The Most Important Events in Crypto 2021

2021 has been another incredible year for the digital assets industry, reaching new highs, pushing new boundaries, creating new narratives, and then some.

For the DFG team, this is a small recollection of the most noteworthy events that took place this year.

• Polkadot and Kusama Parachain Auctions

In 2021, the Polkadot network reached yet another remarkable milestone, the parachain auctions. These auctions are held on the relay chain of the Polkadot network (or its canary network, Kusama) to determine which blockchain will connect to the parachain slot. Once an auction begins, every project on the network is free to submit their bid to the relay chain and the slots will later be assigned to the winners who lock up a bond in DOT for the duration of the lease. During this period, we’ve witnessed over 500 million DOT (approximately 55% of DOT circulating supply) be locked with an estimated worth of $13 billion.

• DeFi TVL increased 400%

DeFi has significantly begun to grow at an impressive pace since the summer of 2020 with Compound launching its $COMP governance token in May of that year and enabling users to earn profit in tokens for providing liquidity to the platform, which indicates DeFi’s taking off. Besides lending protocols, such as Compound and Aave, taking a major portion of TVL, other DeFi applications, like DEX, stablecoins, derivatives, and asset management, have also accelerated to expand in 2021. More and more retail investors and institutions are realizing the potential of DeFi as an investment opportunity, which made the TVL surge by almost 400% year-to-date, according to data from DeFi Pulse.

• WEB3 Becomes Mayor Narrative

Web3 is a concept based on blockchain technologies, which is a term originally coined in 2014 but has only recently come into prominence. Cryptocurrencies can theoretically bypass centralized authorities like banks, Web 3 would also, in theory, bypass central authorities. Despite the fact that billions of dollars have already been invested in certain technologies already, it remains hard to predict exactly what it will look like over the decades.

• NFT Boom

NFT, non-fungible tokens have become a topic that is impossible to overlook in 2021. Beeple’s artwork, CryptoPunks, and Bored Ape Yacht Club along with other famous NFT projects have left the public with an image that NFTs are just JPEGs. Contrary to this popular belief, NFTs are essentially a blockchain-based token that proves that an individual is the sole holder of that one-of-a-kind digital item, despite the forms. (JPEG, Gif, etc.) With an estimated $22 billion trading volume year-to-date, per data from DappRadar with a peak of over $300 million in daily volume during August, NFTs are thriving and maturing, while also helping introduce increasing amounts of people to blockchain and the crypto world.

• GameFi and Play-to-Earn

With the rise of NFTs, Axie Infinity, as the vanguard of an army of GameFi projects, has shown the crypto world the enormous potential for NFTs in games, leading to a new sector within this industry and innovative economics called Play-to-Earn. Millions of players bought various corresponding NFTs as entry tickets to play these blockchain games and to earn tradeable cryptocurrencies through them, some of these players even made a living from it. To solve the sore point that sometimes the price for entry is relatively high for the majority, organizations like Yield Guild Games have been formed and these guilds later invest into more GameFi projects to nourish this sector more.

• Crypto VC funding increased 450%

The total amount of venture capital funding for crypto in 2021 has significantly surged by roughly 450% compared to that in 2020, which is even more than what venture capitalists have bet on crypto in the previous 10 years combined. According to data by PitchBook, about $5.5 billion of VC funding was invested into crypto businesses through 2020, while there has been almost $30 billion of funding in crypto in 2021, among which most funding focused on NFTs, DeFi, and infrastructure development.

• ETH Competitors Gain Market Share

While the Ethereum Network still mostly manages to keep its throne of smart contract blockchain in the entire cryptocurrency market, the overall growth of its market capitalization did not live up to expectations, compared to BSC (BNB +1,300%), Terra (Luna +15,000%), Avalanche (AVAX +4,500%) and Solana (SOL +17,500%) posting double-digit returns during the war of smart contracts through 2021. Although Ethereum is still favored by most cryptocurrency investors, its arch competitors are incurring more developers to launch more dApps, which may potentially allow them to surpass Ethereum. One of the critical reasons, why there has been such an exodus whereby so many new protocols are deployed on other networks than Ethereum, is that they offer considerably better speed, transactions per second, meanwhile, the volume of transactions they can do is considerably higher. That way, dApps are built on these alternatives and can provide a better user experience.

• Crypto Market Cap surged over $2T increasingly attracting institutional capital

As the Bitcoin price has rallied to an all-time high of approximately $69,000 in early November in 2021, the cryptocurrency market capitalization for all cryptocurrencies has soared to a historical record, nearly reaching $3 trillion. Since last November, it has surged by over 4 times compared to when it stood at nearly $6 billion. In October 2021, the first futures-based Bitcoin exchange-traded fund (ETF) was approved, which will allow for major investment inflows from institutional investors, was a milestone for the legitimization of the crypto market. Besides the development of blockchain technologies and cryptocurrencies has been piled up within this industry, they are also benefiting from signs that blockchain is becoming more mainstream.

• Coinbase IPO Listing

Coinbase, as the first major cryptocurrency company, went public to list its shares on a U.S. stock exchange. The Coinbase share price began at $381 per share, around 52% increase over a $250 reference price set by Nasdaq. The stock swung as low as $310 and as high as $429 in a volatile day of trading that reflected the unpredictable nature of cryptocurrency as well as investors being hungry to get a bite of the trending market for digital currencies.

• Countries Adopting Crypto

Despite Bitcoin raising financial and regulatory concerns for major governments worldwide, more and more investors wonder if they can use Bitcoin legally, even though there are still no uniform international laws that regulate Bitcoin. However, on September 7th, 2021, a small country in Central America has made its call: El Salvador officially adopted Bitcoin as legal tender, making it an accepted means of exchange for goods and services. Moreover, the worldwide adoption of cryptocurrency has skyrocketed, especially in relatively developing countries like Vietnam, India, Pakistan, and other emerging economies. Unsurprisingly, as Bitcoin is based on a peer-to-peer system, people are driven to purchase cryptocurrencies on P2P platforms to preserve their savings in many emerging markets with significant currency devaluation.

• Meme Coin Rise

Given that more people are already familiar with Bitcoin and other mainstream cryptocurrencies, there are some meme-based cryptocurrencies, like Dogecoin, which have been getting massive attention since Elon Musk started to tweet about it often. It’s true to say that 2021 was the best year for Dogecoin since its launch: at the beginning of 2021, Dogecoin was trading at $0.005685 and later went to as high as $0.7376 in early May. As of December 2021, this meme coin was trading around $0.18, which stands for over 3,100% pump in 2021. In a nutshell, meme coins are cryptocurrencies inspired by memes and internet jokes. These cryptocurrencies aren’t supposed to be taken seriously ( like another shining meme coin, Shiba Inu Coin, which was promoted as the “Dogecoin Killer” and has gained almost 100,000,000% at its all-time high in October 2021), however, they can still gain momentum when communities ape in and make it popular. As a result, more and more retail investors jump on board and further boost the coins until the early movers decide to dump and take the profit; or the communities lose interest and move on to the next, causing the prices of these meme coins to crash.

We thank you all for joining us in this journey during 2021 and look forward to sharing with you what is yet to come in 2022.