What I Got Right (and Wrong) about Crypto in 2021

By Peter Johnson

At the beginning of 2021, I wrote 10 crypto predictions for the year and reflecting back, most of these came to fruition and surpassed even my expectations. At the time, many of seemed like bold predictions, and I wrote “I have never been more bullish on the industry or more confident in how the space will develop than I am right now.” The year certainly did not disappoint in delivering amazing progress for the industry. Before writing my predictions for 2022, here is a reflection of how I did on each of my 2021 predictions.

What I Got Right:

  • Institutional Investors Get FOMO & Bitcoin Hits $50,000
    • I originally wrote this prediction in November of 2020, when bitcoin’s price was sitting around $15k and a $50k call seemed aggressive. Bitcoin then went on a tear and hit $50k by February on its way to March highs around $60k (which was then followed by a dip and later highs around $69k).
    • During the year, it was clear that institutional investors were starting to come in, including Ray Dalio disclosing a bitcoin position for Bridgewater, firms including Point72, Brevan Howard, and Third Point ramping up their crypto investing efforts, and many other hedge funds buying Grayscale trust products or bitcoin directly. Insurance companies also got into the mix, with NYDIG reporting that they had facilitated Bitcoin buys for several large insurance companies, and at least 6 insurers buying Grayscale products.
  • A Bitcoin ETF Gets Approved
    • After years of waiting, the era of US bitcoin ETFs finally began in October when the ProShares Bitcoin Strategy ETF started trading. Unfortunately, so far, the SEC has only approved futures-based ETFs, which are structurally inferior and will appear to deliver lower returns to investors than a spot ETF would. I am hopeful this will be remedied in 2021 with the approval of spot ETF and the conversation of GBTC into an ETF.
  • M&A Mania Begins
    • Crypto M&A certainly took off in 2021, with over 150 M&A transactions year-to-date, smashing the previous record of 60 crypto M&A deals in 2018. These deals included several in the Jump portfolio including Galaxy’s announced acquisition of BitGo for $1.3bn, PayPal buying Curv, and NYDIG buying Digital Assets Data. Most recently, we also saw banks starting to execute on crypto acquisitions, with Siam Commercial Bank of Thailand buying a majority stake in crypto exchange Bitkub at a $1bn+ valuation.
  • Multiple Crypto Companies Go Public
    • As expected, 2021 provided the first US publicly listed crypto companies - led by Coinbase, and including Bakkt, Diginex, and Marathon Digital. Circle has announced a SPAC transaction and will also soon join what will now be an ever-expanding group of publicly-traded crypto companies.
  • Cryptodollars Reach $100bn in Supply
    • After starting the year below $30mm in total stablecoin (cryptodollar) supply, stablecoins grew to over $140mm outstanding in 2021 with a month still left in the year.
    • I also wrote “Tether will remain the cryptodollar king, but USDC will start to seriously compete for the crown” this has also been true as Tether’s % of total stablecoin supply dropped from 75% at the beginning of the year to ~55% today, while USDC has grown to now represent ~27% of the total supply of stablecoins.
  • DeFi Grows Exponentially
    • By any measure, DeFi grew exponentially in 2021, with the headline being TVL (Total Value Locked) growing from <$23bn to >$100bn. DEX spot volumes as a percentage of CEX spot volumes also grew impressively, starting the year at <1%, and now consistently sitting at ~8% after a spike close to 19% over the summer.
  • No Major Currency CBDCs Are Launched
    • In 2021, no major currency CBDC was launched, and outside of China, CBDCs remain mostly a thought experiment. I believe CBDCs face an uphill battle in all but authoritarian countries such as China, which remains a global outlier in major currency CBDC progress. Since starting their pilots in 2020, China has reported that 140mm people have opened e-CNY wallets, and the official launch of the e-CNY in 2022 will be a major development.

What I Got Somewhat Right (and Somewhat Wrong)

  • Central Bank(s) Buy Bitcoin
    • I want to say this one is right due to El Salvador buying bitcoin in 2021, but technically it wasn’t their central bank that has made the purchases, so I’ll settle for saying this one was somewhat right.
  • Interest-Earning Accounts Proliferate
    • High-interest stablecoin accounts continued to grow in 2021, led by growth at companies like BlockFi, Voyager, Celsius, and Nexo. This offering likely would have gone mainstream had Coinbase been able to launch its product. However, the SEC prevented this and thus somewhat crimped the growth of these accounts in the US, though they continue to show strong growth internationally.
  • Corporate Treasurers Ignore Bitcoin
    • Coming into 2021, some people predicted a flood of companies following the lead of MicroStrategy and Square in adding bitcoin to their balance sheet, and thought this would remain uncommon, and said “If any large corporates do buy bitcoin for their treasuries in 2021, it will likely come from unique CEOs looking to make a statement with the purchase (perhaps Elon Musk)”
    • I got this one somewhat wrong, as a few more companies did buy bitcoin for their balance sheets. However, there was not a flood of corporate treasuries buying bitcoin. In total, there are now 36 public companies around the world holding bitcoin. However, most of these companies are still crypto companies, leaving a relatively small number of non-crypto companies holding bitcoin. I did correctly call the Tesla bitcoin buy.

In total, I’d say I got 7 right, 3 somewhat right / somewhat wrong, and didn’t get any completely wrong. Now, sitting on the precipice of 2022, I remain incredibly bullish on the crypto industry as we remain in the relatively early stages of mass adoption. However, after a year of incredible growth, I also feel there is much more uncertainty on how the next year will play out. Hoping I can maintain my track record as I make my 2022 predictions.

By Peter Johnson

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