On a recent episode of my podcast Unchained, I and three other journalists discussed what we thought were the biggest stories in crypto for 2021 -- and though we didn't all agree on the biggest stories, we all concluded that this past year was the biggest year ever for crypto.
More than $30 billion in venture capital poured into the space. Non-fungible tokens (NFTs) attracted brands and celebrities ranging from Burger King to Kings of Leon. Both sports arenas like LA's former Staples Center (now to be named Crypto.com Arena -- disclosure: Crypto.com is a sponsor of my podcasts) and athletes such as Tom Brady began attaching their names to crypto companies (or vice versa).
Clearly, crypto has entered an escape velocity where it's no longer just associated in the mainstream consciousness with criminal money.
Here are, in chronological order, the ten most significant moments for crypto (aka Web3) in 2021.
In 2020, the publicly traded Microstrategy put bitcoin on its balance sheet as a hedge against inflation, which inspired other corporations to do so, until finally, Tesla, then one of the ten most valuable companies in the world, bought $1.5 billion worth of bitcoin. It's remarkable that an asset created by an anonymous founder and associated early on with the dark web eventually became seen as, at least a diversifier, if not a safe place to park wealth.
Although a number of other firms hold bitcoin on their balance sheets as well, the announcements about such purchases have slowed as of late, so we'll see if the trend continues.
Digital artist Mike Winklemannn, whose online handle is Beeple, sold his first 5,000 "Everydays," or digital artworks that he made every day for 13 years, as a single NFT for $69 million in a Christie's auction to NFT collector MetaKovan.
The NFT juggernaut continued throughout the year, with trading volumes on OpenSea hitting $3.4 billion in August. Although they dipped to below $2.4 billion in November, they are going to close out December at above $3 billion.
Although arguably this latter half of the year is really when NFTs took off, this March Beeple sale was the harbinger of things to come.
According to CryptoSlam.io, NFTs and fan tokens have collectively seen $64 billion in sales over all time.
Coinbase became the first crypto-native company to go public, debuting at a market cap of over $85 billion. While the price is now at about $250, down from the $328 it traded at on its inaugural day, as these charts from The Block show, crypto trading volumes on centralized exchanges were up this year -- and Coinbase took a good share of that.
The original memecoin had been on a tear, starting January 1 at less than a penny, and hitting nearly $0.74 on May 8, the day that Tesla CEO Elon Musk appeared on "Saturday Night Live." During the "Weekend Update" segment, after repeatedly being asked what Dogecoin was, he finally admitted it was "a hustle."
Since then, Dogecoin has been on a mostly downward trend, and is currently trading at about $0.17. However, it's market cap is still at $22 billion.
Its spiritual twin, Shiba Inu (SHIB), which similarly had a crazy run-up and then a crash, still maintains an $18 billion market cap.
Over the course of a few weeks in June, it became clear the Chinese government was serious about banning crypto mining, and miners were shut down and began making plans to leave the country.
This was largely seen as a positive for the Bitcoin community, since in September 2020, 67% of mining power was in China, and after the ban, that proportion dropped to 0%, while the United States became the number-one source for Bitcoin hash rate, or the computing power on the network.
While a ban on crypto mining sounds like negative news, actually, it removed one of the biggest threats to the Bitcoin network. When more than 51% of the hashrate was located in China, there was always the possibility that the Chinese government would take over the miners there and attack the network. With 0% of mining there, now the possibility of the world's largest authoritarian government trying to attack Bitcoin is removed.
If legislators thought of crypto as a topic with a niche following, they realized during the negotiations over the crypto provision in the infrastructure bill, that it was a lot bigger or more energized than they anticipated, or both.
The sheer amount of noise that the industry and community made over the crypto provision caused the bill to be held up for approval in the Senate, and it may have also been a crash course for legislators in crypto. By the time of House and Senate hearings on crypto in December, the lawmakers seemed, by and large, much more knowledgeable than they had in previous such encounters.
This probably wasn't on anyone's bingo card for 2021. El Salvador adopted Bitcoin as legal tender, requiring all citizens in the country to accept it.
However, Bitcoiners had mixed feelings about a president viewed as having autocratic tendencies having championed the measure. Long-time Bitcoin and crypto advocate Jerry Brito, executive director of Coin Center tweeted, "El Salvador's Bitcoin law is a disgrace. As written in statute it forces citizens to accept bitcoins whether they want to or not. This is intuitively wrong to any liberal."
After years of efforts by many, many parties, including the Winklevoss twins, finally, the United States saw the trading of an exchange-traded fund based on bitcoin ... futures. Although it wasn't the investment vehicle that crypto investors wanted, the ProShares Bitcoin Futures ETF (BITO) did about $1 billion in total volume that first day. Eric Balchunas, Bloomberg's senior ETF analyst, called it "easily the biggest Day One of any ETF in terms of 'natural' volume. ... It def defied our expectations."
Still, the industry is awaiting a spot bitcoin ETF, one in which the underlying asset is bitcoin itself not a bitcoin futures product. Read more here to understand why a number of investment professionals believe that a bitcoin futures ETF is an inferior product for investors wanting exposure to the price of bitcoin -- and likely, one that will result in compounding losses on long-term gains vs. the price of bitcoin.
Within a week, a loose group of people online formed a decentralized autonomous organization (DAO) that banded together to try to buy a copy of the US Constitution being put up for auction at Sotheby's. What started as a lark became a huge phenomenon. The DAO collected $50 million in ETH -- with many donations coming from first-time crypto wallet addresses and the median donation being a bit over $206.
Despite the enthusiasm it generated, the night of the auction, ConstitutionDAO was outbid by billionaire Citadel CEO Ken Griffin.
Regardless of the outcome, ConstitutionDAO swept the minds of many across the nation, not only attracting non-crypto people to its cause, but also introducing the concept and possibilities of DAOs to a lay audience.
Conventional wisdom in crypto has been that somewhere between a year and up to two years after Bitcoin halving event, in which the number of new bitcoins being minted with every block gets halved, Bitcoin typically sees a big bull market.
The last halving in May 2020, plus other models such as stock-to-flow, which projected price based on the new production of bitcoins, that had so far proved somewhat accurate in projecting Bitcoin's upward march, set expectations that the end of 2021 would again see, if not all-time highs, at least elevated prices.
Only, that didn't happen. (Bitcoin saw a solid rise from $29,000 to $47,000, but the price is down from its peak earlier this year of almost $64,000.) Some investors had previously said they thought we were now in a "super-cycle," in which Bitcoin and crypto have enough traction that prices will go upward more smoothly rather than experiencing these massive bubbles that end up crashing 80-90% over the course of the next year or two.
Whether or not they are correct remains to be seen, but it's notable that this was the first year bitcoin and the overall crypto market didn't evince the same pattern as it had in previous year's post-halving.
But, maybe it's fitting as well. The overall crypto markets feel very different than they used to. We'll see what new surprises 2022 brings.
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Cover photo credit: (Photo by STR/NurPhoto via Getty Images)