Year in Review: The Five Most Important Events in Crypto in 2021
Last December feels like forever ago (and yet, in some not especially encouraging ways, exactly like today). In case you don’t remember that far back, here’s a reminder: In December 2020, the crypto world was celebrating Bitcoin’s new all-time high of…$29,000. Twelve months later, BTC is worth around $49,000, with a new historical all-time high of $68,000 reached in November. Although there were the expected sputters, the rise was astronomical.
And yet Bitcoin wasn’t even the biggest crypto story of the year. At least not on its own. In 2021, the greater crypto universe rapidly expanded. What were once glimmers of ideas were built into entire solar systems that even big-name skeptics have started exploring. Meanwhile, the infrastructure that already existed—including Bitcoin—has been improving to better suit the physical world that powers it.
As the year comes to an end, we decided to look back on the biggest things to happen in crypto this year, from ETFs to altcoins. This way, we can see where we’ve been, while also getting a sense of how much further we’ll go in 2022.
Bitcoin ETFs Finally Arrived—Sort Of!
For years, it’s been a dream: an exchange-traded fund made up of crypto that would bring the future of money to traditional markets. The Winklevii tried it more than once, with no luck. And after other versions were rejected many (many) times by the SEC, this year it finally happened. In a sense, at least. On October 19, a Bitcoin ETF debuted and rose more than 4% in its first day. The fund saw nearly a billion dollars of shares trading on that first day, making it the second-most highly traded ETF debut of all time.
To call that fund a Bitcoin ETF, though, is actually not quite right. Both it and the similar ETFs that have followed don’t actually hold any Bitcoin—or any crypto at all. They trade in Bitcoin futures contracts, which are instruments that allow investors to bet on whether the price of BTC will rise or fall over a certain period. (You can watch our CEO discuss it in an interview with CoinDesk.) And while their returns are based on Bitcoin’s performance, they aren’t the same as actually owning BTC—something the SEC still doesn’t allow ETFs to do.
But that may change. The SEC plans to rule in February on a proposal to create an ETF that actually holds Bitcoin, and another to convert a crypto fund into an ETF. If those proposals get approved, we’ll still have some complicated feelings about Bitcoin ETFs, but it will nonetheless be huge news.
Institutional Investors Got in the Game…
It was not long ago that many (but not all!) big-name institutional investors, when asked about crypto, would grumble. As recently as October, J.P. Morgan CEO Jamie Dimon famously called Bitcoin “worthless.” Despite those feelings, however, this year the big banks have had to cave to investor demand. As Dimon himself put it right after that “worthless” remark:
Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy [themselves] bitcoin, we can’t custody it. But we can give them legitimate, as clean as possible, access.
That’s why, this August, J.P. Morgan began giving its wealth management clients access to six different crypto funds.
JPM was far from alone. After a three-year hiatus, Goldman Sachs relaunched its crypto trading desk in March, then became something of a booster for greater crypto expansion, with its global head of crypto saying that the company is looking to pursue the development of crypto options markets. Earlier this month, Fidelity—the fourth-biggest fund manager in the world—started a Canadian ETF with actual Bitcoin in it and partnered with cryptocurrency lender Nexo to start offering crypto products to institutional investors. Overall, as Bloomberg Intelligence reported, the end of 2021 saw 80 crypto-tracking investment vehicles with $63 billion in assets. A year earlier, there were only 35 with $24 billion.
…And So Did Everyone Else
It wasn’t just Jamie Dimon who had crypto on his mind in 2021. It was also your grandmother. Or at least your mother. And if not her, then definitely your cousin. This was in part thanks to the public involvement of people like—and, as a company based in Seattle, it pains us to say this—Tom Brady. Matt Damon also helped, as did the Staples Center in Los Angeles being renamed the Crypto.com Arena. Snoop Dogg owns a metaverse mansion in The Sandbox, boasting collectible Snoop Dogg avatars and even concerts. Big-name brands like Adidas have dropped their own NFT lines (including a Bored Ape in a yellow tracksuit) that will give owners exclusive access to merch releases. Nike applied for trademarks to sell sneakers in the metaverse, and major movie theater chains have been racing to accept crypto as payment. The list is long. But what’s most important is the effect. According to Pew Research polling, in 2015, not even half of American adults surveyed had heard of crypto. As of September 2021, that number was 86%.
Altcoins Reshaped the Market
At the beginning of the year, Bitcoin was the big boss of crypto, with a 70% share of the market. And yet it looks like BTC will end this year at around 40%. That’s not because people divested themselves of BTC—not at all. In fact, its own market cap, which is still the biggest in crypto, has significantly grown over the course of the year, from not quite $550 billion to more than $900 billion. The real reason for Bitcoin’s shrinking share? The rise of everything else.
According to Bloomberg’s analysis of CoinGecko data, the king of the altcoins has, unsurprisingly, been Ether, which saw its market share essentially double to 20%. But the remaining 40% of the market is made up of all sorts of alternatives to those two big names, offering a far more diverse space than a year ago. Some of the bigger (little) names to rise this year include Solana, the Ethereum competitor built for DeFi app development that has received a lot of industry and media attention. Additionally, the next two largest cryptos (based on market capitalization available on Makara) after Ether are: LUNA, a coin that helps the Terra stablecoin universe thrive (and that is one of our six most interesting coins of 2021), and the one and only Dogecoin. Together, altcoins have made crypto a far more fascinating and far livelier space, with plenty of new investment opportunities.
Crypto Got More Eco-Conscious
As the crypto universe grew and more people became aware of it, there was undeniable concern about its environmental impact. Representations in the media were dire: The University of Cambridge estimated that, at various stages, Bitcoin consumed more electricity than all of Argentina, and The New York Times calculated that Bitcoin mining consumed more than seven times the energy Google does. Columbia University’s climate school said the average NFT generates as much carbon as driving 500 miles in a gas-powered car.
But there’s good news, and lots of it. For one thing, the Bitcoin Mining Council has been working to increase energy consumption transparency. The Crypto Climate Accord hopes to make several blockchain projects run on completely renewable energy by 2025. And Ethereum itself is aiming to reduce its energy use by 99.95% by the end of next year, when its Eth2 upgrade switches to a far-less-energy-intensive proof-of-stake validation system.
If there’s one thing this year has taught us about crypto, it’s that the way things were isn’t the way they’ll always need to be.
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