Bitcoin close to $70,000, “memecoins” worth billions of dollars, a blockbuster Wall Street listing and a sweeping Chinese crackdown: 2021 was the wildest yet for cryptocurrencies, even by the sector’s volatile standards.
Digital assets started the year with a stampede of cash from investors large and small. And bitcoin and its kin were rarely out of the spotlight since, with the language of crypto becoming firmly entrenched in the investor lexicon.
Here is a look at some of the major trends that dominated cryptocurrencies this year.
1/Bitcoin: Still no.1
The original cryptocurrency held its crown as the biggest and most well-known token – though not without a host of challengers biting at its heels.
Bitcoin soared over 120% from Jan 1. to a then-record of almost $65,000 in mid-April. Fuelling it was a tsunami of cash from institutional investors, growing acceptance by major corporations such as Tesla Inc and Mastercard Inc and an increasing embrace by Wall Street banks.
Spurring investor interest was Bitcoin’s purported inflation-proof qualities – it has a capped supply – as record-breaking stimulus packages fuelled rising prices. The promise of quick gains amid record-low interest rates, and easier access through fast-developing infrastructure, also helped attract buyers.
Emblematic of bitcoin’s mainstream embrace was major U.S. exchange Coinbase’s $86 billion listing in April, the biggest yet of a cryptocurrency company.
“It’s graduated into the sphere where it is traded by the sort of people that are taking bets on treasuries and equities,” said Richard Galvin of crypto fund Digital Capital Asset Management.
Yet the token stayed volatile. It slumped 35% in May before soaring to a new all-time high of $69,000 in November, as inflation spiralled across Europe and the United States.
Prominent sceptics remain, with JPMorgan boss Jamie Dimon calling it “worthless”. Graphic: Peaks and troughs: Bitcoin’s 2021 rollercoaster, https://graphics.reuters.com/FINANCE-YEARENDER/mypmnaljavr/chart.png
2/The rise of the memecoins
Even as bitcoin remained the go-to for investors dipping their toes into crypto, a panoply of new – some would say joke – tokens entered the sector.
“Memecoins” – a loose collection of coins ranging from dogecoin and shiba inu to squid game that have their roots in web culture – often have little practical use.
Dogecoin, launched in 2013 as a bitcoin spinoff, soared over 12,000% to an all-time high in May before slumping almost 80% by mid-December. Shiba inu, which references the same breed of Japanese canine as dogecoin, briefly muscled its way into the 10 largest digital currencies. Graphic: Who let the doge out? https://graphics.reuters.com/FINANCE-YEARENDER/gdvzymlzkpw/chart.png
The memecoin phenomenon was linked to the “Wall Street Bets” movement, where retail traders coordinated online to pile into stocks such as GameStop Corp, squeezing hedge funds’ short positions.
Many of the traders – often stuck at home with spare cash during coronavirus lockdowns – turned to crypto, even as regulators voiced warnings about volatility.
“It’s all about the mobilisation of finance,” said Joseph Edwards, head of research at crypto broker Enigma Securities.
“While assets like DOGE and SHIB may in themselves be purely speculative, the money coming into them is coming from an instinct of ‘why shouldn’t I earn on my money, savings?'” Graphic: Rise of the memecoins, https://graphics.reuters.com/FINANCE-YEARENDER/klpyknyxwpg/chart.png
3/Regulation: The (large) elephant in the room
As money poured into crypto, regulators fretted over what they saw as its potential to enable money laundering and threaten global financial stability.
Long sceptical of crypto – a rebel technology invented to undermine traditional finance – watchdogs called for more powers over the sector, with some warning consumers over volatility.
With new rules looming, crypto markets were skittish to the possible risk of a clampdown.
When Beijing placed curbs on crypto in May, bitcoin tanked almost 50%, dragging the wider market down with it.
“Regulatory risk is everything because those are the rules of the road that people live by and die by in financial services,” said Stephen Kelso, global head of markets at ITI Capital. “The regulators are making good progress, they’re catching up.”
4/NFTs
As memecoin trading went viral, another formerly obscure corner of the crypto complex also grabbed the limelight.
Non-fungible tokens (NFTs) – strings of code stored on the blockchain digital ledger that represent unique ownership of artworks, videos or even tweets – exploded in 2021.
In March, a digital artwork by U.S. artist Beeple sold for nearly $70 million at Christie’s, among the three most expensive pieces by a living artist sold at auction.
The sale heralded a stampede for NFTs.
Sales in the third-quarter hit $10.7 billion, up over eight-fold from the previous three months. As volumes peaked in August, prices for some NFTs rose so quickly speculators could “flip” them for profit in days, or even hours.
Soaring crypto prices that spawned a new cohort of crypto-wealthy investors – as well as predictions for a future of online virtual worlds where NFTs take centre stage – helped fuel the boom.
Cryptocurrencies and NFTs’ popularity may also be linked to a decline in social mobility, said John Egan, CEO of BNP Paribas-owned research company L’Atelier, with younger people drawn to their potential for swift gains as soaring prices put traditional assets like houses out of reach.
While some of the world’s top brands, from Coca-Cola to Burberry, have sold NFTs, still-patchy regulation meant larger investors largely steered clear.
“I don’t see a situation where licensed financial institutions are actively and aggressively trading (these) digital assets in the next three years,” Egan said. Graphic: NFT sales on OpenSea, https://graphics.reuters.com/FINANCE-YEARENDER/CRYPTO-CURRENCY/gdpzymljbvw/chart.png
(Reporting by Tom Wilson and Elizabeth Howcroft; Editing by Chizu Nomiyama)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
