What a year in Crypto it has been! We watched as the sector hit the $1 trillion market valuation back in January where many thought a correction would happen and whilst Bitcoin took a few hits during the year, we’re closing out 2021 with crypto markets now valued at more than $3 trillion. Many might say the industry was upheld by a number of high-profile institutions and businesses investing in crypto in 2020 at an unprecedented rate as a hedge against inflation. The famous example of a big splurge into a large B2C position from strictly non-crypto players was of course the Microstrategy position, back in August 2020. We think the fact that liquidity is now sustainably deep enough, the rapidly maturing infrastructure and high volatility have all played a hand in fueling growth and mainstream institutional adoption.
From Web3 making its way into popular culture and NFTs going mainstream to lowering gas fees via the arrival of Layer 1 and Layer 2 scaling solutions and El Salvador becoming the first country to adopt crypto as legal tender. A lot has truly progressed and been built in 2021. In the US, we saw regulation allowing for entry into crypto, moving sophisticated banks like Goldman Sachs and JP Morgan off of the crypto sidelines and moving certain states to take a more crypto-friendly stance. Wyoming made its move to become the first state to legally recognise DAOs and Florida allowed its residents to pay state taxes in Bitcoin.
Among Bitcoin and Ethereum, the two largest cryptocurrencies by market cap, it was Ethereum’s time to shine with a successful year in growing usage. Ethereum’s native token, Ether (ETH), is up 414% YTD compared to just 59% for Bitcoin (BTC). Major upgrades in April with the Berlin Hard Fork and August’s EIP-1559 began reducing the available supply of Ether with each transaction, thereby improving Ether’s monetary policy. Ethereum also notched its first all-time high of over $4K in 2021.
However, even with the upgrades and increased usage, there was still high demand for lower fees and faster transaction speed than Ethereum 1.0. This led to new Ethereum compatible layer 1 smart contract platforms like Binance Smart Chain, Solana, Terra, Avalanche and Fantom experiencing a breakthrough year, in that regard, alongside the arrival of Ethereum layer 2 scaling solutions like Polygon, Optimism and Arbitrum also emerging as winners to address the rising gas fees issue.
Interest in altcoins was also on the rise in 2021 with meme tokens Dogecoin and Shiba continuing to attract attention thanks to the viral effects of social media tweets.
Let's not forget the DeFi explosion that took place over the past 12 months. Total value locked in DeFi reached an all-time high in November of over $250B, an 11x growth increase from January where it was hovering at $21 billion (source: Coinstack).
For Trustology it was a year of growth and milestones as well. From new partnerships that helped to streamline and de-risk digital asset trading, to developing and innovating our DeFi services further to ensure our clients have the very best in security, access and utility in crypto markets. But our biggest milestone in 2021 by far was becoming one of a handful of firms to receive its full registration as a UK cryptoassetsfirm with the UK’s Financial Conduct and Authority (FCA). A true testament to our mission in building trust and transparency.
As we bring this year to a close, we thought to commemorate some of the industry’s key milestones and our own in 2021 in an infographic.