Cryptocurrencies had a blockbuster year in 2021 by almost any measure. Bitcoin, Ether and other coins jumped, reaching new highs far beyond their previous peaks. More institutions began offering research and services for the sector, and big-name investors piled in. Along the way, nonfungible tokens (NFTs) and decentralized finance (DeFi) joined the popular lexicon.
There have been big wins and big scams, important upgrades, major crackdowns — and some major themes that will carry into 2022. Central banks are getting serious about their own digital currencies, and regulators are becoming very interested in what had previously been a “Wild West” of an industry.
To help get a sense of the path ahead, here’s a look at some of this year’s top moments in crypto, why they mattered and what they may portend:
Tesla Puts Bitcoin on Its Balance Sheet
What happened: Elon Musk’s electric-car maker announced to the world on Feb. 8 that it had invested $1.5 billion in Bitcoin and signaled its intent to take payments in the cryptocurrency as well. That boosted Bitcoin’s price to a record, while setting off all sorts of discussion about whether other companies might follow suit.
What’s next: Tesla Inc.’s bold move ended up being an outlier, although one company — MicroStrategy Inc., led by Bitcoin backer Michael Saylor — famously took investing in the cryptocurrency to a whole new level, even issuing debt to buy more. MicroStrategy’s holdings now sit in the billions of dollars. Both Tesla and MicroStrategy have had to take impairment charges on their positions because of price swings and Bitcoin remains a volatile asset. Still, as the world’s largest cryptocurrency moves into the mainstream, expect more corporate treasurers to consider it an investment option, and more companies to weigh accepting it as payment.
The $69.3 Million NFT Sale
What happened: When “Everydays: the First 5000 Days” from digital artist Mike Winkelmann, also known as Beeple, went up for auction at Christie’s, some people were already paying attention. But when the winning price was announced on March 11 — an eye-popping $69.3 million — it sent a shock through the traditional art world. While NFTs (basically, digital certificates of authenticity) had already been gaining traction, this helped catapult the concept to fame and encouraged artists, creatives and celebrities of all types to look into creating them
What’s next: NFTs look like they have staying power, though there are a lot of questions about insider advantages, relative value, odd trading activity and more. Some industry experts say they have potential far beyond what we’ve seen so far. One industry veteran, William Quigley, says NFTs will be everywhere in 10 years, and will be the revenue model for the metaverse, a virtual environment where people can interact with the internet and other functionalities, supplanting web browsers and mobile apps. The $69.3 million “Everydays” buyer Vignesh Sundaresan, meanwhile, said he’d be happy if everybody downloaded a copy of the “Everydays.”
Memecoins Become a True Force
What happened: The crypto token Dogecoin was created in 2013 as a joke — hey, it’s a Shiba Inu dog on a coin! — and continued to stick around, largely on the fringes of the market. That is, until this year. Helped in no small part by tweets from Elon Musk, Dogecoin soared some 5,000% in the past 12 months, with a lot of swings in between. It wasn’t alone: Memecoins became all the rage in 2021, with Dogecoin leading the way and tokens like Shiba Inu, which briefly topped Dogecoin in market value, coming on strong as well.
What’s next: Memecoins — most of which trade at fractions of a penny — have been a source of fascination and debate. They’ve also made an easy mark for those who are skeptical of crypto. And rightly so, as many have been the vehicle for “pump and dump” scams and other schemes. Search for “Floki,” Elon Musk’s dog’s name, on CoinGecko and six options come up. Some memecoins haven’t turned out so well for people who bought in. Witness the Squid Game token, which wasn’t affiliated with the popular series, restricted withdrawals and eventually plunged from thousands of dollars a token to virtually zero very suddenly. At the same time, some of them — notably Dogecoin and Shiba Inu — have had more formal development, and have actually become payment methods for some things (AMC movie tickets and Houston Rockets merchandise, for instance). The enthusiasm for memecoins shows no signs of dimming for now, but with enforcement scant in this corner of the market and risks aplenty, buyer beware.
Coinbase Listing
What happened: Crypto exchange Coinbase Global Inc.’s direct listing on the Nasdaq stock exchange April 14 was a milestone for the market in terms of greater legitimacy and acceptance, and it also coincided with what was then a peak in Bitcoin’s price. At one point, Coinbase’s valuation soared to $112 billion, though it subsequently fell back in volatile trading.