Cryptocurrencies had an eventful 2021, marked by Bitcoin and Ethereum’s continued dominance, the rapid growth of altcoins and stablecoins and Dogecoin’s wild ride.
2021 was a record-breaking year for the already-burgeoning global cryptocurrency market. It began the year as a $750 billion-dollar industry—roughly on par with the previous all-time high achieved at the peak of the 2017 crypto bull run—and ended the year at a value in excess of $2.3 trillion.
However, the cryptocurrency sector’s whopping 300%+ growth wasn’t its only noteworthy accomplishment in 2021. Accompanying this ballooning figure was the launch of more than 6,000 new cryptocurrencies, bringing the total number of crypto assets to over 16,000. And though staples such as Bitcoin and Ethereum continued to dominate the crypto realm—accounting for 40% and 19% of the entire market, respectively—a number of these newer “altcoin” offerings have soared to stratospheric heights.
For example, rising stars like Cardano and Solana jostled with each other to cement their network, platform and community as part of the mainstream. Meanwhile, stablecoins—cryptocurrencies pegged to the U.S. dollar and other fiat currencies, like Tether, USD Coin, Dai, and others—quietly eclipsed $150 billion in market value, amounting to approximately 7% of the overall crypto market. And of course, a roundup of 2021 wouldn’t be complete without mentioning the meteoric rise of “memecoins”—cryptocurrencies like Dogecoin and Shiba Inu Coin invented for no other reason than to elicit a laugh from users (or rather, HODLers). With so many segments of the cryptocurrency market contributing to its breakout year, it’s worth taking a closer look at each of them. Here are some of the wildest, funniest and most remarkable things that happened to cryptocurrencies in 2021.
In the world of cryptocurrency, Bitcoin needs little introduction. Launched on January 9th, 2009, by the pseudonymous Satoshi Nakamoto, the Bitcoin network powers the oldest (and first) cryptocurrency in the world. In the 13 years since its founding, Bitcoin has been through three complete boom-bust cycles; 2021 saw the continuation of the digital currency’s fourth bull run.
As a result, Bitcoin hit several milestones during the year. On February 19th, it closed above $54,000 per coin, surpassing $1 trillion in market value for the first time in history. Major banks, including BNY Mellon and Goldman Sachs, realized that cryptocurrencies were here to stay as an asset class, and began to make forays into the crypto space.
But they weren’t the only institutions to take notice. Online payments company Square (NYSE: SQ) and Elon Musk-led electric automaker Tesla (NASDAQ: TSLA) both disclosed they were both buying Bitcoin; in February of 2021, Tesla even started accepting Bitcoin as payment for cars, though they stopped taking the digital currency a mere three months later, citing environmental concerns. (Interestingly, Musk said the car manufacturer would resume Bitcoin transactions once more than half the network transitioned to green energy.)
Ethereum, the second-largest cryptocurrency by market value and the world’s first decentralized application (dApp) platform, saw similar enthusiasm from investors and institutions in 2021. Rather than buy and hold the asset, major institutions opted to build on the network instead.
Nike, for example, is planning to launch CryptoKicks, a series of virtual sneakers that will be tokenized on the Ethereum blockchain. Amazon Web Services (NASDAQ: AMZN) also began turning to the decentralized smart contracts platform, announcing that its new Amazon Managed Blockchain solution would support the Ethereum network. Meanwhile, in February 2021, financial giant J.P. Morgan introduced JPM coin, a shared ledger system built on the Ethereum blockchain. The bank hopes it can use the digital token to facilitate seamless and instantaneous online payments.
Bitcoin and Ethereum weren’t the only cryptocurrencies that enjoyed a standout 2021. In fact, when measured by returns alone, plenty of altcoins fared better than the largest two digital currencies—far better.
Dubbed the “Ethereum killer” for its lower fees and faster transaction processing speeds, Cardano (ADA) returned more than 670% for the full year, beating Bitcoin’s comparatively modest 60% return and Ethereum’s 260% growth by a wide margin. Notably, this outperformance occurred after Cardano lost over half its value since its all-time high in September.
But that record pales in comparison to some of the best-performing cryptocurrencies of 2021. Solana (SOL), a Cardano competitor, returned just shy of 10,000% for the year—roughly fourteen times as much as its crypto asset competitor. While this discrepancy is staggering, a comparison of the two rival blockchain networks offers some clues.
Most importantly, Solana’s network is lightning fast; while Cardano’s blockchain can handle 250 transactions per second at an average cost of 40 cents per transaction, Solana’s can process more than 65,000 transactions per second at a cost of just 0.025 cents per transaction. This makes Solana 260 times faster—and 1,600 times cheaper—than Cardano’s network.
If Cardano is termed the Ethereum killer, then Solana arguably earns the moniker “Cardano killer”—though perhaps Solana won’t be able to retain that title forever. Cardano’s upcoming Hydra upgrade, fittingly named after the Lernaean Hydra in Greek and Roman mythology, aims to increase the number of “heads” in the Cardano network by orders of magnitude—up to a staggering one million transactions per second. If successful, it could be Cardano’s turn to dominate in 2022. “Solana killer”, anyone?
On the surface, stablecoins appear to be less exciting than their more speculative counterparts. Since they are designed not to fluctuate in value, they’re not prone to the stomach-churning volatility and explosive price changes that make other altcoins so popular among the crypto trading crowd.
Nonetheless, stablecoins are a force to be reckoned with and have made a notable mark upon the crypto landscape. In 2021, the market value of all stablecoins more than quintupled to over $130 billion as more coins than ever were minted, backed and circulated amongst the crypto community.
Tether, the world’s first stablecoin, became one of the largest holders of U.S. commercial paper in the world in 2021—allocating around half of its $60+ billion in assets to such investments. So named because the price of a Tether token is “tethered” to the value of a dollar, users convert dollars into Tethers and other stablecoins at a one-for-one exchange rate, and then use these stablecoins to trade or borrow other cryptocurrencies.
This enables traders to move in and out of cryptocurrency positions without having to deal with dollars. Speculators trading Bitcoin, for example, would receive Tether or another stablecoin when they sell their stake at a cryptocurrency exchange—ensuring that all transactions stay contained within the crypto ecosystem.
For this reason, stablecoins serve not only as a stable store of value and a medium of exchange, but also as a settlement currency whose use extends far beyond trading. Dai, a token built on the Ethereum blockchain, can enable anyone with an internet connection to transact and pay using the cryptocurrency, even if they don’t have a bank account. The token’s programmable nature gives rise to an array of blockchain-hosted dApps and smart contracts that empower users to borrow, lend and earn interest on their crypto. Additionally, gaming and metaverse platforms built on top of the blockchain, like Axie Infinity—which exploded in popularity in 2021 to over 2.8 million members—give players the opportunity to earn cryptocurrency by completing in-game challenges.
Perhaps the most interesting / hilarious crypto occurrence in 2021 was the rapid rise of memecoins like Dogecoin. Originally created in 2013 as a satirical response to the rampant speculation and fraud that plagued the cryptocurrency community at the time, the dog coin—named after the evergreen Shiba Inu meme—was never intended to be a “serious” cryptocurrency like Bitcoin.
Though it was meant to be a “joke” from the outset, this didn’t prevent the memecoin from becoming an object of mania and investor speculation. From a value of less than a penny per coin at the beginning of the year, demand for Dogecoin reached a fever pitch in April and May of 2021, and mooned to an all-time high of almost $0.74 a coin.
And the joke crypto’s wild ride had some serious (but positive) consequences, too. Aziz McMahon, a London-based Goldman Sachs managing director and 14-year veteran of the investment bank, reportedly quit in May after making $12 million on the meme currency. Meanwhile, several charities, like Save The Children, The Water Project and the American Cancer Society—along with a number of pet shelters—announced that they would begin to accept donations in Dogecoin. Even Elon Musk chimed in, announcing in December that Tesla would take Doge as payment for merchandise.
The explosive growth of crypto markets in 2021 is just a preview of the exciting events that await this unique and emerging asset class in the years and decades to come. But navigating this wild west of finance can be difficult and dangerous if you go about it alone.
With an expert team of industry-leading professionals who specialize in alternative investments like cryptocurrencies and digital assets, The Spaventa Group is ready to serve as your trusted partner and investment advisor—helping you achieve superior returns and peace of mind as you allocate investments into crypto.
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