A Chainalysis report shows that global cryptocurrency investments increased by 400% in 2021, with Bitcoin up 60 percent to $46,300 and Ethereum up 400% to $3,650. While bitcoin saw a 60% gain and ethereum rose 400% to $3,650, the report cites other statistics indicating that profits will continue to skyrocket. The United States leads the way, with total gains of $162.7 billion by the end of 2021, and Japan and China ranked second and third, respectively.
The rise in cryptocurrency value in recent years has been inspiring to the crypto world, and these gains reflect the growing interest in the technology. However, despite the increasing popularity, the industry has been plagued with many risks and must continue to manage these. However, the growth in 2021 is a good sign that the cryptocurrency ecosystem remains a source of economic opportunity in emerging markets. If you’re interested in investing in cryptocurrencies, now is to jump on the bandwagon.
The latest survey of 27 blockchain companies revealed a ninety-three percent rise in revenue in the first quarter of 2021. Exchanges and investment-oriented companies primarily drove the growth. A recent survey of these companies also revealed that blockchain had accelerated the number of digital transformations. Microsoft CEO Satya Nadella said the company had gone through two years’ worth of change in two months.
The recent growth of the cryptocurrency industry has spurred several companies into direct involvement in the cryptocurrency space. PayPal and Block, two financial giants, poured hundreds of millions of dollars into digital assets. Binance, for example, only began operations in 2017 but now handles billions of dollars per day. Despite being less prevalent among U.S. customers, the company is predicted to generate over $20 billion in revenues by 2021.
Timing cryptocurrency prices is difficult and often impossible. If a cryptocurrency’s price is rising rapidly, investors may rush to buy or sell because they cannot predict the market’s path. The dot-com bubble was similar to this: investors rushed to invest in anything with the dot-com moniker. With no fundamental value, investing in cryptocurrencies is even riskier than investing in traditional companies.
The popularity of crypto has led to massive investment in the industry, including a record-breaking $11 billion in the capital. Some Silicon Valley venture capital firms have even launched huge crypto funds. Andreessen Horowitz, for example, invested $20 million in Coinbase in 2013. Then, in November, Paradigm, run by the co-founder of Coinbase, announced a $2.5 billion crypto fund. These investments are expected to drive further growth and expansion of the crypto ecosystem.
The most popular cryptocurrency in the market, Bitcoin was trading for just under $6,000 a few months ago. The bitcoin price has risen more than 400%, and the second-largest cryptocurrency, Ether, has soared by a thousand percent in a year. Its deflationary nature has also encouraged investors to convert their cash into cryptocurrency. The RBI’s recent ban on digital currency has led to a significant rise in cryptocurrency investors in India.
After the announcement, the markets had a wild ride. Peloton and Zoom both fell by 45% in a month, and Peloton, a popular ride-hailing service, flopped by 75% and landed in pre-pandemic lows. The Chinese market gave markets several scares, and Evergrande threatened to create a messy collapse. That is a far cry from the infamous Ponzi schemes that have flooded the markets recently.
Despite the risk associated with cryptocurrency, many public companies turn their cash treasuries into digital currency. The American payments company Square recently bought $50 million worth of Bitcoins, while the Canadian company Microstrategy converted $425 million of cash reserves into Bitcoin. The confidence of these companies has added legitimacy to the cryptocurrency market. In addition, global digital payments company PayPal recently announced that it would begin charging for crypto transactions starting in October 2021.
FTX has weathered the crypto market volatility and reported profits. The company made $85 million in 2020 and was on track to make $820 million in 2021. The company also has a separate U.S. entity, FTX U.S., which had a third-quarter trading volume of $160 million. Its overall trading volume is now $14 billion. Andreessen Horowitz and Block Tower Capital are among the early investors in Coinbase and FTX.
Related: Top 10 Trends of the Crypto Market That Will Change in 2022