In 2021, cryptocurrencies evoked both greed and fear. Cryptocurrencies created and also wiped out large amounts of wealth owing to their volatility. However, overall they ended up adding $1.5 trillion in wealth.
Bitcoin rose by more than 60% in 2021 and garnered all the attention. But Bitcoin also had to share some of the limelight with Ether and Binance Coin. Meme tokens such as Dogecoin and Shiba Inu also made their presence felt.
In 2021, as other tokens gained ground, bitcoin’s share of the crypto market actually shrank. This is indicative of crypto investors broadening their interests in digital assets. Broadening investor interest could also be driven by the volatility of bitcoins.
It is expected that the fall in BTC’s domination of the crypto market will continue in 2022 owing to the growth of other crypto assets. The number of use cases for these assets is also on the rise.
Bitcoin began 2021 with a 70% share of the crypto market. It has now fallen to about a 40% share of the market – largely owing to the rise in popularity of ETH. Also, investments have come into other tokens. Some analysts fear that the heightened speculative activity could give rise to market instability.
Analysts differ on BTC’s role as a hedge against inflation. It is believed that, in 2021, tokens have tended to correlate better with inherently risky technology stocks and have not correlated with inflation closely.
The crypto index jumped over 160% in 2021. This is substantially higher than the climb by commodities of 23% and stocks by 13%. However, crypto assets have been characterized by huge volatility.
BTC, after the large decline of over 30%, is now testing support levels after the recent record high. Bitcoin had breached to a level below the trend line from when the surge began during the pandemic.