Cryptocurrency Market: What happened in 2021 and what to expect in 2022?

2021 was undoubtedly a historic year because The total cryptocurrency market capitalization has risen from approximately $ 800 billion to $ 2,2 trillion. However, 2021 was not only exciting in terms of price, as many epochal events and trends took place throughout the year. In this article, we discuss the top 5 events of the past year and the 5 aspects to pay attention to in 2022.

About the author

Mads Eberhardt, Cryptocurrency Market Analyst, Sax Banks. Cryptocurrency Market Analyst at Saxo Bank. He gained experience as a trader at Bitcoin Suisse AG and founder http://BetterCoins.dk (website taken over by Coinify).

year 2021

NFT market

It is impossible to talk about 2021 without mentioning the non-convertible tokens known as NFT. It was most likely the cryptocurrency trend of the year. However, this trend was more speculative than the cryptocurrency market itself. However, more NFT use cases such as music streaming mentioned in ours Shocking forecasts for 2022it's only a matter of time.

Coinbase debut

This is, in our opinion, the biggest event of last year, and a point of no return in terms of regulation and the seriousness of the market from the outside. Coinbase debuts on the stock exchange he showed that the industry should, firstly, no longer be ignored, and, secondly, more importantly, it should no longer be ignored.

Stablecoins

Supply stable currency increased from $ 29 billion to $ 151 billion, an increase of 421%. Stable currencies are the backbone of the cryptocurrency economy and decentralized finance. The significant increase in the stabilization of currencies indicates the growing interest in these products.

New regulations

Surprisingly, there were only a few regulatory surprises, such as the US infrastructure bill, the adoption of bitcoin as legal tender in El Salvador, and the banning of cryptocurrencies in China. Everything else was just plain stuff that shouldn't come as a shock to any cryptocurrency supporter as they gradually got used to most of them.

VC in the cryptocurrency market

In 2021, funds venture capital have invested a record amount of USD 30 billion into cryptocurrency companies, breaking the 2018 record of USD 8 billion. This naturally proves a hot market, but at the same time demonstrates the growing diversity of cryptocurrency companies attracting money venture capital in this area, i.e. exchanges and brokers, but also decentralized financial platforms, NFT platforms, cryptocurrency games, etc.

year 2022

ETH 2.0

It is expected to be long awaited the second largest cryptocurrency, ethereum, will be updated in Q2.0 or QXNUMX under the name ETH XNUMX. However, you should be prepared that it may not be until the third or even the fourth quarter, because the Ethereum Foundation and its developers are known for postponing dates. In short, ETH 2.0 will make Ethereum a much more scalable, secure and durable cryptocurrency. The latter is extremely important as the protocol proof-of-workwhich is the current consensus mechanism Bitcoin i Ethereum, most likely there is no future. This protocol is known to use a lot of electricity as many servers around the world verify transactions. It is simply too easy to strictly regulate this industry based solely on environmental arguments when institutions have good reason to stay away until the industry becomes more environmentally friendly.

Circle and a special purpose company

The transaction to transform Circle, the issuer of the second-largest USDC stable currency with USD 43 billion in circulation, into a special-purpose acquisition company (SPAC). special purpose acquisition company) was reportedly postponed due to concerns from the US Securities and Exchange Commission regarding currency stabilization. The transaction is likely to take place in 2022, while previously it was expected to happen at the end of 2021. Be aware of the enormous growth in the supply of stabilized currencies and their overall importance in the cryptocurrency market. The impact of the establishment of this SPV will be somewhat comparable to Coinbase's IPO - if that happens, of course.

Future regulations

While there were only a few surprises in 2021, regulation is something you should always pay attention to. The approach to regulation changes daily, so there are no guarantees for 2022.

Second layers

While, for example, bitcoin and ethereum are tier one cryptocurrencies with their own settlement layer, you can increase their scalability by building separate solutions called tier two or L2 on them. Layer 2). For cryptocurrencies to be deployed on a global scale and become the settlement layer of the digital age, L2 is really needed as it is assumed that they can scale cryptocurrencies indefinitely in the future. In 2021, L2 began to gain importance, but it is likely that in 2022 it will become a solid part of the cryptocurrency market, finally proving that cryptocurrencies can be scalable.

Change in the leadership position

In a way, it's a cliche. However, it is still very relevant because if ethereum will beat bitcoin in terms of market capitalization, this will change the sentiment in the cryptocurrency market. It can be assumed that we are approaching the year when this is most likely to happen as ethereum caught up with bitcoin in 2021 thanks to more authentic use cases and an increase in popularity. However, whether this happens or not depends on the institutional implementation of individual cryptocurrencies, decentralized finance, stabilized currencies, NFT, increasing competition, especially against ethereum, and most importantly - how ETH 2.0 fares.