The year 2021 is coming to an end, and if there is a way to describe how the cryptocurrency industry fared in the past 12 months, it would be momentous growth.
Major cryptocurrencies broke previous records, adoption grew, new sectors emerged, and new blockchain use cases made significant progress.
The latest edition of Market Insight recalls events covered in previous editions, as well as topics detailed in Cointelegraph Research industry reports.
DeFi and Altcoins
Two of the top 2021 winners were Solana (SOL) and Terra (LUNA). SOL gained 9,500%, while LUNA gained 13,000%. Significant investments and ecosystem growth catalyzed the huge gains from the two tokens. It could also be argued that the two advertising themselves as potential “Ethereum killers” contributed to its massive rallies.
In the decentralized finance (DeFi) scene, the two tokens are in the top five in total locked value (TVL). Solana is ranked No. 5 with $ 11.45 billion, and LUNA has recently overtaken Binance Coin (BNB) at No. 2 with $ 18.9 billion, according to Defi Llama. Additionally, the emerging ecosystems of Solana and Terra deserve a deeper look, which is why they are the subject of upcoming Cointelegraph Research reports.
Competition has certainly increased for Ethereum. Its stake in TVL was 97% in January, but is currently down to 62.54%, according to Defi Llama. The next phase of development for the sector is called into question in 2022, especially as DeFi’s growth this year has been so substantial that authorities have gone from denying the industry to grappling with ways to deal with it.
DeFi’s market capitalization is still a small fraction of the overall cryptocurrency market capitalization, but it experienced the same growth trajectory. Some believe that integration with legacy banking could be one of DeFi’s main focuses in 2022.
NFT
Non-fungible tokens, or NFTs, found their breakout year in 2021 despite existing since 2014. Most of the sales occurred in the past 12 months, topping $ 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 in the first half of the year were primarily driven by individual artists joining the space with their respective collections and some high-profile sales, while the second half brought in more mainstream brands.
For example, Coca-Cola auctioned a bubble jacket skin to wear in Decentraland, and Visa bought its first NFT. This participation of these brands allowed the NFT market to flourish fully. The report also revealed that the most profitable NFT collection in 2021 was “CryptoPunks”. A “CryptoPunk” NFT offers a better all-time average return on investment compared to NFTs in other popular collections, such as “CryptoKitties” and “Bored Ape Yacht Club”.
NFTs have also created disruption in the gaming industry and have become key to fully realizing the concept of metaverses through their blockchain properties. However, some critics doubt that the parabolic surge in 2021 will play out in 2022, especially with increased regulatory scrutiny.
However, the amount of venture capital investments this year channeled to NFT companies is more than considerable. NFT funding in 2021 is already $ 2.1 billion as of Q3, yet nearly 40% of venture capital deal activities involve just one company at Andreessen Horowitz, according to PitchBook. Therefore, as sales and interest in NFTs continue to grow, it can be difficult for companies with a thirst for high growth potential to resist NFTs.
Regulation
2021 has been progressive on the crypto regulatory front. The 117th United States Congress has introduced 35 bills that focus on the regulation of cryptocurrencies, blockchain policy, and central bank digital currencies. Federal Reserve Chairman Jerome Powell expressed his view that cryptocurrency is not a significant threat to the stability of the US financial market. However, a likely discussion that could leak over the next year is the regulation of stable coins.
The President’s Task Force on Financial Markets has stated in a report that stablecoins could be a beneficial alternative payment option, but they are “subject to adequate oversight.” Currently, there are no regulations on stablecoins, even when their market capitalization exceeded $ 162 billion at the time of this writing, but a bill proposed by Wyoming Sen. Cynthia Lummis could be a step in that direction.
Lummis plans to introduce a comprehensive bill in 2022 that will provide regulatory clarity on stablecoins, guide regulators on asset classes, and offer consumer protection. Cryptocurrency regulation will be a topic of conversation in 2022 and it will also be a topic that the Cointelegraph research team will continue to examine.
GameFi
It’s almost certain that everyone in space agrees that Axie Infinity revolutionized gaming. The play-to-earn model was a huge success as it added real income potential to video games. The data shows how decentralized applications (DApps) play-to-earn dominated the second half of 2021 in terms of active, unique and connected wallet addresses.. And since September, tokens from games like The Sandbox (SAND), Axie Infinity (AXS), Enjin (ENJ), Illuvium (ILV), and Ultra (UOS) have even surpassed Bitcoin in earnings, as revealed in the previous issue. of this newsletter.
The gaming industry took the helm from DeFi which saw the most addresses connected in the first seven months of the year. The two DApp categories gave rise to a new sector, GameFi, which is believed to be the next logical step in blockchain development. Crypto-based games already allow users to have control over their in-game assets through NFT, but the elements of DeFi could take it to another level. The addition of DeFi would mean that features like gambling would be available to users where they can earn interest on their tokens.
However, the sector is still in its early stages, but its appeal lies in its appeal to users who may not necessarily be cryptocurrency holders. Attracting these users could further contribute to increased adoption of cryptocurrencies, which will likely be its focal point for GameFi in 2022.
Adoption
With the developments in 2021, cryptocurrencies were able to captivate a much wider audience compared to the previous year. In the second quarter alone, global adoption has grown 880% since 2020, as shown by the Chainalysis data. And the key events mentioned above are likely contributing factors to cryptocurrencies becoming more mainstream. The above-mentioned NFT venture capital activities represent just 7% of the $ 30 billion invested in crypto-related investments in 2021.
But despite the apparent growth, crypto ownership remains relatively low. TripleA estimates that the global cryptocurrency ownership rate is averaging 3.9%. Ukraine, Russia and Venezuela are the main countries, and at least 10% of their population owns cryptocurrencies.
Low ownership rates imply substantial room for growth, so a 60.8% CAGR between 2021 and 2026 for the cryptocurrency market may have some merit. This year, the market value of cryptocurrencies has already grown from $ 364.5 billion last year to more than $ 2.5 trillion, an increase of 586%. And in the coming year, new sectors at GameFi and perhaps Web3-related assets could possibly be new avenues for continued growth.
The tokenization of certain securities could also occur on a much larger scale, and is even predicted to be the norm by 2030. Additionally, the prevalence of cryptocurrencies for payments could also be another area with untapped potential, which will be further explored in another upcoming report.
Predicting which sectors in 2022 are poised for the same breakthrough that NFTs had this year would be difficult, if not impossible. However, reports that study carefully and delve into certain topics would offer a better way to understand the nuances of a specific sector.
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