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Crypto's mixed start to 2022

Crypto's mixed start to 2022

On the first day of 2022, crypto’s total market cap was worth roughly $2.2 trillion, up from $770 billion on New Year’s Day in 2021. [Nora Carol Photography via Getty Images]

There’s never a dull moment on the blockchain. Here’s what you need to know this week.

Crypto had a mixed start to 2022. As Bitcoin faltered, the broader market showed signs of growth.

Key themes we’re watching this year. The metaverse, blockchain gaming, and crypto trends we’re keeping tabs on.

The week in numbers. The surprising amount of DOGE the co-founder of Dogecoin holds, and other key figures to know.

Market Report

Bitcoin stumbles into 2022, but the crypto market shows signs of strength

After a “Santa Claus rally” lifted both crypto and stock markets in the days surrounding Christmas, the S&P 500 has seen sustained momentum — and is up nearly 5% since December 20. Bitcoin? Not quite as jolly. In the same timeframe, BTC has given up its gains, and the total crypto market cap has settled around $2.3 trillion (down from November’s $3 trillion all-time high, but still about 300% higher than a year ago!). In any case, the news isn’t all bad — there are plenty of promising crypto developments that have us optimistic about 2022. Let’s take a look.

  • Bitcoin’s relatively depressed price — around $45,000 — is only part of the story. The network’s mining power (or “hashrate”) keeps breaking records as more miners come online in North America following China’s 2021 crypto crackdown. One U.S. mining firm, Marathon Digital Holdings, just spent nearly $900 million on mining rigs. Meanwhile, the number of addresses holding BTC hit all-time highs of nearly 40 million.

  • Ethereum — driven by interest in NFTs and DeFi— now has a record 71 million addresses. The NFT boom continues into the new year, as OpenSea recorded nearly $243 million worth of trading on January 2, its third-best day ever — and the number of active traders using OpenSea reached all-time highs around 362,000 in December. In related news, a South Korean presidential candidate is even using NFTs to fundraise his campaign.

  • All of that activity has pushed Ethereum’s fees higher, helping drive the growth of low-cost alternatives like Polygon and Solana. Polygon, an Ethereum “sidechain” (kind of like an express lane for the network), emerged as a popular alternative for OpenSea users — with $76 million in volume in December. Solana, another ETH alternative that offers lower fees, saw a record high of 1.8 million users for its Phantom wallet last month.

  • Inflation continues to be the global economy’s biggest story — but how is it impacting crypto? Turkey, which hit an annual inflation rate of 36%, will soon debate a new law to set up an official crypto custodian. In Australia, the Sydney Morning Herald reports that a traditionally conservative pension fund recently “told its 1.8 million members that the [crypto] asset class was a good investment in the face of rising inflation.” Meanwhile, major banks in Italy and Spain are offering crypto trading to retail customers — a move that few U.S. banks seem interested in pursuing.

Why it matters… An interesting stat to consider is Bitcoin’s “dominance” — a measure of  BTC’s percentage of the total crypto market. This time last year, BTC made up around 70% of all crypto. Now? Less than 40%. Which isn’t to say that BTC has lost ground — it remains a vast, $870 billion market. Instead, a new crop of crypto opportunities have bloomed: alternative blockchains from Avalanche to Luna, NFT projects like Bored Ape Yacht Club, play-to-earn games like DeFi Kingdoms, and Web3 projects like the cloud storage protocol Aleph.im.

Trendwatch

Can 2022 be an even bigger crypto year than 2021?

By pretty much all measures — from celebrities like Jimmy Fallon and Jay-Z “aping” into NFT projects to a group of strangers almost buying the constitution —  2021 was the year that crypto finally broke into the mainstream. Over the course of the year, the number of crypto users spiked from 100 million to more than 300 million, Beeple crushed art-world records with his $69 millon sale, and even previously skeptical banks like J.P. Morgan began offering wealthy clients crypto investment options. Is there any chance 2022 can compete? Here are a few key trends we’re watching in the new year. 

  • Pop culture’s obsession with NFTs will intensify. Did you think the first month of 2022 would include a drop date for an Ozzy Osbourne NFT project called “CryptoBatz?” Neither did we! It’s unclear how many more collections of pixelated animals the $23 billion NFT market can sustain, but CryptoBatz’ Twitter feed has already surpassed 37,000 followers. And there’s no sign that mainstream artists are losing interest in the trend. The start of 2022 also saw Eminem hop into the NFT space, buying a Bored Ape Yacht Club avatar that happens to be rocking his signature army cap.

  • Brands will begin marketing in (and building) the metaverse. Most people seem to agree that the metaverse will one day evolve into an all-encompassing, persistent virtual world, where you can work, game, and socialize — sort of like the one that Ready Player One imagines. Plenty of big brands (like Meta, formerly Facebook) and institutions see massive opportunities by getting in early. Analysts at Morgan Stanley agree — they envision the metaverse market topping $57 billion within a decade. Nike, Adidas, Samsung, and Budweiser are among corporate early adopters. Nike’s recent acquisition of virtual fashion brand RTFKT sets the sneaker giant up for major metaverse moves in 2022.

  • Major video game publishers will explore blockchain gaming. On the first day of 2022, Final Fantasy developer Square Enix published a letter signaling its intention to explore NFTs and blockchain gaming. Noting the ”play-to-earn” model that Axie Infinity helped pioneer, Square Enix president Yosuke Matsuda described the next phase of gaming as “play-to-contribute,” in which gamers who want to create or build within game universes are rewarded. He notes: “a wide variety of motivations will inspire people to engage with games and connect with one another. It is blockchain-based tokens that will enable this.” 

Why it matters… At the start of 2021, words like “NFT,” “metaverse,” and “Web3” weren’t exactly household terms. By the end of the year, more people were searching the word “NFT” than “Kanye West” and “Kim Kardashian” combined. And as these concepts begin to mature, new ones arise, and even more individuals and institutions dive deeper into the ecosystem, 2022 could become crypto’s biggest year yet. Or as crypto Twitter might put it, WAGMI!

Numbers to Know

$1 billion

NFT project Bored Ape Yacht Club’s total sales volume, since launching last April. (As of January 3, the collection had already seen $55 million in 2022 sales.) Boosted by celebrity Ape holders like Post Malone, Diplo, and Eminem — BAYC boasts the fourth-largest sales figures of any NFT collection, behind Axie Infinity, CryptoPunks, and Art Blocks.

$94.2 million

Amount MicroStrategy spent to add 1,914 BTC to its balance sheet in December.  The publicly traded company now holds around $5.7 billion of BTC. Its CEO, Michael Saylor, is one of Bitcoin’s most enthusiastic boosters. In September 2020, he tweeted “#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth.”

220,000

Number of Dogecoin — worth roughly $40,000 — that the memecoin’s co-creator Billy Markus holds. (Ethereum co-founder Vitalik Buterin held at least 325,000 ETH in 2018, worth about $1.2 billion at today’s prices.) Markus, who no longer works on DOGE, distanced himself from his creation last week: “I don’t speak for dogecoin. I am not on the project. I am a community member.”

The number of new Samsung TV models the electronics giant says will enable NFT trading. According to a press release, the MICRO LED, Neo QLED, and Frame TVs will all include an “integrated platform for discovering, purchasing, and trading digital artwork.”

Tune In

How Bitcoin might evolve beyond digital money

These days, most people think of Bitcoin primarily as an inflation-resistant store of value. Ethereum’s smart-contract compatibility, on the other hand, makes it a global computer that powers NFTs, blockchain games, and decentralized exchanges. But can Bitcoin evolve into a global computer of its own? On the latest episode of Around The Block — Coinbase’s weekly podcast — Coinbase Ventures’ Justin Mart and Katherine Wu discuss Bitcoin’s programmable future with Stacks co-founder Muneeb Ali, who is dedicated to building smart contracts on Bitcoin.

TOKEN TRIVIA

Who created Dogecoin?

A

Elon Musk and Max Levchin

B

Eddie Doge and Coin John

C

Vitalik Buterin and Charles Hoskinson

D

Jackson Palmer and Billy Markus

Find the answer below.

Trivia Answer

D

Jackson Palmer and Billy Markus