Crypto is spreading, and you can do nothing about it
The first part of the year is about to end and there’s never a dull moment in the crypto space — the last 6 months were particularly buzzy.
From Coinbase IPO or the latest Elon Musk tweets to the nation-state bitcoin adoption by El Salvador, we will go through the most important events that hit headlines so far in 2021.
And guess what? We had anticipated some of these events in our 2020 year-end review!
So here are the things worth knowing.
Coinbase IPO
Coinbase Global Inc.’s market debuted on April 14. The direct listing of the largest U.S. crypto exchange supercharged theories that crypto had made it to the investing mainstream, that Wall Street’s embrace lent legitimacy to the asset class and the sky was the limit. Retail investors flooded in.
In retrospect, Coinbase’s landing on Wall Street was a very similar event to the CME futures listing in December 2017. We were close to a first market top.
The largest cryptocurrency at one point lost 31% to drop close to $ 30,000, less than half of its record of almost $ 65,000 in April.
Despite everything, it remains a memorable event. A report from Axios found that the company was valued at $ 100 billion when it sold shares on the private market. Since it was listed, $COIN has been decreasing but its capitalization is still around $ 50 billion. Exactly as we had expected!
More than 80 crypto unicorns
The value of the cryptocurrency market topped $ 2 trillion for the first time this year.
It took the crypto market 10 years to reach $1 trillion and then, in roughly 90 days, the market capitalization of the cryptocurrency market has doubled as retail and institutional investors pile into the space.
Bitcoin accounts for over 40% of the entire cryptocurrency market capitalization. Bitcoin has rallied over 100% this year alone, and that has helped drive the cryptocurrency market higher.
But Bitcoin wasn’t the only driver. There is growing excitement about the use of so-called decentralized finance, or DeFi, applications. These are blockchain-based financial services, such as lending, which could in theory bypass banks and brokerages. Users of these apps may transact using cryptocurrency. Another driver behind the recent craze is non-fungible tokens, or NFTs — a new type of digital asset that it’s unique and can’t be replaced with something else.
Market has more than doubled the number of unicorns. At the end of 2020, there were 32 cryptocurrencies with a market capitalization of over 1 billion while now they are 83! (source coingecko).
DeFi over $ 100 billions
According to decentralized finance ecosystem tracker DeFiLlama, the DeFi ecosystem breached $ 100 billion in total value locked (TVL) for the first time in history on April 7. (now sitting at $ 116 billion with an ATH over $ 150 billion in May).
Aside from the psychologically significant ninth digit, the figure is notable both for the speed with which it was attained (the ecosystem sat just over $ 20 billion total on Jan. 1, the time when we made the forecast) and the sheer quantity of assets the upstart financial vertical now represents.
According to Wikipedia, at $ 100 billion TVL in DeFi is now the equivalent of the 36th-largest United States bank, sitting between Credit Suisse’s $ 118 billion in assets and SVB Financial Group’s $ 116 billion.
There is still a long way to get to the podium as to become the equivalent of the largest U.S. bank, DeFi would have to surpass JPMorgan’s $ 3.38 trillion, and then the Industrial and Commercial Bank of China’s $ 4.3 trillion to become the largest in the world.
But if the growth continues at this rate, it won’t take long.
The Elon Saga
Bitcoin is good. Bitcoin is bad. First, it is accepted and then it is criticized. Elon Musk showed us a drama worthy of the best soap operas.
Let’s keep it short:
Tesla announced in an SEC filing in February that it has bought $ 1.5 billion worth of bitcoin.
The company also said it would start accepting bitcoin as a payment method for its products (which it did later in March)
Only a month later, Musk announced that Tesla would no longer be accepting Bitcoin for payments due to environmental concerns.
The saga has continued with fears that Musk will sell off Tesla’s position in Bitcoin. Musk backed up this idea in one Tweet. However, he later clarified that Tesla has yet to sell any of its Bitcoin.
Later on, attempting to address some of the criticisms of the Bitcoin network, Elon Musk joined bitcoin-bull Michael Saylor in a meeting of North American Bitcoin mining firms to coordinate the use of renewable energy and transparency in the business worldwide.
El Salvador: The First Bitcoin Country
This is the freshest news. El Salvador has become the first country in the world to adopt bitcoin as legal tender after congress approved President Nayib Bukele’s proposal to embrace the cryptocurrency in an effort to promote “financial inclusion”, investment and economic development.
Bukele, a media-savvy former mayor of the capital, San Salvador, who was elected president in a landslide victory two years ago, is known for his love of technology and his fondness for attention-grabbing stunts.
The law text also indicated that the exchange rate between BTC and the USD will be established freely by the market, tax contributions may be made in bitcoin, exchanges in bitcoin will not be subject to capital gains taxes, and that every economic agent must accept BTC when offered unless they do not have access to the technology that would allow them to do so.
Although El Salvador is not a world power, this news represents the first step towards the acceptance of bitcoin by nation-states.
It seems that this initiative has already paid off. In recent days, various South American politicians have begun to activate laser eyes, a sign of support for Bitcoin, and some rumors say that other nations will soon take their step.
In 1944, the world monetary system was fixed by elites at Bretton Woods. In 1971, it was rigged up by Nixon and Kissinger at the White House. In 2021, after a decade of online public collaboration, a new open system was launched on a beach in El Salvador.
Unlike any other country to date, El Salvador has not decided to ban bitcoin, make it illegal or adopt a state cryptocurrency. They chose Bitcoin, we are curious to see what the long-term impact will be.
To foresee such a thing was impossible. However, we were close enough as we supposed that one of the world’s central banks would have adopted bitcoin as a reserve asset. There is still half of the year though.
The crypto market is rising
These are just some of the main events that characterized the first part of the year. In addition to these we have seen the regulatory crackdowns by China (what a novelty), or India (again), the continuation of uncontrolled monetary policies by the United States and the continuous advancement towards central bank digital currencies.
Considering that Bitcoin was introduced only a decade ago, the rate at which it is rapidly growing is ground-breaking. There is already a whole system, and industries built around cryptocurrencies globally. Many industrial investors have plunged into cryptocurrencies seeking shelter against inflation in the traditional economy. Even banks that had previously refused to talk about cryptocurrencies are now setting up shops to provide cryptocurrency services to their clients.
We live in a world where more than two-thirds of the globe lacks the essential infrastructure for banking services that enable people to get loans, build savings, etc.
With cryptocurrency in the picture, the finances of such places can become more stable. Its ease of use and high volatility presents several opportunities for the less privileged to build wealth.
Exciting times coming ahead.
