2021 will be remembered as a year when we defied the odds. 

We lost hope in traditional financial systems that failed us for decades. We just couldn’t see it. With the pandemic and collapse of institutions, it has become crystal clear that inflation is not so “transitory,” and monetary policies of governments are not suited to be financially stable tools. 

The global financial crisis fueled the growth of a new discovery for the general public. It is crypto. Many believed it was their exit vote. The blockchain world has existed for many years, but most current users came across it in 2021.

This year, the public wave of interest towards crypto was massive. Something that cannot be quantified. Some were in it for the fast money. No doubt about it. But all of them had a belief that decentralization is the way out and offers a much better platform than most legacy institutions that do nothing but decay. 

As the industry matured and established itself as a multi-trillion dollar market, we started many new paradigms that were not limited to any one market sector. The quick accrual of talent, network infrastructure, and capital helped assemble some of the best protocols and decentralized platforms trying to make “Web3” a reality. 

The parabolic growth of DeFi from less than $18 billion in locked value to more than $245 billion is something we can look at to understand how much innovation and financial inclusion we achieved this year. In the process, we had some ups and downs. Mostly ups. And we had many moments in this crypto-verse that either changed the markets in a major way or introduced new forms of blockchain technology. 

In this year-end report, we are going to share a mix of all highlights that cover everything from countries banning and adopting crypto to new narratives taking over traditional industries. Read it till the end. You may have missed some. 

Tesla along with other Corporate Treasuries Buy Bitcoin 

In a way, we could say it was the turning point for bitcoin when Tesla announced they were accepting bitcoin payments and added $1.5 billion worth of BTC to their treasury. This news immediately changed the market trends and structure. We had to look at it from a new perspective. The upside volatility was nearly 10-20 percent in a matter of days, sending BTC over $44,000. 

It was not just Tesla buying BTC. Many companies started to view or speculate on bitcoin as a store of value. As a result, they bought hundreds of millions worth of bitcoin. A good example is MicroStrategy. The business intelligence company led by Michael Saylor went all-in on bitcoin. Currently, the company holds more than 122,478 BTC at an average price below $30,000. This was only possible because Michael decided to raise money on a convertible note that promises BTC to reach $58,000 by 2026. It sounds like a good deal, right? We thought so too.

Other notable companies adding BTC include Square, Grayscale, and Meitu. There are many more public companies that went for it and made astronomical returns in this past year. That was pretty much the narrative for the first quarter. 

China Crackdown on Mining

This chapter of 2021 has resulted in two major outcomes. One, China’s bitcoin industry plummeted because of the regulatory and environmental concerns raised towards local and industrial mining activities. 

The second outcome is a positive for the entire crypto ecosystem. For many years, China accounted for more than 75% of the hash rate, meaning Chinese miners had more control or shared over bitcoin’s network. They were making profits all over China. By leveraging the seasonal rotation of sustainable energy, the miners were able to maximize their operations without sacrificing any bitcoin reserved in the treasury. 

All of this changed when Chinese authorities announced a blanket ban on crypto mining activities. China’s dominant force in the crypto world was no longer present. The government wiped out 90% of bitcoin mining activities, bringing the hash rate to an 8-month low. In consequence, we saw the miners relocate to new locations like the United States and Kazakhstan. In my opinion, Borat’s home country, Kazakhstan, will emerge as one of the best mining spots after this distribution of hash rate. You can read the full article to understand why. 

This distribution of bitcoin’s hash power is one of the biggest developments we saw this past year. It gives miners better opportunities with more resources at lower costs and new locations with less stringent rules. 

May 2021 Becomes the Six-worst Month in Bitcoin History 

We knew the markets would react violently after China made multiple announcements banning entire crypto activity, including mining and bank-provided services. But we never thought the sell-off would lead to a dip of nearly 40%. After making a new all-time high at $64,000, it came right down to $29k-$30k. We saw some of the biggest intraday liquidations in bitcoin history. 4.8 billion, to be exact. One trillion dollars was wiped out. Yes, it was that bad. 

On top of China’s negative actions, Tesla decided to stop accepting bitcoin as payment. This rubbed many people in the wrong direction. It was mainly because the company made $100 million in profit before selling. Elon takes to Twitter that he was concerned about the environmental issues regarding bitcoin mining. Though he admits he doesn’t plan on selling any more bitcoin, he still has not provided a clear direction whether Tesla will accept BTC again or not. Without a doubt, this was a major market-shifting moment of 2021. 

EIP-1559 Was Activated & Burned $4.9 Billion Worth ETH 

Ethereum (ETH) is among the top performers of 2021. It is not a surprise. But the price appreciation was not the only highlight associated with Ethereum. There was another milestone achieved by activating the London hard fork. According to the co-founder of Ethereum, Vitalik Buterin, the EIP-1559 upgrade proves that the network can undergo significant changes without any trade-offs. 

The upgrade was crucial because it limited developers and users from accessing Ethereum networks and making transactions. Along with high fees, the MEV problem was getting out of hand. Miners were front-running block generation, causing major spikes in transaction fees. The London hard fork introduced a base fee structure that reduces gas fees and brings down many entry barriers. 

For a short period, the gas fee was as low as $2. It was mainly due to a major market correction in the second and third quarters. But as soon as the market recovered and activity increased, the gas fee immediately shot up. It has become a normal standard for Ethereum users to pay hundreds of dollars to make a single transaction. 

The price of ETH soared despite the network issues to more than $4,000. The main reason is the burn rate. The new upgrade was burning thousands of ETH every single day. Many believe this will have a deflationary effect, which is incorrect, but it still drove the price to new heights. Currently, as the market is in a downtrend, the burn rate is around 8TH per minute, meaning nearly $40,000 worth ETH is burned every minute. 

Source- Etherscan.org

El Salvador Becomes the First Country to make Bitcoin Legal Tender 

This one is for history books. When a country adopts an asset like bitcoin, and the president keeps buying dips, you have to recognize it and applaud their efforts to financially lift the lives of citizens. El Salvador, a country with less than 7 million in population and $4400 in per capita income, became the first country to make bitcoin a legal tender. 

Nayib Bukele’s president is so pro bitcoin that he actively participates in conversations with industry leaders and keeps stacking more BTC. He also offered immediate residency for entrepreneurs trying to develop the country with bitcoin and crypto. To support miners and showcase the country’s abundant renewable resources, he promised to build a geothermal electric company that uses 100% clean energy to mine bitcoin. 

Geothermal Energy From Volcanoes (Source- Twitter) 

We may not see another country adopt bitcoin as a legal tender for quite some time, so it will be interesting to watch El Salvador in 2022. The real impact on the economy will be seen, and how seamlessly the government can promote financial inclusion will be displayed to the world. 

NFTs were the biggest Revelation of 2021 

Out of all the things that happened this year, the one that stands out for me, personally, is the NFT craze. What started as a simple phenomenon of digital form trading sports cards and art collectibles has now become a market-expanding technology. 

Non-fungible tokens (NFTs) introduced the world to true ownership and what scarcity could do to the value of an asset. The underlying technology made it all possible. Artists, musicians, celebrities, sports superstars, and global entrepreneurs showcased a great deal of interest in this emerging market. In 2021, the NFT market alone observed more than $17 billion in trading volume. For comparison, in 2020, it was less than $400 million. 

Total Sales in 2021 (Source- nonfungible.com)

We had several collections that caught everyone by surprise. Some of them are Bored Ape Yacht Club, Cool Cats, Mutant Ape Yacht Club, Cyber Kongz, Robotos, Fidenza, Neo Tokyo, Doodles, Creature World, and Clone X. It’s important to remember how some of these started, especially BAYC. This one collection started the PFP NFT trend, which many others followed, replicated, and used as inspiration to create good projects with great communities. Bored Apes also made many millionaires this year, after going from an average price of $3,000 to $300,000. 

Bored Ape Yacht Club 

The NFTs are no longer a minor market trend or segment in the crypto world. Big companies like Adidas and Nike see long-term value in NFTs. It is mainly because the use-cases are limitless. We will likely see more implementation in the coming year as more projects roll out their utility features and fulfill roadmap promises to their holders. 

Play-to-Earn games & Metaverses 

I highly recommend watching Ready Player One before you explore any blockchain-based game or metaverse projects. Trust me. You will relate to the play-to-earn concept in a much better way. 

When the market was down, there were a couple of projects mooning in ways no one ever imagined. One of them was Axie Infinity. This pet-based video game made more than 30 million dollars in revenue every day in June. Not only that, they achieved nearly a million active users playing the game or buying new NFTs at the Axie marketplace. 

The game had a dual token economy that outperformed many Defi projects in Q3. This led to many more games using a similar model, providing income-earning opportunities for skilled gamers. The company also got major funding from big venture capital firms, making blockchain gaming more mainstream. 

Sandbox Metaverse 

At the same time, we saw metaverse projects pick up the pace. We all know why it happened. FB’s rebranding made everyone notice the concept behind a metaverse and how there were already many operable virtual worlds like Sandbox and Decentraland. The native tokens of these leading projects did a 10x in returns in less than 2 months. Here is a list of top metaverse tokens in 2021.  

Wrapping Up 

The highlights of 2021 are never-ending. I have missed a few important ones, like increasing capital-efficient models with Magic Internet Money and OHM forks. The growth of DAOs is also notable. All in all, it’s been a fantastic year for crypto. We have achieved so much in terms of adoption and innovation. If you think you are late for the party, you are wrong, my friend. We are just getting started. See you in 2022. Stay Safe, and have a great new year.