All you need to know about cryptocurrency in 2021

Bitcoin at nearly $70,000, memecoins at billions of dollars, a massive Wall Street listing, and an all-out Chinese crackdown: 2021 has been the wildest yet for cryptocurrencies, even by volatile industry standards.

Digital assets have started the year with a rush of money from large and small investors. Bitcoin and the like have rarely been out of the spotlight since then, with the language of crypto firmly entrenched in the investor’s lexicon.

Here is a look at some of the major trends that have dominated cryptocurrencies this year.

1 – Bitcoin: Still No. 1

The original digital currency has retained its crown as the largest and most popular token – albeit not without a host of competitors chasing after it.

Bitcoin has surged more than 120% from January 1 to a record $65,000 in mid-April. This was caused by a tsunami of cash from institutional investors, growing acceptance by big companies such as Tesla (NASDAQ:TSLA) and Mastercard Inc (NYSE:MA) and a growing embrace of Wall Street banks.

Investors’ interest was driven by the purported qualities of inflation-resistant bitcoin – it has a limited supply – as record stimulus packages fueled price increases. The promise of quick gains amid record low interest rates, and easy access through rapidly developing infrastructure, has also helped attract buyers.

Also, the dominant bitcoin incubation token was Coinbase’s major US listing (Coinbase Global Inc. (NASDAQ:COIN)) worth $86 billion in April, the largest to date for a cryptocurrency company.

“It’s coming out into the field where it’s being traded by the kind of people who are betting on Treasuries and stocks,” said Richard Galvin of crypto fund Digital Capital Asset Management.

However, the digital currency has remained volatile. It fell 35% in May before rising to an all-time high of $69,000 in November, with inflation surging across Europe and the US.

Notable skeptics remain, with JPMorgan (NYSE:JPM) president Jamie Dimon calling it “worthless”.

2 – Rise of the meme coins

Although Bitcoin has remained the number one choice for investors who dip their toes into digital currencies, a batch of new tokens have – some would say a joke – entered the sector.

“Memes”—a loose group of currencies ranging from the Dogecoin and Shiba Inu to game squid with roots in web culture—often have little practical use.

Launched in 2013 as a single product of Bitcoin, Dogecoin surged more than 12,000% to an all-time high in May before dropping nearly 80% by mid-December. The Shiba Inu, which refers to the same Japanese dog breed as Dogecoin, briefly made its way into the top 10 cryptocurrencies. Graphic: Who let the dog out?

The meme phenomenon has been linked to the Wall Street Beats movement, as online retailers coordinated a buildup in stocks like GameStop Corp (NYSE:GME)), putting pressure on hedge funds’ short positions.

Many traders – often stuck at home with excess funds during coronavirus shutdowns – have switched to crypto, even as regulators have voiced warnings about volatility.

“It’s all about mobilizing funding,” said Joseph Edwards, head of research at crypto broker Enigma Securities.

“While assets like DOGE and SHIB may themselves be purely speculative, the money coming into them comes from the instinct of ‘Why don’t I earn with my money and savings?’” Chart, rising meme coins.

3 – Organizers: The (big) elephant in the room

With money pouring into digital currencies, regulators were concerned about what they saw as its potential to enable money laundering and threaten global financial stability.

Long skeptical of cryptocurrencies – a rebellious technology invented to undermine traditional finance – regulators have called for more power over the sector, with some consumers warning of the volatility.

With the new rules approaching, the cryptocurrency markets have been volatile about the potential risks of tightening.

And when Beijing imposed restrictions on cryptocurrencies in May, bitcoin slumped nearly 50%, dragging the broader market down with it.

“Regulatory risk is everything because these are the rules of the road that people live and die by in financial services,” said Stephen Kelso, head of global markets at ITI Capital. “The organizers are making good progress, they are catching up.”

4 – Non-fungible NFTs

With the proliferation of meme trading, another previously obscure corner of the cryptocurrency pool has grabbed the spotlight as well.

Non-fungible tokens — strings of code stored in a blockchain digital ledger that represent unique property of artwork, videos, or even tweets — exploded in 2021.

While a digital artwork by American artist Pebble sold for nearly $70 million at Christie’s in March, it was among the three most expensive pieces by a living artist at auction.

The sale led to a scramble for non-fungible tokens.

Sales in the third quarter were $10.7 billion, an eight-fold increase from the previous three months. With trading volumes reaching their peak in August, the prices of some non-fungible tokens have soared so quickly that speculators can “flip” them to make a profit in days, or even hours.

Rising cryptocurrency prices that have spawned a new group of crypto-rich investors — as well as predictions for the future of online virtual worlds where non-fungible tokens take center stage — have helped fuel the boom.

The popularity of digital currencies and non-fungible tokens may also be linked to a decline in social mobility, as young people are attracted to their potential for quick gains as rising prices make traditional assets such as homes difficult, said John Egan, CEO of BNP Paribas-owned research firm Atelier. elusive.

While some of the world’s best brands, from The Coca-Cola Company (LON:CCH) ( Coca-Cola Co (NYSE:KO)) to Burberry, has sold the non-fungible tokens, the still-incomplete regulations mean big investors are turning in big.

“I don’t see a situation where licensed financial institutions will actively and aggressively trade (this) digital assets in the next three years,” Egan said.