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5 minute read
23 Dec 2021
10:03 am

The state of crypto 2021 – Part 2: Bitcoin and stablecoins

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Stablecoins (which were once almost exclusively the tools of crypto traders) showed themselves to be handier than expected in 2021.

Welcome to part two of our analysis of the 2021 crypto year in review. In part one, we looked at some of the reasons why altcoins stole the limelight more than ever this year.

We also considered that, despite the meteoric growth cryptos like SOL (+14 000%), and BNB (+1 500%) experienced, not even heavyweight Ethereum is yet to come close to challenging big brother Bitcoin’s top spot in market cap.

As such, the original cryptocurrency remains synonymous with crypto as a whole in the minds of many investors. Even though we’ve seen Bitcoin dominance reach all-time lows in the market this year (39.66%), it hasn’t shown any signs of slowing down.

Meanwhile, stablecoins (which were once almost exclusively the tools of crypto traders) showed themselves to be handier than expected in 2021.

Let’s get into it!

Institutional money continues to flow into BTC

In November 2021, Bitcoin’s most famous corporate backer – Michael Saylor of Microstrategy – announced that his company had purchased another 7 002 BTC. This brings its total holdings up to 121​​,044 BTC (worth $6 billion).

Institutional investors precluded from investing directly in BTC can gain exposure via Microstrategy, which is ostensibly an IT firm. But in reality, it has become a proxy for Bitcoin.

“This is not a speculation, nor a hedge. It is a deliberate corporate strategy to adopt the Bitcoin Standard,” Saylor told Real Vision CEO Raoul Pal in an interview.

Over the years, Saylor has become a believer in the power of  Bitcoin as a balance sheet asset. He is of the notion that, in the current economic environment, holding cash is a losing play that eats away at your purchasing power. Bitcoin seems to solve this issue by offering a lower inflation rate to that of traditional fiat dollars. 

“Institutional adoption is still in its infancy, but it’s not as if fund managers aren’t drooling over BTC’s compound annual returns of about 200% a year. Most are simply precluded from this new asset class in terms of their investor mandates, and by Bitcoin’s lack of regulation, which they hope will change in the coming years,” says Brett Hope Robertson – Head of Investments at crypto investment platform, Revix.

Some of the world’s largest fund managers have started to gain exposure to crypto. This includes the world’s largest investment house, Blackrock as well as Morgan Stanley Investment Management and more than a dozen other fund managers. Blackrock also owns a 14.56% stake in Microstrategy.

As it stands, the most popular way for institutional investors to gain exposure to Bitcoin is through the Grayscale Bitcoin Trust. Which is a publicly-traded instrument backed by investments in Bitcoin. With $35 billion under management, Grayscale allows investors with a minimum of $50 000 to gain exposure to Bitcoin without having to worry about issues such as custody and security.

US regulators have been reluctant to grant approval to exchange-traded funds (ETFs) with direct exposure to Bitcoin. But in October, the ProShares Bitcoin Strategy ETF was approved. It is one of several futures-backed Bitcoin ETFs now either approved or under consideration.

Meanwhile, corporate adoption of Bitcoin continues to grow. It’s led by Saylor – former Twitter CEO Jack Dorsey’s investment company Square – and Ross Stevens of Stone Ridge Asset Management, among others. Even Tesla CEO Elon Musk showed support for Bitcoin in 2021.

Stablecoins prove to be … stable

Stablecoins have been a longtime staple of traders. Since they are cryptocurrencies backed by real-world currencies and assets, they allow crypto traders to park profits during crypto volatility.

Stablecoins include USD Tether (USDT), with the 4th largest market cap of $76 billion, USD Coin (USDC) with the 8th largest market cap of $43 billion and Binance USD (BUSD), with the 15th largest market cap of $14.5 billion.

In addition to acting as a relatively safe “parking space”, Stablecoins serve as a bridge between fiat currencies and crypto-assets. In a study conducted in September 2021, around 75% of all trading on crypto trading platforms were shown to involve a stablecoin.

As the year draws to a close, stablecoins account for four out of the top 20 cryptos by market cap. Each of these stablecoins is backed 1:1 by the US dollar or US dollar equivalents.

All in all, the world of crypto has continued to grow, expand and evolve in ways that few could have predicted in 2020. Here’s looking forward to another year of unprecedented progress in a space set to define the future of money, trade, entertainment and art.

This festive season, make smart investments a new family tradition!

With all the momentum the crypto market has gained this year, 2022 is set to be another exciting year of investments. This festive season is your chance to make the habit of investing a part of your life as well as the lives of your family and friends.

“I think the simple act of saving can make a life-changing difference to people’s financial wellbeing. Instead of giving another candle or beach towel this Christmas, maybe people should think about giving an asset or an investment to their friends and family. Giving an investment means giving something that will appreciate in value over time and possibly help those who receive it tenfold in the future … much more than that beach towel ever will,” say Brett Hope Robertson.

You don’t need another reason to make December the month that you and your loved ones start your investment journey together. But Revix, a crypto trading platform in Cape Town, is giving you one.

Between 17 and 29 December 2021, help a friend or family member start their crypto journey. Revix is rewarding you and whoever you bring along for the ride with an R800 combined reward. That’s 150 Revix Rewards points (worth a total of R300) for you and R500 for the person you successfully refer!

It’s your chance to help your family and friends to discover a safe and simple way to invest in crypto.