Skip to contentSkip to site index
Coinbase Logo

Research & Insights>

Research>

Insights Reports

2021 Year in Review

In Coinbase Institutional's 2021 Year-in-Review, we guide our clients through the highlights from the past year, including the new drivers of the emerging crypto economy.

January 26, 2022

Featured

Insights Reports

10 min read

Default Article Image

At a glance

In Coinbase Institutional's 2021 Year-in-Review, we guide our clients through the highlights from the past year, including the remarkable growth for cryptocurrencies, the important regulatory milestone for Bitcoin ETFs, and the new drivers of the emerging crypto economy.

Key takeaways

  • Total crypto market cap nearly tripled to $2.3 trillion by year-end, while the crypto economy rapidly expands amid growth in NFTs and DeFi.
  • Ethereum Mainnet merge with Beacon Chain expected in 2022.

Written by

  • David Duong, CFA, Head of Institutional Research

Introduction

In early November 2021 the total market capitalization of cryptocurrencies peaked at $3.1 trillion before falling back to $2.3 trillion by the end of the year. That’s still nearly triple its size at the end of 2020 ($777 billion).

Bitcoin’s (BTC) dominance fell from 70% to 40% over that period, as we witnessed the explosion of the crypto economy, including decentralized finance (DeFi)/decentralized applications (dapps), non-fungible tokens (NFTs), play-to-earn gaming, and Metaverse-related opportunities. 

All this reflects a broadening landscape no longer focused predominantly on BTC. That said, the “original cryptocurrency” still holds a special place in the asset class: eight years after the first crypto exchange traded fund (ETF) application went to the Securities and Exchange Commission (SEC), the U.S. finally got approval for a futures-based bitcoin ETF in October 2021.

Looking ahead, 2022 promises to be equally exciting. One closely watched event will be the merge of the Ethereum Mainnet with the Beacon Chain, which may happen in H1 2022. Ethereum (ETH) is the second-largest cryptocurrency by market cap. Significantly, it is moving from a proof of work (PoW) to a proof of stake (PoS) consensus model, which should introduce greater efficiency to the network. As more ETH-centric scaling solutions (like layer 2s) are introduced, we think the need to use or switch to alternative blockchain networks could decrease, potentially reducing volatility for the whole asset class as the competition for layer 1s begins to moderate. 

This report takes readers on a tour of the crypto horizon, summarizing the most important market developments we are tracking from our institutional practice. We cover key developments for BTC, ETH and other altcoin protocols, and highlight key events for 2022. We also look at exchange volumes, DeFi, stablecoins, the regulatory environment, and our investment activity via Coinbase Ventures. 

The rapid expansion of the crypto market brings Coinbase new horizons: unified developer docs at Coinbase Cloud; custody services to Facebook’s NOVI venture; the launch of the Coinbase NFT marketplace; and, on the regulatory front, the introduction of Coinbase’s Digital Asset Policy Proposal (DAPP).

We hope you find the report useful. If you have questions about our work or want to understand how Coinbase’s institutional practice can help your firm engage with the crypto markets, please contact us at institutional.coinbase.com.

David Duong, CFA, Head of Institutional Research

Explore:
ResearchResourcesMedia
newsletter.png

Sign up for our insights

Get the latest market insights, developments and updates, direct to your inbox.

Disclaimer: COINBASE and related logos are trademarks of Coinbase, Inc., or its Affiliates. The views and opinions expressed herein are those of the author(s) and do not necessarily reflect the views of Coinbase and summarizes information and articles with respect to cryptocurrencies or related topics. This material is for informational purposes only and is only intended for sophisticated investors, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations, or (iii) an official statement of Coinbase. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated and may not be updated or otherwise revised to reflect information that subsequently became available or a change in circumstances after the date of publication. Coinbase, its affiliates and its employees do not make any representation or warranty, expressed or implied, as to accuracy or completeness of the information or any other information transmitted or made available. Investing in cryptocurrency comes with risk. Certain statements in this document provide predictions and there is no guarantee that such predictions are currently accurate or will ultimately be realized. Prior results that are presented here are not guaranteed and prior results do not guarantee future performance. Recipients should consult their advisors before making any investment decision. Coinbase may have financial interests in, or relationships with, some of the assets, entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase's endorsement, or approval of any third-party websites or their content. Any use, review, retransmission, distribution, or reproduction of these materials, in whole or in part, is strictly prohibited in any form without the express written approval of Coinbase. Coinbase, Inc. is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Coinbase, Inc., 248 3rd St #434, Oakland, CA, 94607.