Crypto is finally going mainstream after a year in which its market cap surpassed $3 trillion, the SEC approved its first bitcoin ETF, and NFT fever pushed digital doodles to million-dollar valuations.
Here are six metrics that defined cryptocurrency in 2021, as well as what they mean for the year ahead.
11%
Bitcoin’s estimated share of gold’s $11 trillion market cap at the peak of its bull run on November 10th, 2021. On that date, Bitcoin reached an all-time high of $68,721, representing a year-to-date gain of 120 percent and a market capitalization of nearly $3 trillion. Bitcoin’s total market capitalization was roughly 2.8 percent of gold’s three years ago. In 2021, however, bitcoin was far from the best-performing crypto asset. Ethereum, a multipurpose platform that can handle any type of transaction, has risen 443 percent in the last year, outpacing many competitors, including Decentralized Finance (DeFi) tokens and non-fungible tokens (NFTs).
While bitcoin’s ‘digital gold’ narrative has found a receptive audience, given that its rise coincided with record levels of inflation, it still trades erratically, making it largely untouchable for anyone looking for asset purchases that will allow them to sleep well at night. With the Fed looking to speed up its tapering schedule in response to November’s price increases of 6.8%, the highest in 40 years, bitcoin will need to find a new value proposition that isn’t reliant on Washington’s easy money.
123.02
The estimated annual energy consumption of Bitcoin miners, measured in terawatt-hours (TW/h), is 123.02 TW/h. This is roughly the same amount of energy used by Argentina, Colombia, Norway, Sweden, and Ukraine in a given year, according to the Cambridge University Bitcoin Electricity Consumption Index, which maintains a model to track electricity usage. Hash rate (the amount of computing power on the network) skyrocketed as Bitcoin’s price rose this year, setting numerous all-time highs in the spring. The hash rate dropped dramatically after China exiled its entire mining industry over the summer, as shown in the graph below. The network, on the other hand, has recouped its losses and is poised for further expansion. In addition, top miners plan to add hundreds of thousands of new machines in 2022, indicating that this is only the beginning. Bitcoin’s carbon footprint will inevitably increase as key stakeholders refuse to switch to more energy-efficient alternatives due to concerns about network security and centralization, both of which are critical to Bitcoin’s value proposition. In many cases, industry has responded by looking for renewable energy sources or purchasing carbon offsets.
$233,276
The starting price for a monkey at the Bored Ape Yacht Club. CryptoPunks and Bored Ape Yacht Club monkeys, which were founded in 2017 and 2021, respectively, are ‘pfp’ collections, which means that their owners like to use their punk or ape as their profile picture or avatar. One of the 10,000 CryptoPunks or BAYC apes may have appeared as a Twitter avatar, Gmail icon, Facebook profile picture, or even a LinkedIn headshot. The “floor price” for NFTs (non-fungible tokens) in the NFT world is exactly what it sounds like: the cheapest price for that class of assets. The majority of sales for CryptoPunks, one of the oldest and most prestigious collections of NFTs, also exceed this figure. Floor prices, perhaps even more than the $69 million sale of a work of art by digital artist Beeple, encapsulate what has been a scorching 2021 for the NFT market.
As prominent exchanges like Coinbase, FTX, Crypto.com, and Blockchain.com launch their own marketplaces in 2021, NFTs are set to become even more mainstream. Overall success, however, will necessitate finding ways to make them more accessible to everyday investors, who account for 80% of all NFT buyers and cannot afford six, seven, or eight-figure investments.
$27,000,000,000
In 2021, cryptocurrency companies will have raised more money from venture capitalists than in the previous ten years combined. Furthermore, almost all of this year’s top ten investment rounds, which totaled more than $6.3 billion, were the industry’s largest ever at the time of closing. The two largest were crypto service provider NYDIG, which raised $1 billion this month, and crypto derivatives exchange FTX, which completed a $900 million Series B round in July. The Bahamas-based company then raised an additional $420,690,000 just three months later, more than doubling its valuation—from $1.2 billion just a year ago to a whopping $25 billion—perhaps one of the most striking examples of the industry’s meteoric growth over the past 12 months. With a fortune of $26.5 billion, FTX’s 29-year-old founder Sam Bankman-Fried has become the richest person under 30 on the planet.
Furthermore, venture appetites are only increasing. Paradigm, a crypto-focused investment firm, announced a $2.5 billion venture fund last month, surpassing Andreessen Horowitz’s $2.2 billion Crypto Fund III as the largest fund of its kind.
12 billion dollars
A rough estimate of the amount of money raised in 2021 to create the metaverse, a virtual reality layer on top of the internet. Epic Games, which raised $1 billion earlier this year to ensure that its games were not displaced by open-source competitors built on top of blockchains, led the pack. More than 700 metaverse-related deals closed this year, according to Crunchbase, in fields as diverse as online gaming and augmented reality (there was likely some overlap with blockchain as well). The first NFT magazine cover was sold for $333,333 in April by Forbes. The cover of the book, titled Masters of the Metaverse, featured Tyler and Cameron Winklevoss, who raised $400 million to expand their cryptocurrency exchange and invest in a number of metaverse-related projects.
The metaverse is set to be one of the hottest topics in 2022, with Google search interest for the term up 1,000 percent in the last few months and prominent tokens tied to the vertical seeing record growth, such as AXS, MANA, and SAND. However, real questions must be answered, such as when users will see the value and whether the metaverse truly requires a blockchain. When Facebook announced its Meta rebrand, Keanu Reeves expressed the sentiments of many CryptoPunks, saying in an interview with The Verge, “Can we just not have metaverse be like invented by Facebook?”
88%
So far in Q4 of this year, there has been a surge in open interest (OI), or the number of unsettled contracts at the CME. Despite the bull run that began in 2020 and continued into early 2021, OI turned negative in the spring as institutions reduced their bets. The introduction of ether futures, followed by micro-bitcoin futures, had little effect on new OI growth. The crypto OI was down 14% nine months into 2021.
But then there was Q4. The approval of bitcoin futures ETFs by the US Securities and Exchange Commission (SEC), which traded exclusively at the CME, was a major catalyst. In October 2021, the dollar value of CME crypto futures reached $4.7 billion per day, an increase of 783 percent year over year, temporarily making the CME the world’s largest crypto derivatives exchange. Following the launch of the three bitcoin ETFs, the CME’s crypto OI had increased by 12% from its previous high of 2020, and the dollar value of these contracts had increased by 351% to $5 billion. The CME is on a roll heading into 2022 with this momentum. However, it anticipates a much more crowded competitive landscape in 2021, and some of its monopolistic positioning may be compromised if the SEC approves a long-awaited spot ETF next year.
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