2021 marked a rapid escalation in the popularity of cryptocurrencies, and this was fueled, to a large extent, by the increased media attention that came their way.
You couldn’t go far without hearing about the skyrocketing value of Bitcoin, or the exciting potentials uses of blockchains in the area of DeFi (decentralized finance). Digital currencies had officially risen from their status as a speculative niche into the mainstream consciousness.
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Beyond the arena of financial trading, the underlying technology caught the public imagination in the form of NFTs (non-fungible tokens), in the concept of the metaverse, and in the practical realm of smart contracts. Cryptos seemed to be the wave of the future and their popularity snow balled.
All this attention is “going to continue to drive the growth of the industry for a while now”, says Gemini’s David Abner. On the other hand, we know the crypto market went into a slump last year, particularly from May when the TerraUSD stablecoin became unhinged from the US dollar.
Terra’s sister coin, Luna, then collapsed and a domino effect ensued. Later on, there were some high-profile bankruptcies in the sector, including those of Three Arrows Capital, Celsius, and FTX.
The Reason Behind The Popularity Of Crypto
To what extent are the reasons for crypto’s rise still active? What has changed since 2022’s crypto bear market took hold? In order to start answering these questions, let’s look at the reasons for the popularity of crypto in the first place.
At its birth in 2009, Bitcoin was worth only $0.0009, but in November 2021 it had almost touched $69,000. Those involved in financial trading couldn’t ignore the fact that, in the ten years running up to March 2021, Bitcoin brought returns of over 230%. Turning to a more recent coin, Shiba Inu, we saw its price mushroom by a flabbergasting 45 million% in 2021.
The media’s non-stop coverage of this kept it in the forefront of people’s minds. At the same time, crypto exchanges like Coinbase went public, which cemented the status of crypto as a mainstream asset.
Initially, crypto trading was something you could only do on a few specialized platforms like Robinhood, but, in the last couple of years, more and more online brokers have been popping up, simplifying and improving the trading experience as they go.
The mere fact that it is now so straightforward, talked-about, and common to get involved in crypto trading has fed into its popularity. Even Fidelity – a respected name in the field of traditional financial services – began to offer Bitcoin as an option for its clients.
Aside from crypto’s appeal as a trading instrument, it also offers a unique way of paying for things. At the moment, it is uncommon to make daily purchases using cryptocurrency, but an increasing number of merchants have agreed to accept it in the past couple of years.
The more this trend continues, the more crypto could be normalized as a payment method, especially since it seems to have the potential for special security features.
Like cryptocurrency itself, the metaverse has morphed, in the last few years, from a fascinating prospect into a mainstream industry that pours billions of dollars into development. Facebook renamed itself Meta Platforms in order to signify its devotion to the cause.
The potential is there to construct a virtual world in which real-world transactions are conducted. For instance, loans, mortgages, and banking services are all imagined as functioning in a man-made digital world. The currency of choice in this world will probably be cryptocurrency, so it’s believed that the growth of the metaverse will go hand-in-hand with crypto adoption.
DeFi presents the prospect of a blockchain-based network of financial transaction that shuns the need for banks, lenders, and central authorities. Like the metaverse, it is still in the development phase, but it offers people the opportunity of taking full control of their finances, which is appealing to many. DeFi uses smart contracts to take the place of the traditional intermediaries in the financial world.
It’s true that some nations, most notably China, have banned the use of cryptocurrencies in recent times, but Jerome Powell, the head of the US Federal Reserve, said clearly in 2021 that he has “no intention” of doing the same.
On the contrary, as many analysts point out, the fact that the US government has recently spent so much effort in outlining proper regulation for the industry indicates it may have a bright future. Their attention is being spent on ensuring the safety of crypto as a trading instrument, but also on securing it against the designs of cybercriminals.