The Global 2021 Crypto Market: A Detailed Review
Retail and institutional investors have shown interest in blockchain-based applications, such as decentralized finance, or DeFi, fueling the expansion of Web3, which is the decentralized version of the internet based on blockchain technology that powers NFTs and underpins cryptocurrencies. All of this contributed to the mainstreaming of cryptocurrency in 2021. People started to read, learn and accept the world of cryptocurrencies on a huge scale. And even though the market is going through a correction it is also a matter of time that the market will bounce back. In the year 2021, the crypto market saw a lot of changes. Large corporations, diverse governments (countries), influential and well-known individuals such as Elon Musk and ex-Twitter CEO and internet entrepreneur Jack Dorsey have all had an impact. This has a significant impact on public awareness, as well as the price of cryptocurrencies like Bitcoin and Ethereum, among others.
So let’s take a look at the most happening events this year to do a detailed review of the 2021 crypto market. These events can be held responsible for shaping the crypto market last year. Though there were countless defining moments this year, here are the 6 major highlights from 2021.
Bitcoin Reaching Its ATH and the Launch of Taproot
Bitcoin reached its all-time high price of $68,000 in November 2021. And it's the highest bitcoin price ever recorded. Bitcoin's recent market pricing demonstrates a continuous increase in market price, despite occasional price drops. Let's have a look at the price of Bitcoin in 2021. The price of Bitcoin increased to its highest point before falling to its lowest point in the first half of 2021, as indicated in the graph below. However, due to tremendous demand for Bitcoin and the impact of favorable news, the price rose sharply to its all-time high in November.
The year 2021 also saw the release of Taproot, a significant technological update to the Bitcoin protocol. Taproot is a three-part upgrade that boosts network security, privacy, and scalability. Since the activation of Segregated Witness's block capacity boost in 2017, Taproot is the most significant upgrade to the Bitcoin network. Taproot served as a reminder that Bitcoin is a flexible technology that can evolve to improve usability and user experience. The future success of Taproot will serve as proof that Bitcoin can adapt.
El Salvador Made Bitcoin a Legal Tender in the Country
El Salvador became the first country to embrace bitcoin as legal cash when it passed a new law in June. El Salvador's law permits bitcoin to be used to pay for goods and taxes. According to CNBC, businesses can price their products in bitcoin, and exchanges will not be subject to capital gains tax. The government of President Nayib Bukele is banking on Bitcoin to boost the country's economic growth and investment, given that the price of Bitcoin continues to rise. We'll go over Bukele's concept for a Bitcoin city here.
The city will be built near the Conchagua volcano to take advantage of the country's geothermal energy, which will be used to power both the city and cryptocurrency mining, which is an energy-intensive process of solving complex mathematical calculations 24 hours a day, 7 days a week to verify and add crypto coins to the Blockchain network. It's worth noting that El Salvador already has a Bitcoin mining pilot project underway at a geothermal power station near the Tecapa volcano. Residents in Bitcoin city, according to Bukele, will not have to pay any income, property, capital gains, or even payroll taxes. The city would be constructed to attract international investment.
Ethereum On The Top of its Game
It's no surprise that bitcoin’s dominance, a measure of BTC market capitalization compared to the market capitalization of other digital assets, declined from 70.2% to 40.1% in 2021, thanks to Ether's stronger asset price performance. Bitcoin's decline is not solely due to ETH; rather, crypto projects have sprung out with a variety of use cases that are not directly competitive with Bitcoin.
From EIP 1559 through the approaching shift to proof-of-stake, Ethereum has had huge catalysts. Both events are crucial in the development of a narrative for Ethereum's native asset, as well as the evolution of Ethereum as a technology. EIP 1559 established ether's position as "gas" in the ecosystem, requiring that it be consumed and burned in return for building on or interacting with the network. The "Merge" to proof-of-stake is an attempt to build a more secure, scalable smart contract network without the use of miners or a lot of energy.
China’s Umbrella Ban on Cryptocurrencies
The People's Bank of China confirmed in September that it would continue to tighten down on bitcoin. The PBOC stated in a Q&A on its website that all crypto-related operations, including trading digital assets, order matching, token issuance, and derivatives, are unlawful in China. Furthermore, the PBOC stated that overseas crypto exchanges providing services in mainland China are unlawful.
Throughout the year, China's ongoing crackdown on Bitcoin mining pushed the industry elsewhere, and in October, data from the University of Cambridge revealed that the United States had overtaken China as the top destination for bitcoin miners. According to the data, the United States had 35.4% of Bitcoin's hash rate, which is the total computing power of all miners, as of July, surpassing China for the first time. Cambridge also discovered that China's average monthly share of global hash rate zeroed out in July, a significant shift from September 2020, when China held about 67% of the market.
The Rise of NFTs and Metaverse
The popularity of NFTs has soared to new heights, with widespread support from both the crypto community and the general public. Non-fungible tokens (NFTs), which were formerly regarded to be a fad, are now spreading throughout the crypto-verse. According to DappRadar, the NFT market had its biggest year ever, earning over $23 billion in revenue, with the floor market capitalization of the top 100 NFT collections standing at $16.7 billion as of Dec. 17, even before the year ended.
The most significant development for NFTs and the metaverse has been Facebook's statement in October 2021 that it would be rebranded to Meta to broaden its influence beyond social media and into the Metaverse. It was discovered in the last week of October that over $106 million worth of Metaverse land had been sold in just seven days. GameFi protocols are a major turning point for NFTs that have been following the Metaverse narrative. GameFi is touted as a unified ecosystem that combines gaming and DeFi. GameFi, according to Huobi Research, the bitcoin exchange's research arm, has reignited interest in blockchain gaming.
Meme Tokens Entering The Game..and How!
Memcoins dominated the first half of the year, when Dogecoin, courtesy of Elon Musk's tweets, staged a tremendous rally. In the second half, second-tier meme coins such as Shiba Inu, Floki Inu, and others followed suit.
Doge was the catalyst for the uproar. A digital coin established by a pair of software developers in 2013 took off as an interest in crypto trading grew and a new generation of retail traders flocked to social media platforms, gaining popularity through jokes, sarcasm, and trolling. Elon Musk, the CEO of Tesla Inc., embraced the token, which helped it rise. Due to Doge's popularity, other tokens based on dog breeds have been created, including Shiba Inu, Baby Shiba Inu, and Floki, which is named after Musk's pet.
However, the memes have become less lighthearted as cryptocurrency values continue to plummet. "Meme coins attracted a lot of retail investors. In India, meme coins accounted for more than 60% of transaction volume,” Hitesh Malviya, founder, Itsblockchain.com, said. "Memecoins are doomed because they lack fundamentals. In the next bear cycle, we should expect meme coins like Shiba coins to perish." Traders are expecting them to be back in the game soon after the correction ends.
Conclusion
Crypto made it so big in 2021 that plans of regulations surrounding it started to reach the Parliament of various countries. The term "crypto" was even heard in Congress, where a $1 trillion infrastructure measure was stalled owing to a crypto tax-reporting provision. The fact that regulators are interested in discussing crypto reflects a broad opinion that crypto is here to stay and should be regulated to "keep citizens secure." In general, the year 2021 was a watershed moment for the cryptocurrency and blockchain industries. This year will certainly be packed with many more interesting events and new ATHs.