Moments that rocked the cryptosphere in 2021
2021 was a transformative year for DeFi. Bitcoin reached stratospheric highs, Beeple put NFTs on the map and the first ETFs to feature cryptocurrency began trading. These are just some of the highlights that are featured in today’s stroll down memory lane.
And if 2021 taught us anything, it’s that cryptocurrency is only just warming up and will make even bigger waves in the year to come.
Remember: All investing involves risk. The content of the podcast is for informational purposes only and is not investment advice. Please always use caution and diversify.
Hello and welcome to the 26th episode of Alternative Investing. I’m your host, Trevor Kraus, Communications Manager at MyConstant.
First and foremost I hope all of you listening had a wonderful holiday season and safe and happy new year.
I began working on this particular podcast before the year came to a close and intended to release it at the end of December, but here we are, the first week of the new year. So it’s still relevant—albeit a tad late.
These days news comes at us fast and furiously. By the time you’ve digested one bit of news, more comes at you. So when you look back on a year, it’s easy to get things muddled. In today’s episode I’m going to be going over some of the top crypto / DeFi moments that occurred in 2021. Sort of a recap of things you might have missed that have impacted the cryptosphere.
Keep in mind, these are not in order of relevance—I think they’re all interesting pieces of news, but I will save the top one for last.
First on this list is the sale of NFT’s.
Back in March 2021, the artist, Beeple, gained worldwide exposure when his NFT titled, everydays, the first 5000 days sold at Christie’s Auctionhouse for an eye watering 69 million US dollars.
This sale really catapulted NFTs into the public consciousness and now, you’re seeing them everywhere—MyConstant included. It became so big that NFT was explained in a skit with the rapper Eminem on SNL. Just as a refresh, in case you don’t know. NFT stands for non-fungible token.
“Non-fungible” essentially means that it’s unique and can not be replaced with something else. It’s a legal term. For example, bitcoin is fungible—trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something entirely different.
NFTs are a modern-day solution for artists. Digital arts are quickly gaining the audiences’ acceptance, but this does not mean that physical art forms are losing value. They will still hold their significance. However, looking at the current situation, especially during these uncertain times of the COVID-19 pandemic, online museums and digital art platforms have been soaring in popularity.
NFT’s give a seal of authenticity and ownership to whomever has it. In the traditional art world, the artist will sign their name on the painting or sculpture. If the art is sold it has provenance which is a secure way of stating who owned the piece art and where it came from.
But when you go on google images, things are put out there all the time and too often, people don’t get the proper credit, compensation or recognition.
Most NFTs are part of the Ethereum blockchain. Ethereum—being the second most popular cryptocurrency to bitcoin—supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It’s worth noting too, that other blockchains can implement their own versions of NFTs.
People profit off of NFTs without ever touching one. Some users treat NFT’s like stocks. By purchasing an NFT of something potentially profitable early on, you may be able to make a decent profit later on. Keep in mind that, unfortunately, the opposite could happen with your investment, as well.
The second big DeFi news piece on my end of 2021 list is Elon Musk and his influence on Dogecoin.
In May, just before Elon Musk made his “Saturday Night Live” debut, the price of dogecoin began to spike. On May 8th, the day of Musk’s SNL appearance, dogecoin hit an all-time high of about 73 cents.
But its price quickly retreated from that peak. As Musk appeared on the show, dogecoin fell as much as 29.5% and dropped to 49 cents at one point.
This was representative of the roller-coaster run that dogecoin had all year, most of which had to do with Musk. The Tesla and SpaceX CEO has been a consistent supporter of the meme-inspired cryptocurrency. Dogecoin’s rally first began in February after a series of tweets from Musk, and since, he has continued to hype up the digital coin.
On that note, just two weeks ago, Elon Musk tweeted a picture of the dog from dogecoin on his twitter and once again it’s value spiked.
While cryptos like Bitcoin and Ethereum have had a more long term, natural acceptance, Dogecoin initially came onto the screen as something of a joke. It was produced to mock the wild speculation of cryptocurrencies in the past—and many ways—the present. Unlike other mega rich individuals like Warren Buffet and Bill Gates who aren’t fans of crypto, Musk is. The fact that Musk can tweet a photo and drive up the price of Dogecoin is great for holders, but rightfully gives people pause in buying it.
One of the reasons that people like crypto so much is that no small group or one individual controls it’s value. Musk coming in and being playful with his tweets, kind of takes away some of that group oriented appeal. Either way, it’ll be interesting to watch and see what Dogecoin does in 2022.
The third most noteworthy story of 2021 is the $600 million dollars worth of crypto that was stolen in a DeFi hack over at Poly Network.
Back in August of last year, DeFi platform Poly Network was hacked. Initially, over $600 million was stolen.
Experts said that the hacker was able to exploit an issue within the network’s code. It was one of the biggest cryptocurrency thefts ever.
However, in a strange twist, the Poly Network hacker didn’t run off with the haul. Instead, they opened a dialogue with the organization that was targeted, promising to return all the funds. And, sure enough, the hacker gave back nearly all of the money — with the exception of $33 million of tether, or USDT, which was frozen by its issuers.
There was a catch, however. More than $200 million of assets was trapped in an account that required passwords from both Poly Network and the hacker. For some time, the hacker refused to hand over their password, simply saying they would only do so once “everyone is ready.”
This kind of fraud was not uncommon throughout the year. Over $7.7 billion was stolen in cryptocurrency scams worldwide in 2021, according to a report by blockchain analytics firm Chainalysis. That’s an 81% rise compared to 2020.
Rug pulls, a type of scam where developers abandon a project and leave with investors’ funds, became the “go-to scam” of the DeFi ecosystem, Chainalysis wrote in its report. In 2021, rug pulls accounted for over $2.8 billion stolen, or 37% of all cryptocurrency scam revenue, compared to 1% in 2020.
These kinds of scams do happen, this is why on MyConstant, we’re constantly talking about security. If you own great amounts of crypto, you need to store it in cold wallets. This means a wallet not connected to a server. Physically unplugged from your computer.
The fourth most interesting story to come out of 2021 is the bitcoin EFTs.
Back in October, a provider of specialized exchange-traded products based in Bethesda, Maryland—began trading of the Bitcoin Strategy Fund. This marked the first Bitcoin ETF to trade in the nation. Trading under the ticker, BITO.
A lot of people predicted that ETFs and Bitcoin would converge sooner than later. The possibility of an ETF that tracks bitcoin is the best opportunity for this type of connection. However, there were growing pains and problems in trying to launch the first bitcoin ETFs.
The primary reason is that bitcoin—the largest cryptocurrency in the world—remains largely unregulated. On top of that, the Securities and Exchange Commission (SEC) is hesitant to allow an ETF focused on the new and mostly untested cryptocurrency market to make its way to the public.
As a refresh, ETF stands for exchange traded fund and it’s a type of security that tracks an index, sector, commodity, or other asset, but can be purchased or sold on a stock exchange the same way a regular stock can.
An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.
A well-known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index. If you’re unfamiliar, The S&P 500 Index stands for Standard & Poor’s 500 Index, and it’s a market-capitalization-weighted index of 500 leading publicly traded companies in the United States. But you should note that it’s not an exact list of the top 500 US companies by market cap because there are other criteria to be included in the index.
So what does Bitcoin’s integration into EFTs mean for you—the investor? Well, for starters, it helps reduce the fears that many crypto newcomers have, including concerns about navigating exchanges and using wallets and private keys.
The ETF allows you to invest in bitcoin without dealing with any of the unfamiliar aspects of the cryptocurrency ownership experience. By letting you indirectly invest in bitcoin without actually holding the digital asset itself, Bitcoin ETFs eliminate many of the entry barriers surrounding traditional cryptocurrency trading.
The new bitcoin-linked ETF, which gains exposure to bitcoin via future contracts, became the second-highest traded fund on its debut. According to data compiled by Bloomberg, 24 million shares of the Bitcoin ETF changed hands during its first day of trading.
When the ETF launched on the NYSE (under the ticker BITO) it started with $20 million of seed capital. Meanwhile, the price of the cryptocurrency rose as much as 3.8% to a record high of around $66,000 following the Bitcoin ETF launch (today it’s closer to $62,000).
Three months in, the big question is long term, are people going to start investing in bitcoin even more now that it’s become even more mainstream than ever? Time will tell.
There are other DeFi moments in 2021 that are worth mentioning. These include China banning cryptocurrency—again. El Salvador adopting Bitcoin as legal tender. And the demand for Ethereum—the most used blockchain—skyrockets.
That said, no single or cumulative moment in 2021 can beat bitcoin’s incredible year. Most notably, in February of last year it hit $1 trillion in market value. In the months of February, April and November, 1 BTC rose to over $65,000 in value.
Bitcoin has been around since 2009, but last year it made its mark. By January of 2021 we were (and in many ways, still are) in the middle of a pandemic. Much like when bitcoin first made its appearance in 2009, the economy was in turmoil. When the world seems upended and government money appears shaky, people turn to different avenues to maintain or build their wealth.
At this time, people were at home. Some working, some not. Playing on their phones. Apps like Robinhood and our own MyConstant saw surges in customers looking at investing in a different way. People who maybe didn’t usually have time to research different ways to invest or bitcoin were suddenly able to.
Beyond that, there was a—get this—880% adoption to bitcoin as a means to pay. That’s, as they say—game changing. AT&T, Burger King, Microsoft, even Wikipedia now accept bitcoin as a form of payment. You can even find bitcoin ATM’s in cities across the world.
Bitcoin, like other cryptos, is still very volatile. Not to mention, it’s hard to pin down exactly where Bitcoin fits in finance and how it should be classified. The one sure thing about it is its limited supply: Only 21 million Bitcoin tokens will be put into circulation. This is why narratives around why investors should be fans tend to shift willy-nilly—and in the process, so does its price.
As you always hear us say on MyConstant, don’t invest more than you can stand to lose and do your research. Knowing that cryptocurrencies are volatile is just one part of the puzzle though.
This was my personal list of major crypto moments in the past year. But if you feel that there were bigger or more interesting crypto or DeFi moments in 2021 that were worth shouting out. Let me know. I’d also like to hear about some of your predictions and what to look out for in 2022. Will the value of bitcoin climb even higher? Will Dogecoin finally stop being a joke? What role will influencers like Elon Musk play? If you have comments shoot me an email at Trevor @myconstant.com.
Again, I hope you all had a terrific new year and if 2022 is anything like last year, we’ll have many more interesting conversations to come!
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