In 2021, the cryptocurrency market became a multi-trillion-dollar asset class while cryptocurrencies are known for their volatility. A longer term view of the market shows a steadily increasing valuation. By the end of 2021, the market capitalization of crypto will have reached multiple milestones, including crossing the $1 trillion value mark for the first time. It took the crypto market roughly four months to double to $2 trillion before briefly surpassing $3 trillion in early November.
Six-figures worth of Bitcoin was a consensus trade among analysts, investors, and market observers who were all expecting the flagship cryptocurrency to have another end-of-year blow-off top. Although it’s still a very long way off, Bitcoin has entered a stage of sustainable hyper-growth. It’s printing higher highs and higher lows on the yearly chart. It’s seeing widespread institutional and retail adoption.
Despite the recent bearish price action, 2021 was crypto’s big year in which we saw many positive developments. Tesla and MicroStrategy decisions to buy Bitcoin (early this year) not only sent the Bitcoin price soaring but also signaled to other corporations that cryptocurrencies are a strategic reserve asset. Corporations have seen crypto as a strategic reserve asset for the very same reasons the crypto whales were buying Bitcoin. After winning the hearts of crypto loyalists, Musk would later reveal that his company was halting BTC payments over concerns about the cryptocurrency’s energy usage. He also said Tesla sold roughly 10% of its BTC holdings, but only to demonstrate the coin’s liquidity. The billionaire also hinted that his company was closer to accepting Bitcoin payments again. He also added that he would never offloaded any of his personal BTC holdings.
El Salvador became the first nation in the world to make Bitcoin legal tender back in June. It was an instant success, and now the tiny Central American country is buying the dips on every major correction in the Bitcoin price. Several Latin American countries are said to be considering adopting bitcoin as a legal tender, but none of them have adopted it yet as a legal tender. El Salvador’s decision to adopt Bitcoin is likely to have some ramifications for a region that is struggling with hyperinflation, fiscal pressures and economic uncertainty.
American regulators have been far less progressive when it comes to digital assets than their counterparts in other parts of the world. The U.S. Securities and Exchange Commission has denied three separate requests from investors to create a “Bitcoin-based” Exchange Traded Fund.
However, in October of this year, the SEC did greenlight two separate Bitcoin-related products. The first was ProShares Bitcoin Strategy ETF, The second was Valkyrie Bitcoin Strategy ETF hit the market. Then, in November, VanEck launched its own Bitcoin Strategy ETFa fund that would invest in the Bitcoin/USD exchange rate and they were able to obtain SEC approval.
The crypto market is finally beginning to be considered as a legitimate asset class by institutional investors. Lowest price of BTC in 2020 was $3,800 and lowest we’ve seen this year was $27,734 per Bitcoin. Over the last years Bitcoin proved that it has the best qualities as hedge fund against inflation in comparison to any other asset class.
