Why is 2021 crypto's wildest year?
Digital assets started the year with a rush of cash from investors big and small. And Bitcoin and its kin have rarely been out of the spotlight since, with the crypto language becoming firmly entrenched in the investor lexicon.
Here are some of the main trends that have dominated cryptocurrencies this year.
Bitcoin is still number 1
The original cryptocurrency holds the crown as the largest and most famous token – though not without a number of challengers biting its heels.
Bitcoin jumped more than 120 percent from January 1 to a record nearly $65,000 (€57,400) in mid-April. The triggers were a cash tsunami from institutional investors, increased acceptance by big companies like Tesla and Mastercard, and increased embrace by Wall Street banks.
Spurring investors' interest is Bitcoin's claimed inflation-resistant qualities - it has a limited supply - as the record-breaking stimulus package fuels the price hike. The promise of quick profits amid record low interest rates, and easier access through a rapidly expanding infrastructure, is also helping to attract buyers.
The epitome of Bitcoin's mainstream embrace is Coinbase's listing of major US exchanges worth $86 billion (€75.9 billion) in April, the largest of any cryptocurrency company.
“It graduated to a field where it is traded by the kind of people who bet on treasuries and equities,” said Richard Galvin of crypto fund Digital Capital Asset Management.
However the token remains unstable. It slumped 35 percent in May before surging to a new all-time high of $69,000 (€60,900) in November, as inflation spiraled across Europe and the United States.
Leading skeptics remain, with JPMorgan boss Jamie Dimon calling it "worthless".
The emergence of memecoin
Even as Bitcoin remains a destination for investors dipping their toes into crypto, a large number of new tokens – some would say a joke – are entering the sector.
“Memecoins” – loose collections of coins ranging from Dogecoin and Shiba Inu to Game Squid rooted in web culture – are often of little practical use.
Dogecoin, launched in 2013 as a Bitcoin spin-off, surged more than 12,000 percent to an all-time high in May before slumping nearly 80 percent in mid-December. Shiba inu, which refers to the same Japanese dog breed as Dogecoin, briefly ranks among the top 10 digital currencies.
The memecoin phenomenon is linked to the "Wall Street Bets" movement, in which retail traders coordinate online to stockpile stocks such as GameStop Corp, squeezing hedge funds short positions.
Many traders – often stuck at home with spare cash during the coronavirus lockdown – are turning to crypto, even as regulators sound warnings about volatility.
“It's all about financial mobilization,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities.
"While assets like DOGE and SHIB themselves may be purely speculative, the money that goes into them comes from the instinct of 'why don't I get my money, savings?
Rules: Elephant (large) indoors
As money flows into crypto, regulators fret over what they see as its potential to allow money laundering and threaten global financial stability.
Long skeptical of crypto - a rebel technology created to undermine traditional finance - watchdogs are calling for more power over the sector, with some consumer warnings over volatility.
With the new rules looming, crypto markets are nervous about the possible risk of a crackdown.
When Beijing capped crypto in May, Bitcoin slumped nearly 50 percent, dragging the broader market down with it.
“Regulatory risk is everything because it is the rule of the road that people in financial services walk and walk,” said Stephen Kelso, head of global markets at ITI Capital.
"Regulators are making good progress, they are catching up".
NFT
As memecoin trading goes viral, another angle of the previously obscure crypto complex is also taking center stage.
Non-fungible tokens (NFTs) – strings of code stored on a blockchain digital ledger that represent unique ownership of artwork, videos, or even tweets – explode in 2021.
In March, a digital artwork by US artist Beeple sold for nearly $70 million (€61.7 million) at Christie's, among the three most expensive works by a living artist sold at auction.
Sales heralded a stampede for NFTs.
Sales in the third quarter totaled $10.7 billion (€9.4 billion), more than eightfold from the previous three months. When volume peaks in August, prices for some NFTs rise so quickly that speculators can "flip" them for profit within days, or even hours.
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