- Blockchain products like NFTs or DeFi gain more traction in global markets.
- 2022 continues to be bullish, with several narratives in play.
We started Crypto Banter in November 2020, with the sole purpose of bringing 24/7 live, credible crypto content to degens and crypto-newcomers alike.
Our channel exploded! In less than a year, we became the largest live video channel in the world, and built the strongest and most loyal community in crypto! 2021 was a great year for Crypto Banter and it was a great year for crypto!
Even though Bitcoin didn’t quite hit $100K this year and Ethereum missed the proverbial $10,000 mark, we do have a lot to celebrate in 2021.
2021 in our rearview mirror
2021 was by far the best year Bitcoin has ever seen!
Bitcoin hit $1trillion market cap, nation states adopted Bitcoin as legal tender, leaders bought the dip, listed companies put Bitcoin on their balance sheets as an inflation hedge, and a Bitcoin futures ETF got approved. Mining power finally migrated from China, Bitcoin hit 10% of gold’s market cap, the biggest funds and richest people in the world publicly declared their support and holdings for Bitcoin, mostmajor banks announced plans to offer Bitcoin to their clients, and Jack Dorsey resigned from Twitter to pursue more Bitcoin related interests…and this was just Bitcoin.
In crypto as a whole, total market cap surpassed $3 trillion, Ethereum made major progress towards ETH 2.0, NFTs became mainstream in under six months. Meta is entering the metaverse, $260 billion is locked in DeFi, Axie Infinity pioneered play-to-earn, Solana is in the heat of a never ending summer, Cardano finally launched smart contracts, and Polkadot successfully launched the first five parachains. Paypal, Visa and Mastercard are in a race for crypto payments, Doggie coins made millions of millionaires, Luna is halfway to the moon,
XRP is beating the SEC, stable coins have a $150bn market cap, Binance is finally doing KYC, and Melania Trump is launching her very own NFT collection on Solana!
And there are still 10 days left of this year!
Let’s dig a little deeper.
The long DeFi summer
DeFi came into the spotlight in 2020, with Ethereum native protocols like Aave and Compound opening up blockchain usability to new markets. Users got access to new financial products without relying on a middleman to approve their transactions and we all became yield farmers. The DeFi summer lingered on into 2021, with new protocols exploring new DeFi applications.
Ethereum saw its position as a DeFi ruler lose steam after exorbitant gas fees killed its momentum. 373.8 ETH was the highest Gwei price, and users were still paying it. Other instances saw Ethereum charge more than four-digit fees for small transactions before the EIP-1559 upgrade.
DeFi turned to Gen 3 smart contract platforms like Solana, AVAX, Polygon or Binance Smart Chain because they offered lower fees and faster transactions. The TVL on protocols except Ethereum reached US$99 billion, with LUNA now firmly in the number 2 spot. DEFI is now bigger than just DeFi on Ethereum.
Crypto is king!
Vertical adoption of cryptocurrencies ramped up in 2021. El Salvador made history when it adopted Bitcoin as a legal tender. In addition, cryptocurrency companies partnered with iconic establishments to boost global crypto awareness. According to Chainalysis, the global adoption index has increased by 881% since Q2 2020. If that doesn’t paint a clear picture of crypto adoption, we don’t know what does!
The number of crypto users reached 271 million on 4 November 2021.Bitcoin transactions have settled more than $12 trillion (yes, trillion) this year, and the state of the market is only improving.
Increasing use of decentralized crypto wallets like Metamask or Phantom illustrates retail investors are starting to understand and use crypto. Both wallets have seen staggering user growth. Solana’s Phantom alone increased by 500% in just three months, and has room to grow.
Traditional financial organizations aren’t waiting on the sidelines to be overtaken by an ownerless protocol. Oh no… They’re fast recognizing crypto as an opportunity they can bank on – very capitalistic and counterintuitive to crypto, we know, but it helps with adoption in the long run. Visa made it possible for users to make payments using crypto, and PayPal enabled users to buy, sell or send cryptocurrencies through its app. We might even see Boomers going full degen soon!
Layer-2s and scalability
Ethereum’s Achilles’ heel has always been its lack of scalability and transaction strength. Ethereum 2.0 was set in motion on 1 December 2020, to address the scalability issue. In 2021, Ethereum Foundation released the London upgrade to set the tone for the 2022 merge. The EIP-1559 forced miners to want to attack the very chain they were mining.
As discussed during a recent Crypto Banter show, Ethereum is pushing to new all-time highs because Layer-2, like Polygon, is attracting interest from both institutional and retail investors. The TVL of Layer-2 reached an ATH of US$7 billion while emerging zk rollups amounted to US$1.9 billion this year.
Data from Nansen shows Polygon is outperforming Ethereum on several metrics, including stablecoin transactions. Transactions between US$10,000 and US$100,000 take 10% to 15% of total transactions on Polygon, and only 6% on Ethereum. The same pattern is shown for lower transactions, meaning users are more likely to use a Layer-2 like Polygon regardless of the transaction size.
In 2021, the market went on a wild goose chase for popular meme coin Dogecoin, which was pumped purely for speculative reasons. Cryptoquant’s CEO highlighted that dumb money was being poured into animal coins, like Dogecoin or Shiba Inu, which gained a lot of ground. But as always, the smart money moved into projects with sound fundamentals.
The first half of the year belonged to Dogecoin, while the latter half was all about Shiba Inu, in part due to Elon Musk. As a result, DOGE increased by more than 4,000% in 2021, hitting an all-time high of US$0.74, creating what are now self-proclaimed Dogecoin millionaires. What’s even more shocking is that Shiba increased by 63,200,000, even breaking into the Top 10 coins by market cap.
In his TIME Magazine person of the year interview, Elon Musk took a serious stance on Dogecoin, yet that didn’t move DOGE as it did previously. Google Trends data shows Dogecoin’s price increase related heavily to its screen time.
Discussions about Dogecoin’s use cases picked up as Elon Musk proposed a 900% block creation increase on Doge. Dogecoin was always seen as speculative, and Vitalik Buterin disagreed with Elon. His view is that a 10x block increase is contrary to the ideals of decentralization because it adds multiple points of failure to the entire network. To add a cherry on top of the narrative, Jackson Palmer, Dogecoin’s original creator, called crypto a “get rich quick” funnel, without referring to Dogecoin or any particular currency.
Saying institutions went crazy for crypto in 2021 is a bit of an understatement. Institutions that are managed by Bitcoin and crypto maximalists embraced and pushed for more crypto adoption. Companies like MicroStrategy and Tesla added Bitcoin to their balance sheets, making a strong statement about the place Bitcoin and crypto as a whole have in the global financial market. It’s no longer a threat – it’s an opportunity, and it has transcended into a new asset class.
Grayscale expanded its investment trust to offer exposure to cryptocurrencies like Bitcoin and Ethereum. In the US, the Securities and Exchange Commission (SEC) approved the first Bitcoin Futures ETF, while in Canada regulators approved several Bitcoin and Ethereum spot ETFs.
The institutionalization of cryptocurrencies in traditional markets was and is geared by market regulation and government acceptance of cryptocurrencies. Unfortunately, most legislators are dinosaurs when it comes to understanding paradigm shifts in technology (remember the Facebook congress hearing?). Nonetheless, they’ve made minor amendments to permit more institutions to gain exposure to cryptocurrencies.
NFT and metaverse migration
The next chapter of digitized interaction started this year. Non-fungible tokens (NFTs) kickstarted the NFT summer after users began to understand the value NFTs bring to the digital space. NFTs are largely geared towards reshaping Web 2.0 interactions by increasing the emphasis on the growing digital economy, and yearly NFT sales reflect that. Chainalysis shows over US$26.9 billion worth of NFTs have been sold in 2021 – whether it’s digital land, art or in-game assets.
Investors poured millions into making the metaverse a reality after interest spiked when Facebook rebranded to Meta. Commodities such as real estate and art are all part of the metaverse discussion as investors purchase into their digital versions.The SandBox, one of the leading decentralized metaverses, raised US$93 million in early November but that’s not the only highlight.
A plot of land in the same metaverse sold for US$4.3 million, after an art NFT by Beeple sold in early 2021 for US$69 million. And that’s just the tip of the iceberg. OpenSea, the popular NFT platform for Ethereum, has been valued at $100 million after the platform processed more than US$16 billion worth of NFT transactions in 2021.
And the positive news for the metaverse and NFTs doesn’t stop here. JP Morgan expects the metaverse industry to reach US$8 trillion soon, pushing investors to get into the hype.
NFTs have caused a market hysteria. In the short six months since we entered the NFT summer, every personality from Snoop Dogg to Lindsey Lohan and Melania Trump launched an NFT. It got even weirder when an artist sold his farts as NFTs, just to prove every piece of content has a place in the new economy.
But why did NFTs become so popular? Mainly because NFTs are the first tool that empowers end users to monetize their creativity or even digital assets. Animoca Brands founder Yat Siu described NFTs as helping to change real world consensus by shifting from a rental economy to an ownership economy, where assets can be valued in the broader digital space.
That actually happened. Audius, an NFT music streaming service, partnered with TikTok to import user-generated content in the form of music NFT straight onto the platform.
In retrospect, 2021 was the year of crypto headlines. As the year draws to an end, Crypto Banter will delve into the narratives that we believe will make headlines in 2022. There will be more mini-narratives to follow, but every crypto enthusiast should be keeping an eye on:
- ETH 2.0 and its shift towards Proof of Stake (PoS),
- The growth of Layer-2 scaling solutions as alternative protocols,
- The expansion of decentralized autonomous organizations (DAOs),
- An emphasis on interoperability and agnostic blockchains,
- Metaverses that are fully decentralized in all aspects including computing power, storage, governance and money.
- The expansion of privacy tokens.