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More than half of current owners (55%) made a BTC investment in 2021.
A large portion of investors are completely new to the world of digital currency; a world that has seen horrible rallies and horrible accidents this year.
Let’s look at what were the biggest lessons in the cryptocurrency space in 2021.
Crypto Lesson 5: Retailers have power
Since its birth and the first spectacular Bitcoin rally in late 2017, the crypto space has been known as the Wild West. An unregulated market with high profits from thousands of retail investors, but not institutional ones that needed a more secure and controlled environment.
Things changed in late 2020, when institutional money, corporate capital, and large investors switched to cryptography as a better stockholder than any other asset during the pandemic and rising inflation.
This meant not only recognition, but also market manipulation. Large investors have the knowledge, tools and, most importantly, enough capital to move the market in their direction.
Retailers were never able to deal with professional issues. That is, until the beginning of 2021, when a community of Reddit-based network investors came together to form a critical force and “tighten” Wall Street professionals.
Thousands of individual investors pumped the stock price of the GameStop (NYSE 🙂 video store retailer and took Wall Street sellers into the trap. Professional investors suffered heavy losses.
Although the iconic story took place on the stock market, it bears many similarities to the cryptocurrency space, where individual investors are still considered “dumb money” by large capital funds and well-trained and well-stocked wealth managers. However, it seems that the odds can also pile up against them when traders unite.
Crypto Lesson 4: Comes with a free and easy cost
Free and popular investment apps like Robinhood (NASDAQ 🙂 brought finance to the public, especially to the younger generation of new investors.
With no commission and easy to use, the Robinhood app was designed to “turn everyone’s finances off”. It simplified and gamified trade, which led to relatively young and inexperienced users doing day-to-day and unlimited trading – something that warned investment professionals not to practice without knowledge.
In 2021 alone, Robinhood attracted twice as many new users as in the previous 5 years. But the effects did not last long.
The app caused a great deal of outrage over its failure to oversee services such as the customer identification program, the provision of false and misleading information about a number of serious issues, and the shutdown of systems that caused significant losses in serious market accidents.
A 20-year-old college student killed himself after lowering his Robinhood account balance to a negative $ 730,165 due to successful options trading that allows for increased investment gains but increased losses.
Later in 2021, Robinhood received a historic $ 70 million fine from the Financial Industry Regulatory Authority (FINRA) for “system oversight failures and significant damage to millions of customers.”
Crypto-space, meanwhile, received a lesson that seems like nothing; it’s not always a game. Investment products may seem simple, but the complex nature is nowhere to be found.
Related: Simple rules for managing risks for crypto traders
Crypto Lesson 3: Controlled by players
For years, players have had a perfect audience: they spend huge sums of money on in-game assets that have never been theirs. It was the game developers who made the profits and controlled all the property rights.
Things started to change with a decentralized blockchain, NFT, and play-to-earn working model, which revolutionized the multi-billion dollar online gaming industry. Players have the right to own in-game assets and win crypto prizes for playing a game. Players gained real ability to market in-game assets in and out of the game.
It was created as one of the biggest sensations of winning games in 2021. The game, which allows users to grow, grow and exchange digital tokenized pets (Axies) in metabersion, rose by more than 2000% in just a few months and even became one. the best-selling NFT collection ever.
Hundreds of thousands of players joined the game, growing Axies and exchanging them online. The phenomenon was particularly noticeable in the Philippines, such as booming economies, where many players entered Axie Infinity and even managed to earn more from games than from real-life jobs.
In fact, the average daily wage in the Philippines is about 540 Philippine pesos ($ 10), which is pretty easy to beat in a winning game.
However, this does not negate the tectonic change that NFT games have brought to the gaming industry and the way players think. Tokenized games created a new income for players by giving them control of ownership and in-game assets.
Crypto Lesson 2: Influencers are the new foundation
Meme coins are no longer a joke. What once appeared to be pure exotic fun has become one of the most lucrative cryptocurrencies in 2021.
The iconic (DOGE) rose more than 14,700% from the first day of the year, setting a record in May. His opponents ’meme coin (SHIB) rose even more than 58,000 at the same time. However, SHIB continued the year with another 1025% increase in the fall.
A tremendous rise was made possible, in part, by a single man: Elon Musk. The CEOs of Tesla (NASDAQ 🙂 and SpaceX regularly approved one or the other meme coin in their tweets, causing wild and immediate price changes.
67 million followers and a highly reactive, speculative and sentiment-driven cryptocurrency market player created a powerful cocktail that became a meme coin phenomenon.
Dog coins included crypto Olympus; their market capsule surpassed that of the largest companies. Brands began accepting meme coins as payment for goods around the world, even though reputable blockchain analytics incorporated them into their crypto reports.
It was obvious that it’s not the basics that bring you sympathy and wild walks to the moon, it’s just a single man from SpaceX.
Crypto Lesson 1: Centralization has gone nowhere
More than a decade ago, Bitcoin was born with the idea of becoming a new kind of currency: fully digital, decentralized, and free from the control of central authorities or intermediaries.
The open source protocol had to be controlled by users around the world. 12 years later, the reality was different.
In late spring 2021, historic floods in China’s Sichuan province destroyed the number of Bitcoin mining operations and caused about 20% hashrate losses for Chinese Bitcoin miners.
At the time, the Sichuan region alone accumulated more than 50% of the total power of Bitcoin. The price of Bitcoin fell to an annual low of $ 29K, respectively.
A month later, the country’s communist government launched a crusade against all digital currencies, except for its national digital currency issued by the central bank.
Bitcoin miners left China, the hashpower concentration split and dispersed, restoring a slightly healthier balance.
However, Bitcoin’s dependence on major external factors is not over. Corporate and institutional whales flooded the crypto market. All kinds of funds and companies bought Bitcoin to cover their capital from inflation.
MicroStrategy alone acquired 122,478 Bitcoin, spending more than $ 3.1 billion. The company is the largest corporate in Bitcoin, followed by Tesla (38.3K BTC), Galaxy Digital Holdings (14.9K), Square (8K), Coinbase (NASDAQ 🙂 (4.5K) and others.
Bitcoin’s total supply is limited to 21 million BTC and almost 20% of its existing coins are permanently lost. As the concentration of Bitcoin remains in many hands, there is a risk of its centralization.
Since there are always whales that control the market and create price patterns, centralization for individual investors only means weaker Bitcoin and greater opportunities to manipulate the market.
Related: Central Bank Digital Currency (CBDC): What to Know
Why you should care
2021 has been a big year for the cryptocurrency space, especially in terms of adoption. However, the $ 2.3 trillion market is not as innocent as it seems to newcomers. It’s like any other financial market, it comes with its creators, shakes and risks. So for any newcomer, it is essential to see the best possible image of the cryptocurrency market.
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