The year 2021 is coming to an end and if there is one way to describe how the cryptocurrency industry fared in the last 12 months, it would be significant growth.
Larger cryptocurrencies broke previous records, adoption grew, new sectors sprouted, and new blockchain utility cases made significant breakthroughs.
Market Insight’s latest issue is reminiscent of the events covered in previous issues, as well as in-depth topics in Cointelegraph Research’s industry reports.
DeFi and Altcoins
Two of the best winners in 2021 were Solana (SUN) and Terra (LUNA). SOL won 9,500%, while LUNA won 13,000%. Significant investment and ecosystem growth catalyzed the huge gains for the two tokens. One can also argue that two are billed as potential “Ethereum killers” contributed to their massive rallies.
In the scene of decentralized finance (DeFi), the two tokens sit among the top five in total value-locked (TVL). Solana is No. 5 with $ 11.45 billion, and LUNA has recently surpassed Binance Coin (BNB) to No. 2 spot with $ 18.9 billion, according to Defi Llama. In addition, the new ecosystems in Solana and Terra deserve a deeper look, which is why they are the subject of Cointelegraph Research’s forthcoming reports.
The competition has undoubtedly increased for Ethereum. Its TVL share was 97% in January, but is currently down to 62.54% per share. Defi Llama. The next phase of development for the sector comes into play in 2022, especially as the growth of DeFi this year has been so significant that the authorities have gone from refusing the industry to struggling with ways to deal with it.
The DeFi market value remains a small fraction of the total market value of cryptocurrencies, but it underwent the same growth path. Some believe that integration with legacy banking could be one of them main focus for DeFi in 2022.
NFTs
Non-fungible tokens, or NFTs, found their outbreak year in 2021 despite having existed since 2014. The majority of sales came within the last 12 months, exceeding $ 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 who came into 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 off a portable bubble jacket skin in Decentraland, and we saw bought its first NFT. Such participation from these brands enabled the NFT market to flourish. The report also revealed that the most profitable NFT collection in 2021 was “CryptoPunks.” A “CryptoPunk” NFT provides a better average return on investment at all times compared to NFTs on other popular collections, such as “CryptoKitties” and “Bored Ape Yacht Club.”
NFTs have also disrupted the gaming industry and have become the key to fully realizing the concept of metavers through their blockchain capabilities. However, some critics doubt that parabolic increase in 2021 will unfold in 2022, especially with more regulatory control.
Nevertheless, this year’s volume of venture capital investments transferred to NFT companies is unmanageable. NFT funding in 2021 is already at $ 2.1 billion in Q3, but nearly 40% of VC trading activities involve only a single company in Andreessen Horowitz, according to to PitchBook. As sales and interest in NFTs continue to grow, it may therefore be difficult for companies with a thirst for high growth potential to resist NFTs.
Regulation
2021 has been progressive in the regulation of cryptocurrency. The 117th U.S. Congress has introduced 35 bills focusing on cryptocurrency regulation, blockchain policy, and central bank digital currencies. Federal Reserve Chairman Jerome Powell expressed his views that cryptocurrency is not a significant threat to the stability of the US financial market. One likely discussion that could seep into next year, however, is the regulation on stack coins.
The Chairman’s Working Group on Financial Markets has listed in a report that stablecoins could be an advantageous alternative payment option but are “subject to appropriate supervision.” Currently, there are no rules for stack coins, even though their market value exceeded $ 162 billion as of this writing, but a bill proposed by Wyoming Senator Cynthia Lummis could be a step in that direction.
Lummis plans to submit a comprehensive bill in 2022 which will provide regulatory clarity on stack coins, guide regulators around asset classes and offer consumer protection. Regulation of cryptocurrency will be a point of discussion in 2022 and will also be a topic that the Cointelegraph Research team will investigate further.
GameFi
It’s almost certain that everyone in the room agrees that the Axie Infinity revolutionized gaming. The play-to-earn model was a huge hit as it added a real income potential to playing video games. Data shows how play-to-earn decentralized applications (DApps) dominated the latter half of 2021 in terms of connected, unique, active wallet addresses. And since September, gaming tokens like The Sandbox (SAND), Axie Infinity (AXS), Enjin (ENJ), Illuvium (ILV) and Ultra (UOS) have even beaten Bitcoin into winnings that revealed in the previous issue of this newsletter.
The gaming sector took the helm from DeFi, which saw the most addresses connected in the first seven months of the year. The two DApp categories gave birth to a new sector, GameFi, which is believed to be the next logical step in the development of blockchain. Crypto-based games already allow users to have control over their assets in the game via NFTs, but the elements of DeFi could take it to another level. Incorporation of DeFi would mean that features such as staking would be available to users where they can earn interest in their tokens.
Yet the sector is still in its early stages, but its appeal lies in its appeal to users who may not necessarily be holders of cryptocurrency. Attracting such users could further contribute to more cryptocurrency adoption, which is likely to be its focal point for GameFi in 2022.
Adoption
With the development in 2021, cryptocurrencies were able to capture a much wider audience compared to the year before. In just the second quarter, global adoption has grown 880% since 2020, Chainalysis data show. And the key events mentioned above are likely contributing factors to cryptocurrencies becoming more mainstream. The previously mentioned NFT venture capital activities represent only 7% of the DKK 30 billion poured in crypto-related investments in 2021.
But despite the apparent growth, ownership of cryptocurrency remains relatively low. TripleA estimates the global ownership rate of cryptocurrencies at an average of 3.9%. Ukraine, Russia and Venezuela are the best countries where at least 10% of their population owns cryptocurrencies.
The low holdings involve significant room for growth, which is why a CAGR of 60.8% from 2021 to 2026 for the cryptocurrency market may have some advantage. This year, the value of the cryptocurrency market has already grown from $ 364.5 billion last year to more than $ 2.5 trillion – an increase of 586%. And in the coming year, the new sectors of GameFi and perhaps assets related to Web3 may be new avenues for continued growth.
Tokenization of certain securities can also happen on a much larger scale, and it even is expected to be the norm in 2030. Furthermore, the prevalence of cryptocurrencies for payments may also be another area of untapped potential, which will be explored further in another forthcoming report.
Predicting which sectors in 2022 are ready for the same breakthrough that NFTs had this year would be difficult, if not, impossible. However, reports that carefully study and delve into specific topics would offer a better way of understanding the nuances of a specific sector.
The Cointelegraphs Market Insights newsletter shares our knowledge of the fundamentals that are moving the digital asset market. The newsletter dives into the latest data on the feel of social media, on-chain metrics and derivatives.
We also review industry key news, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integrations. Sign up now to be the first to receive this insight. All previous editions of Market Insights are also available at Cointelegraph.com.
