The year 2021 is drawing to a close, and if there’s one way to describe how the cryptocurrency industry has fared over the past 12 months, that would be significant growth.
Major cryptocurrencies have broken previous records, adoption has increased, new sectors have sprouted, and new blockchain use cases have made significant inroads.
The latest edition of Market Insight recalls events covered in previous issues as well as in-depth topics in industry reports from Cointelegraph Research.
DeFi and Altcoins
Two of the top 2021 winners were Solana (SOL) and Terra (LUNA). SOL gained 9,500%, while LUNA gained 13,000%. Large investments and the growth of the ecosystem catalyzed the immense gains for both tokens. It could also be argued that the two, billed as potential ‘Ethereum killers’, contributed to their massive rallies.
In the decentralized finance (DeFi) scene, the two tokens are in the top five in terms of total locked-in value (TVL). Solana is at No.5 with $ 11.45 billion, and LUNA recently passed Binance Coin (BNB) for second place with $ 18.9 billion, according to Defi Llama. Additionally, the emerging ecosystems of Solana and Terra merit further examination, which is why they are the subject of future Cointelegraph Research reports.
Competition has undoubtedly increased for Ethereum. Its TVL share was 97% in January but is currently down to 62.54%, per Defi Llama. The next phase of the industry’s development is in question in 2022, especially since DeFi’s growth this year has been so significant that authorities have moved from denying the industry to finding ways to address it. .
DeFi’s market cap remains a small fraction of the cryptocurrency’s overall market cap, but it has undergone the same growth trajectory. Some believe that integration with traditional banking services could be one of DeFi’s main goals in 2022.
Non-fungible tokens, or NFTs, found their breakthrough year in 2021 despite having been around since 2014. The bulk of sales have been in the past 12 months, surpassing $ 14 billion in December. Digital art collections and digital collectibles dominate 91% of these sales volumes, which is one of the key data revealed in this report.
Sales for the first half of the year were mostly driven by individual artists who joined the space with their respective collections and a few high profile sales, while the second half attracted more traditional brands.
For example, Coca-Cola auctioned off a wearable bubble jacket skin to Decentraland, and Visa bought its first NFT. This participation of these brands has allowed the NFT market to flourish. The report also revealed that the top-grossing NFT collection in 2021 was “CryptoPunks”. A “CryptoPunk” NFT offers an all-time best average return on investment compared to NFTs from other popular collections, such as “CryptoKitties” and “Bored Ape Yacht Club”.
NFTs have also disrupted the gaming industry and have become essential for fully realizing the concept of metaverse through their blockchain properties. However, some critics doubt that the parabolic surge of 2021 will happen again in 2022, especially with increased regulatory control.
Nonetheless, this year’s amount of venture capital investment funneled into NFT companies is beyond size. NFT funding in 2021 was already $ 2.1 billion in the third quarter, but nearly 40% of venture capital deals involve just one company in Andreessen Horowitz, according to PitchBook. Therefore, as sales and interest in NFTs continue to grow, it can be difficult for companies hungry for high growth potential to resist NFTs.
2021 has been a gradual one on the cryptocurrency regulation front. The 117th United States Congress introduced 35 bills focused on cryptocurrency regulation, blockchain policy, and central bank digital currencies. Federal Reserve Chairman Jerome Powell has expressed his view that cryptocurrency is not a significant threat to the stability of the U.S. financial market. However, one likely discussion that could seep into next year is the stablecoin regulation.
The president’s financial markets task force said in a report that stablecoins could be a beneficial alternative payment option, but that they are “subject to appropriate oversight.” Currently, there are no regulations on stable coins, although their market capitalization exceeds $ 162 billion at the time of writing, but a bill proposed by Wyoming Senator Cynthia Lummis could be one. not in that direction.
Lummis plans to present a comprehensive bill in 2022 that will provide regulatory clarity on stablecoins, guide regulators around asset classes, and offer protections for consumers. The regulation of cryptocurrencies will be a topic of discussion in 2022 and will also be a topic that the Cointelegraph Research team will take a closer look at.
It is almost certain that everyone in space agrees that Axie Infinity has revolutionized gaming. The game-to-win model has been a huge success as it has added real income potential to games. video. The data shows how decentralized play-to-earn apps (DApps) dominated the second half of 2021 in terms of active, unique and connected wallet addresses. And since September, gaming tokens such as The Sandbox (SAND), Axie Infinity (AXS), Enjin (ENJ), Illuvium (ILV) and Ultra (UOS) have even beaten Bitcoin in earnings, as revealed in the previous issue of this newsletter.
The gaming industry has taken the helm of DeFi which saw the most addresses connected in the first seven months of the year. The two DApp categories gave birth to a new sector, GameFi, which would be the next logical step in blockchain development. Crypto-based games already allow users to control their in-game assets through NFTs, but elements of DeFi could take it to another level. The integration of DeFi would mean that features like staking would be available to users where they could earn interest on their tokens.
Still, the industry is still in its infancy, but its appeal lies in its appeal to users who are not necessarily cryptocurrency holders. Attracting such users could further contribute to greater adoption of the cryptocurrency, which will likely be its focal point for GameFi in 2022.
With the developments of 2021, cryptocurrencies were able to captivate a much larger audience compared to the previous year. In the second quarter alone, global adoption increased 880% since 2020, according to data from Chainalysis. And the key events mentioned above are probably factors contributing to the spread of cryptocurrencies. The previously mentioned NFT venture capital activities only represent 7% of the $ 30 billion invested in crypto-related investments in 2021.
But despite the apparent growth, ownership of cryptocurrency remains relatively low. TripleA estimates the global cryptocurrency ownership rate at an average of 3.9%. The main countries are Ukraine, Russia and Venezuela, with at least 10% of their population owning cryptocurrencies.
Low ownership rates imply substantial room for growth, which is why a CAGR of 60.8% from 2021 to 2026 for the cryptocurrency market may have some merit. This year, the value of the cryptocurrency market has already grown from $ 364.5 billion last year to over $ 2.5 trillion, an increase of 586%. And in the coming year, the new areas of GameFi and perhaps Web3-related assets could potentially be new avenues for continued growth.
Tokenization of certain securities could also occur on a much larger scale, and is even expected to be the norm by 2030. In addition, the prevalence of cryptocurrencies for payments could also be another area with untapped potential, which will be explored further in another forthcoming report.
Predicting which sectors in 2022 are poised for the same breakthrough as NFTs this year would be difficult, if not impossible. However, reports that carefully study and delve into certain topics would offer a better way to understand the nuances of a specific industry.
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