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​What was going on with cryptocurrency in 2021? Summing up the results of the year

31.12.2021 - 07:30

90

7 min

Dear friends! The Getblock team congratulates you on the upcoming New Year holidays! We would like to thank you for your support and wish you success and joy in the New Year of the Tiger. Today we want to summarize the results of 2021. It has been a challenging but very important year for the crypto market. In this article, we will go through the main events that have affected the industry. Enjoy reading!

Bitcoin rally and capitalization growth

For the first time in the history of cryptocurrencies, the market capitalization surpassed the $1 trillion mark. This happened in January 2021, and by May the figure had already reached $2,5 trillion. Bitcoin was the main contributor to the market's growth. The asset began the year with a price of $29 800 and quickly reached the new ATH. In April bitcoin stormed the $63 000 mark, and by November the value on some exchanges exceeded $67 500. After that, the expected correction started, and the asset ends at $47 700 (according to CoinMarketCap on 29.12.2021) in 2021.

As FinExpertiza's analytics shows, it was bitcoin that made the most profit for Russian investors. According to the published report, the instrument's annual return was 65 600 Russian rubles (RUB) with 100 000 invested. Interestingly, gold and the euro showed negative returns, while the dollar had zero returns.

Source: Finexpertiza

The mass-adoption we have been waiting for

This has been a positive year for the cryptocurrency market. Despite a number of unpleasant events, such as, for example, China's total ban on mining, in most jurisdictions there was a trend towards cooperation between the government and crypto projects’ representatives.

According to a reportby the Global Legal Research Directorate (GLRD) of the US Law Library of Congress, 51 countries around the world now have restrictions and bans on cryptocurrencies. Only nine countries, including Nepal, Algeria, China, Tunisia, Iraq, Qatar, Morocco, Bangladesh, and Egypt, have a total ban on cryptocurrencies.

Source: LAW Library of Congress

In 103 countries, the situation remains favorable for cryptocurrencies, with the tax legislation implemented here, as well as measures against money laundering and terrorist financing. At the same time, the analysts have put Russia in the green zone. This means that, in the opinion of the document's creators, our country still does not plan to introduce a total ban on cryptocurrencies in the near future.

Russia: the territory of uncertainty

In 2021, the authorities have not decided on the regulation of the cryptocurrency industry. The situation with the mining continues to remain unclear. The opinions vary from a complete ban to recognition as an official activity with the possibility of paying taxes and providing benefits. In such circumstances, one cannot speak about the support of this industry by the state. According to Anatoly Aksakov, the head of the State Duma Financial Markets Committee, cryptocurrency mining does not need it, as such activity has no social relevance.

As for the regulation of the digital asset market, the authorities also consider various options. In December, the Reuters website published a material reporting on the possibility of a complete ban on cryptocurrencies in Russia. According to Reuters' own knowledgeable sources, the Russian Central Bank's current position is aimed at a complete rejection of cryptocurrencies. At the same time, the possible sanctions should not affect those users who have previously purchased digital assets. The final decisions on the industry regulation are expected to be adopted in the spring session of parliament in 2022.

Binance: from decentralization to cooperation

One of the big news of the year was Binance, the largest cryptocurrency exchange, abandoning the concept of a decentralized business model. Previously, Changpeng Zhao, the platform's head, stated that Binance's office is located where he is. However, after the pressure from regulators on the exchange, the management has had to change the way it operates.

Binance now believes that the company's operations should have a centralized structure with clear capitalization data, a proper board of directors, governance, and transparent control of KYC (Know Your Customer) and AML (Anti-Money Laundering) practices.

Cooperation with regulators has benefited the company, and by the end of the year, Binance received permission to operate in Bahrain and a license to provide crypto services in Canada. And the exchange plans to establish an industry-specific crypto hub in Dubai. A memorandum of understanding has already been signed with the emirate's authorities.

Elon Musk: the main manipulator of the year

It is hard to find a more popular person in the cryptocurrency market than Elon Musk. Throughout the year, the entrepreneur has been a newsmaker and showman, and his controversial tweets have led to dramatic fluctuations in exchange rates.

It all started in January when Musk posted a tweet with the hashtag bitcoin. Within just an hour of the posting, the asset grew by $6250. Then, in February, it became known that Tesla had invested $1,5 billion in bitcoin. The asset reacted to the news by rising to $44 000. Following this, the entrepreneur opened up the sale of electric cars for cryptocurrency but later removed the option, citing “the rapidly growing use of fossil fuels for bitcoin mining.”

Throughout the year, Elon Musk has been promoted meme tokens. His tweets in support of Dogecoin led to the asset entering the top Google searches for 2021. At the end of December, Musk also published a short tweet about the Santa Floki token. Immediately after the publication, the followers began buying up the asset and raised its value by 5000%. One can only guess what surprises the Tesla founder has in store for his army of fans over the next year.

El Salvador: the experiment of the century

Perhaps the most important and striking event of 2021 was the recognition of bitcoin as legal tender in El Salvador. The state created special tax conditions for investors and also established a bitcoin trust to ensure the exchange of cryptocurrency for fiat currency. The surplus resulting from bitcoin appreciation is being used to develop social projects, such as building clinics and schools.

A new large-scale project of El Salvador's authorities' is to create the world's first bitcoin city (Bitcoin City). The new metropolis will be built next to a volcano and its energy will be used for cryptocurrency mining. The government will issue $1 billion worth of bitcoin bonds in partnership with Blockstream and Bitfinex to finance the construction. The Bitcoin City residents can expect zero taxes on income, property, capital gains, and wages.

According to El Salvador's President Nayib Bukele, Bitcoin City will be a full-fledged metropolis with residential and commercial areas, restaurants, an airport, a seaport, and a railway station.

The full version of the speech

This is how we will remember the year 2021. Thank you for being with us and once again we congratulate you on the upcoming holidays. See you in 2022!

Author:

Michael Golikov Michael Golikov

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