The 2021 breakout year for digital assets saw prices rise and prices explode, but there’s more.
In 2021, cryptocurrencies were peerless conduits for greed and fear. They alternately created and destroyed fortunes while adding $1.5 trillion to the overall market value.
Bitcoin, which rose more than 60% in 2016, attracted a lot of attention but was forced to share more spotlight with Ether and Binance Coin, as well as meme tokens like Dogecoin, Shiba Inu, and Dogecoin.
In fact, Bitcoin’s share in the crypto market declined dramatically over 2021 while other tokens rose, which is a sign that investor interest has increased in digital assets despite or because of extreme volatility.
Vijay Ayyar is the head of Asia Pacific at Luno, a crypto exchange based in Singapore. He said that the decline in Bitcoin’s dominance could continue into next year.
The crypto market cap has nearly tripled by 2021. It was once close to $3 trillion. According to CoinGecko which tracks almost 12,000 tokens, the overall market value for cryptocurrencies increased by $1.5 trillion to $2.3 trillion in 2021.
As Ether’s market share nearly doubled, Bitcoin’s crypto market share fell this year. Bitcoin, the largest cryptocurrency in the world, started the year with a 70% market share. This has dropped to below 40% partly because Ether is becoming more popular. However, money has flowed into many other tokens and this trend could indicate potentially unstable speculative foam.
The debate over Bitcoin’s role in investment portfolios is still raging. It is argued that it can provide a hedge against the most severe inflation of recent generations. However, the token of 2021 was more consistent with risk assets like technology stocks than inflation expectations.
In 2021, crypto returns outperformed traditional assets by a wide margin. The Bloomberg Galaxy Crypto Index’s 160% increase this year is far greater than the 23% and 13% increases in commodities and global stocks. Given the massive swings in crypto, it is obvious that the old saying “no pain, no gain” applies.
After a drop of more than 30% from the record high reached just over a year ago, Bitcoin is now testing key technical levels. The 55-week moving mean — which has in the past provided a floor to selloffs – is one. Another is the level of $44,100 implied from a Fibonacci analysis of the rally between the March 2020 peak and the November 2021 trough. The trendline that was drawn at the start of the cryptocurrency’s surge during the pandemic has been broken.
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