The yr 2021 is coming to an in depth, and if there’s one approach to describe how the cryptocurrency business fared up to now 12 months, it could be momentous development.
Main cryptocurrencies shattered earlier information, adoption grew, new sectors sprouted and novel blockchain use instances made important breakthroughs.
The Market Perception’s newest version recollects the occasions lined in previous points in addition to deep-dive matters in Cointelegraph Analysis’s business reviews.
DeFi and Altcoins
Two of the highest gainers of 2021 had been Solana (SOL) and Terra (LUNA). SOL gained 9,500%, whereas LUNA gained 13,000%. Vital investments and ecosystem development catalyzed the immense good points for the 2 tokens. One might additionally argue that the two being billed as potential “Ethereum killers” had a component in contributing to their huge rallies.
Within the decentralized finance (DeFi) scene, the 2 tokens sit among the many high 5 in complete worth locked (TVL). Solana is at No. 5 with $11.45 billion, and LUNA has just lately surpassed Binance Coin (BNB) for the No. 2 spot with $18.9 billion, in line with Defi Llama. Furthermore, the rising ecosystems of Solana and Terra deserve a deeper look, which is why they’re the topic of Cointelegraph Analysis’s upcoming reviews.
Competitors has undoubtedly elevated for Ethereum. Its TVL share was 97% in January however is at present right down to 62.54%, per Defi Llama. The subsequent part of growth for the sector comes into query in 2022, particularly for the reason that development of DeFi this yr has been so substantial that authorities have switched from denying the business to grappling with methods to cope with it.
The DeFi market capitalization stays a small fraction of the general cryptocurrency market cap, but it surely underwent the identical development trajectory. Some imagine that integration with legacy banking could possibly be certainly one of the main focuses for DeFi in 2022.
Nonfungible tokens, or NFTs, discovered their breakout yr in 2021 regardless of current since 2014. The majority of gross sales got here up to now 12 months, surpassing $14 billion in December. Digital artwork collections and digital collectibles dominate 91% of those gross sales volumes, which is among the key knowledge revealed on this report.
The gross sales within the first half of the yr had been pushed primarily by particular person artists becoming a member of the area with their respective collections and a few high-profile gross sales, whereas the second half introduced in additional mainstream manufacturers.
As an example, Coca-Cola auctioned a wearable bubble jacket skin in Decentraland, and Visa purchased its first NFT. Such participation from these manufacturers enabled the NFT market to come back into full bloom. The report additionally revealed that essentially the most worthwhile NFT assortment in 2021 was “CryptoPunks.” A “CryptoPunk” NFT affords a greater all-time common return on funding in comparison with NFTs on different standard collections, comparable to “CryptoKitties” and “Bored Ape Yacht Membership.”
NFTs have additionally disrupted the gaming business and change into key to completely realizing the idea of metaverses by means of their blockchain properties. Nonetheless, some critics doubt that the parabolic surge in 2021 will play out in 2022, particularly with extra regulatory scrutiny.
Nonetheless, this yr’s quantity of enterprise capital investments funneled into NFT firms is past sizable. NFT funding in 2021 is already at $2.1 billion as of Q3, but practically 40% of VC deal actions contain solely a single agency in Andreessen Horowitz, according to PitchBook. Subsequently, as gross sales and curiosity for NFTs proceed to develop, it could be troublesome for corporations with a thirst for prime development potential to withstand NFTs.
2021 has been progressive within the cryptocurrency regulatory entrance. The 117th United States Congress has launched 35 payments that target cryptocurrency regulation, blockchain coverage and central financial institution digital currencies. Federal Reserve Chair Jerome Powell expressed his views that cryptocurrency is not a significant threat to the U.S. financial market’s stability. However, a likely discussion that could seep into next year is the regulation on stablecoins.
The President’s Working Group on Financial Markets has stated in a report that stablecoins could possibly be a helpful different cost possibility however are “topic to acceptable oversight.” At the moment, there aren’t any rules on stablecoins, at the same time as their market capitalization handed $162 billion as of this writing, however a invoice proposed by Wyoming Senator Cynthia Lummis could possibly be a step in that route.
Lummis plans to introduce a comprehensive bill in 2022 that may present regulatory readability on stablecoins, information regulators round asset lessons and supply shopper protections. Cryptocurrency regulation shall be a speaking level in 2022 and also will be a subject that the Cointelegraph Analysis group shall be inspecting additional.
It’s nearly sure that everybody within the area agrees that Axie Infinity revolutionized gaming. The play-to-earn mannequin was an enormous hit, because it added actual revenue potential to enjoying video video games. Information shows how play-to-earn decentralized purposes (DApps) dominated the latter half of 2021 when it comes to related, distinctive, lively pockets addresses. And since September, gaming tokens comparable to The Sandbox (SAND), Axie Infinity (AXS), Enjin (ENJ), Illuvium (ILV) and Extremely (UOS) have even beat out Bitcoin in good points, as revealed in this newsletter’s previous issue.
The gaming sector took the helm from DeFi that noticed essentially the most addresses related within the first seven months of the yr. The 2 DApp classes birthed a brand new sector, GameFi, which is believed to be the subsequent logical step in blockchain growth. Crypto-based video games already allow customers to have management over their in-game property through NFTs, however the parts of DeFi might take it to a different stage. Incorporating DeFi would imply that options comparable to staking can be obtainable to customers the place they will earn curiosity of their tokens.
But, the sector continues to be in its early phases, however its attraction lies inside its attractiveness to customers who might not essentially be cryptocurrency holders. Attracting such customers might additional contribute to extra cryptocurrency adoption, which can probably be its focus for GameFi in 2022.
With the developments in 2021, cryptocurrencies had been capable of captivate a much wider viewers in comparison with the yr earlier than. In simply the second quarter, world adoption has grown 880% since 2020, Chainalysis knowledge exhibits. And the important thing occasions talked about above are probably contributing components to cryptocurrencies going extra mainstream. The NFT enterprise capital actions said earlier characterize solely 7% of the $30 billion poured into crypto-related investments in 2021.
However regardless of the obvious development, cryptocurrency possession stays comparatively low. TripleA estimates the worldwide cryptocurrency possession fee to be at a median of three.9%. Ukraine, Russia and Venezuela are the highest international locations, with not less than 10% of their inhabitants proudly owning cryptocurrencies.
The low possession charges imply substantial room for development, which is why a CAGR of 60.8% from 2021 to 2026 for the cryptocurrency market might have some benefit. This yr, the worth of the cryptocurrency market has already grown from $364.5 billion final yr to greater than $2.5 trillion — a 586% surge. And within the coming yr, the brand new sectors in GameFi and maybe property associated to Web3 might probably be new avenues for continued development.
Tokenization of sure securities might additionally occur on a a lot bigger scale, and it’s even predicted to be the norm by 2030. Furthermore, the prevalence of cryptocurrencies for payments could also be another area with untapped potential, which will be explored further in another upcoming report.
Predicting what sectors in 2022 are poised for the same breakthrough that NFTs had this year would be difficult, if not, impossible. However, reports that carefully study and go in-depth about certain topics would offer a better way of understanding the nuances of a specific sector.
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