In 2021, Crypto prepared for its close-up

The biggest story of cryptocurrency this year is that it has gone mainstream.

The best studies show that about 13% to 14% of Americans own or have owned cryptocurrency. The mainstream media (mostly) covers bitcoin in the business and markets section rather than the crime report. Politicians are fighting for that. And large institutional investors like hedge funds invest in it.

Then there is the government’s perspective. Treasury Secretary Janet Yellen was asked about bitcoin during her confirmation hearing. Republicans and Democrats are taking a stand on how to strictly regulate it. Securities and Exchange Commission (SEC) Chairman Gary Gensler – an expert who taught cryptography at MIT before joining the agency – called him the “Wild West.”

Both bitcoin and ether saw their prices skyrocket, even explaining a post-bullish crash in November. Bitcoin’s market cap hit $ 1,000 billion in February, $ 2,000 billion in August, and $ 3 trillion (briefly) in November, when the price of bitcoin hovered close to $ 68,800. Ether, which started the year at around $ 750, ends it at nearly $ 4,000. Institutional investors plunged as bitcoin increasingly became seen as a crypto in a class of its own: a store of value to hedge against inflation, like gold.

Here’s a look at 10 of the biggest crypto stories of 2021.

DeFi takes center stage

At the start of the year, around $ 25 billion had been invested (frozen) in decentralized finance (DeFi) projects, such as decentralized exchanges (DEX) and lending / borrowing platforms. Now it’s $ 100 billion. It made headlines in the New York Times when Massachusetts Senator Elizabeth Warren called it “the most dangerous part of the crypto world.”

Stablecoins create a stir

Dollar-pegged cryptocurrency stables may not be an entirely new topic this year – Facebook’s June 2019 Libra (now Deim) project ensured that and widespread fear among regulators, central bankers and elected officials that they could endanger monetary sovereignty and the global financial system. But they are getting bigger and bigger, as a five-hour coin hearing before the Senate Banking Committee showed. Then there is the money. The market capitalization of the top five stablecoins – Tether, UDS Coin, Binance USD, Terra USD, and Dai – is $ 152 billion.

And there’s a storm coming in 2022 when elected officials understand that the No. 7 stablecoin Paxos deal has just been announced as a payout currency – instantly and for anyone, anywhere – on Facebook’s 2 billion-customer WhatsApp messaging service is Libra by another name.

Global Economies Watch CBDCs

Central bank digital currencies (CBDCs) are at the heart of the next payments revolution. It is not clear whether CBDCs, stablecoins, or real-time payment projects of traditional financial institutions will bring real-time payments to both back-end transactions and consumers. Whoever wins, real-time payouts arrive.

It is difficult to unpack them from China. The digital yuan is no longer in the testing phase and it looks like China will meet its goal of having a live CBDC in time for the Beijing Winter Olympics in February. It is the first country to have a CBDC – the Bahamian Sand Dollar won this honor. But China’s digital asset is igniting fires under finance ministries around the world, with 87 countries, including the European Union, looking. The fear is that the digital dollar will give China a tool to challenge the dollar’s role as a global reserve currency. However, the United States is still exploring the idea of ​​a digital dollar, and neither Yellen nor Federal Reserve Chairman Jerome Powell is convinced of the need – or the urgency.

China Shifts Crypto’s Center of Gravity

Two points. First, the digital yuan is forcing a payments revolution (see CBDC above). Second, by outright banning crypto trading and mining, China has shifted crypto’s center of gravity – and highly polluting bitcoin mining operations – directly to the United States. It also removed 1.4 billion buyers from the market. Between that, the great firewall and extensive internet censorship, the ban will likely continue.

NFTs become mainstream

The non-fungible token (NFT) has soared into the crypto and mainstream mainstream this year, to the point that NFTs – along with DeFi – are slowing Ethereum at a breakneck pace. A type of cryptocurrency token capable of permanently locking down data such as pictures, music, and even videos in a format that can prove its own provenance is making forays into art and games and could be used for symbolize everything, from stocks to real estate.

The $ 69 million NFT collage artist Beeple sold at Christie’s in May has garnered mainstream interest, but professional sports – notably basketball and soccer – have jumped on both feet, offering digital collectible cards and loyalty efforts, like allowing fans to vote on team decisions.

Coinbase goes public

When the US cryptocurrency exchange Coinbase launched its IDO – an initial direct offering, similar to an initial public offering (IPO) but without financial intermediaries – on the Nasdaq in April, it became the first company in the industry. crypto to go public without sneaking through a reverse merger. . It was a radical change, showing that crypto was a “real” and legitimate industry.

Bitcoin gains legitimacy with ETFs

The launch of bitcoin exchange-traded funds (ETFs) is another phase that the industry as a whole sees as a step towards legitimacy. This is largely because the SEC will not allow them as they believe cryptocurrency trading is still far too manipulated and manipulated. Thus, the October decision to authorize bitcoin futures ETFs was a big step, but still far from the legitimacy that a spot ETF would bring.

Regulatory battle lines drawn

Crypto regulation is coming. On this, almost everyone agrees. After that, however, there are a lot of disputes, but the two biggest are all about control.

First, there is the form of regulation. This pits the crypto industry’s desire for a lean regime to foster innovation (shared by a good number of Republican congressmen) against the desire of many regulators for a stricter regime aimed more at protecting investors. consumers (shared by a good number of Democratic congressmen). So there is a partisan battle brewing, with Senator Cynthia Lummis on one side and most recently Warren on the other.

Second, there is the power struggle between regulators. This to some extent mirrors the first, pitting the SEC against the Commodity Futures Trading Commission (CFTC). Gensler’s recent call for a single crypto regulator – say, his agency – matches CFTC Chairman Rostin Behnam’s suggestion that Congress expand his agency’s authority. It’s more than a power struggle. SEC scrutiny would support the view that virtually all cryptocurrencies are securities – investments rather than commodities. The latter would make a lot more utility tokens used to run decentralized applications (DApps), platforms and blockchains much easier to sell and manage. The SEC’s ongoing lawsuit against international payments firm Ripple for selling unlicensed securities – XRP tokens – could settle the dispute in court if Congress does not act.

Big banks embrace crypto

OK, kissing might be a strong word, but the big banks and other financial institutions (FIs) are starting to offer crypto investments to high net worth clients – who demand it – while taking custody seriously and using Stables, CBDCs, or some other form of cryptocurrency (like Ripple’s XRP) for real-time, background settlement of all kinds of transactions. Gone are the days when banks closed the account of any customer who sent money to an exchange account.

A little story about Jack and Elon

No comeback to crypto in 2021 would be complete without the stories of Tesla and SpaceX CEO Elon Musk and Block (and formerly Twitter) CEO Jack Dorsey.

Dorsey has become a stronger and more proud advocate of bitcoin and blockchain technology. Bitcoin maximist, he just said he thinks bitcoin will replace the US dollar. Block’s Cash app was the first major non-industry payment app to feature crypto trading, and it’s a huge chunk of the company’s profits. He is also a strong supporter of decentralized technology, funding a project – BlueSky – to create an open source social media platform that cannot be censored. And this whole story of resigning as CEO of Twitter started when an activist hedge fund complained that Twitter’s poor results stemmed from Dorsey spending too much time and attention on Block (formerly Square). .

And then we have Musk. A crypto advocate who bought $ 1.5 billion in bitcoin for Tesla’s treasury, he also became – very briefly – the first CEO of a large company to sell goods for bitcoin. Sadly, Tesla’s embrace was fleeting, which he blamed on the staggering environmental impact of bitcoin mining.

Then there is his Twitter account, which currently has 66 million followers. Musk likes to shake the market with subtle comments and memes, and he’s done it very effectively with bitcoin. But this is Dogecoin where it really shines. The joke cryptocurrency – literally it was meant as a joke – has gone from virtually worthless to the # 12 cryptocurrency by market cap. Memes of “The Lion King” and things like buying some for his son and declaring him the first “Toddler HODLer” have skyrocketed DOGE. Of course, a “Saturday Night Live” skit dropped the price. What is clear is that overall, Dogecoin is essentially Musk.