In terms of price developments, cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) will end with a whimper in 2021, which belies expectations of a top scenario at the end of the year of blowing off. A six-digit bitcoin in December became a consensus trade among many analysts, investors, and market watchers who expected the flagship cryptocurrency to repeat its previous four-year cycle.
While Bitcoin is still a long way from this coveted milestone, exponential markets require a longer-term view. If we zoom out, we can see that Bitcoin continues to print higher highs and higher lows on the yearly chart. We are also seeing significant adoption from both private and institutional investors who now view crypto as a legitimate asset class.
Bitcoin annual lows:
2012: $ 4
2013: $ 65
2014: $ 200
2015: $ 185
2016: $ 365
2017: $ 780
2018: $ 3,200
2019: $ 3,350
2020: $ 3,800
2021: $ 27,734
Bitcoin HODLers are the bottom. They are the revolutionaries who keep Bitcoin and grow it.
Do you still want to bet against her?
– Dan Held (@danheld) March 15, 2021
Despite the recent downward price movements, 2021 was crypto’s big year. Amid all of the positive developments we’ve seen over the past 12 months, we found five stories in particular to be the most optimistic from a business and adoption perspective.
Tesla is adding Bitcoin to its balance sheet
Elon Musk’s Tesla Motors sparked shock waves in the crypto community in February when it announced it had allocated a significant portion of its balance sheet to Bitcoin. The company’s final filing of the company’s Form 10-K for fiscal 2020 showed an allocation of $ 1.5 billion.
In addition to buying Bitcoin, the company said it was accepting BTC payments for its vehicles, a move that gave crypto whales more reason to buy Tesla products. Not only did Tesla’s decision skyrocket the price of Bitcoin, it also signaled to other companies that crypto is a strategic reserve.
After winning the hearts of crypto loyalists, Musk later revealed that his company stopped BTC payments because of concerns about the cryptocurrency’s energy consumption. He also said Tesla sold about 10% of its BTC holdings, but only to demonstrate the coin’s liquidity.
Although this could be seen as a negative development – the crypto community certainly thought so at the time – the billionaire also indicated that his company was closer to accepting Bitcoin payments again. Oh, and he says he never dumped his personal BTC bags.
No you do not. I didn’t sell any of my bitcoins. Tesla sold 10% of its holdings essentially to prove Bitcoin’s liquidity as an alternative to keeping cash on balance sheet.
– Elon Musk (@elonmusk) April 26, 2021
El Salvador declares Bitcoin to be legal tender
The tiny Central American nation of El Salvador made crypto history in June when it became the first country to declare Bitcoin legal tender.
Despite fierce opposition from the World Bank and the International Monetary Fund, El Salvador believes its Bitcoin gambit could help transform its economy by streamlining remittances, promoting the digitization of finances, and offering consumers a new tool for transactions and savings.
El Salvador has issued its own government-backed Bitcoin wallet called Chivo and has installed hundreds of crypto ATMs across the country to make it easier for locals to trade BTC.
Since the implementation of the Bitcoin law, El Salvador has been eagerly buying the slumps on all major BTC price corrections. After its last purchase on December 21, the country now holds 1,220 BTC on its books, valued at around $ 60 million at today’s prices.
El Salvador’s decision to adopt Bitcoin could have a significant impact on a region struggling with hyperinflation, fiscal pressures and economic uncertainty. Although several other Latin American countries are reportedly considering adopting Bitcoin, no other government has yet followed El Salvador’s lead.
Related: Bank of America outlines 4 potential benefits of El Salvador’s Bitcoin strategy
Crypto is becoming a multi-trillion dollar asset class
While cryptocurrencies are known for their volatility, a longer-term view shows a steadily increasing market valuation. In 2021, the market capitalization of the cryptocurrency set several milestones, including breaking the $ 1 trillion mark for the first time in early January. According to CoinGecko data, it took the crypto market about four months to double to $ 2 trillion before briefly topping $ 3 trillion in early November.
In 2021, crypto emerged as a multi-trillion dollar asset class too big to ignore. Source: CoinGecko
The emergence of crypto as a multi-trillion dollar asset class means more institutional investors are planning to enter the market. Existing crypto-focused investment managers have also seen a surge in demand for their products, with net asset flows into digital investment products exceeding $ 9.3 billion for 2021, according to CoinShares data.
Financial institutions and other companies are also making higher crypto transactions, with Europe emerging as the largest crypto economy and Asia also seeing significant growth, according to blockchain analytics firm Chainalysis.
Related: Are Institutional Investors the Most Important Silent Partners for Crypto?
Bitcoin ETFs approved
The 2017 bull market culminated with the introduction of Bitcoin futures contracts by the CBOE and CME, which offered institutional investors new opportunities to delve into the digital asset. Four years later, investors can buy and hold Bitcoin through various exchange-traded funds or ETFs.
The first quarter saw the debut of two funds in Canada – the Purpose Bitcoin ETF and the Evolve Bitcoin ETF – which enable direct physical exposure to the digital asset.
The debuts were a resounding success, with the Purpose Bitcoin fund amassing over $ 1.3 billion in net worth in less than two months. Fast forward to the end of the year, Fidelity Canada launched a spot Bitcoin ETF that is expected to bring more investors to the digital asset market.
SEMI-SHOCK: Fidelity is launching a spot Bitcoin ETF in Canada this week. Didn’t know about it. Will easily be the largest asset manager yet with a Bitcoin ETF. pic.twitter.com/H2XJRBY3O6
– Eric Balchunas (@EricBalchunas) November 30, 2021
Regulators in the United States have been much less advanced in their approach to digital assets. While the Securities and Exchange Commission refused to give the green light to a spot Bitcoin ETF in 2021, regulators approved two futures-linked Bitcoin products that many in the industry viewed as a major milestone.
The ProShares Bitcoin Strategy ETF became the first US-approved BTC fund in October. Shortly afterwards, the Valkyrie Bitcoin Strategy ETF came onto the market. Then, in November, VanEck launched its own Bitcoin strategy ETF in the US.
Related: Why now? It took the SEC eight years to authorize a Bitcoin ETF in the United States
Venture capital arrives
Perhaps the most optimistic indicator for crypto in 2021 was the tidal wave of venture capital that flooded the market. Dozens of crypto unicorns were crowned this year as startup valuations surged over $ 1 billion.
Amber Group, Bitso, Blockchain.com, Blockstream, BlockFi, CoinList, CoinSwitch Kuber, ConsenSys, Figure Technologies, Fireblocks, OpenSea, 2TM and others have joined this exclusive list thanks to very successful private funding rounds.
In the first 10 months of 2021, venture capital funded crypto and blockchain-focused startups with $ 17 billion, more than three times the 2020 amount, according to PitchDeck.
Related: Unicorns in Crypto: A Growing Herd of Billion Dollar Crypto Firms
The arrival of venture capital means that smart money has identified crypto and blockchain as major growth themes. Of course, if you’re Jack Dorsey, that’s not necessarily a good thing:
https://t.co/YaEO5tLlWl
– jack⚡️ (@jack) December 21, 2021
That said, VCs impersonating blockchain startups, regardless of where we are in the market cycle, are a sign that the industry is maturing. It’s also a gentle reminder to anyone who survived the initial coin supply craze that their initial idea of investing in crypto was likely correct. After all, you beat Silicon Valley.
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