2021 is a small climax in the digital currency Warring States era. For the entire digital financial market, it is a magnificent period of history. Looking back at 2021, whether it is central bank digital currency (CBDC), encrypted digital currency (Crypto), or Metaverse and Web3.0, all are facing a rapidly changing market, a complex international environment, and increasingly clear regulatory policies.
So what are the major events that have occurred in the past year? Peer data will provide you with an inventory of major events in the digital currency industry in 2021.
1. Cryptocurrency is re-examined by the global financial market
Before the new crown epidemic, the world has been in an era of low and even negative interest rates. In such a financial environment, holding cash is actually the worst investment option. However, due to the sudden emergence of the new crown epidemic, global investors panic dumped assets to withdraw cash in March 2020, and global stock markets, commodities, real estate, and digital assets all plummeted. Under the influence of the “low interest rate market environment + global government quantitative easing”, it is equivalent to in the era when cash is the least ought to be held. Global investors suddenly hold a large amount of cash, which is obviously not long-lasting.
So starting from 2021, with the success of vaccine development and panic subsiding, these cash will be returned to assets through the financial market. In this round of re-assessment, since the widespread use of vaccines did not bring about a fundamental change in the global epidemic, the inflation of the US dollar is still very serious. The encrypted digital assets represented by Bitcoin have obviously been favored by global investors. Favor.
According to data from Companion, the BTC futures spread will rise rapidly in the beginning of 2021, from 14.14 in January to 39.39 in April, indicating that the market will enter an unprecedented bull market. Sure enough, the BTC spot market rose soon afterwards. Between January and February, BTC rose by more than 90%. In 2021, the total market value of cryptocurrencies has exceeded 3 trillion U.S. dollars, surpassing the market value of technology companies such as Tencent, Apple, and becoming the world’s largest “listed company”. In terms of economic aggregates, the “crypto republic” has surpassed the GDP of the United Kingdom and India, second only to Germany, and ranked fifth in the world. It has become a force that cannot be ignored in the financial market.
(Data source of current price difference in Bitcoin: Companion Customer Data TBanic Digital Financial Terminal)
This round of skyrocketing, analysts generally believe that due to the influx of institutional investors and even national investors, the Office of the Comptroller of the Currency approved the establishment of the first federally chartered crypto bank Anchorage in January, and Tesla included BTC in February. The balance sheet, the first Bitcoin ETF was listed in the United States in October, and the Coinbase exchange also successfully completed an IPO on Nasdaq. In September, the South American country of El Salvador officially established Bitcoin as the country’s only legal tender and installed it nationwide. Hundreds of Bitcoin ATM machines all mean that cryptocurrency has gradually evolved from a “game market” dominated by retail investors to a professional financial market dominated by institutions.
With the scale and specialization of the encrypted financial market, DeFi decentralized finance has gradually surfaced.According to data from Companion, the “Decentralized Financial Challenge Index”, which represents the ratio of the top five DeFi lock-ups to the top five U.S. dollar asset management institutions’ asset management scale, has risen by as much as 6 times in 2021 and reached it on November 9. The peak, and then fell back with the market turbulence, reflects that the market experienced a huge bubble during the year.
(DeFi decentralized financial challenge index data source: Tbanic digital financial terminal of peer data)
(DeFi decentralized financial benchmark interest rate data source: Tbanic digital financial terminal of peer data)
At the same time, the benchmark interest rate in the decentralized financial market continued to fall, gradually dropping from the highest point of 18.98% during the year to around 3.81%. In December, the US 10-year Treasury bond interest rate was 1.46%, which is almost the same as the benchmark interest rate in the decentralized financial market.
A major reason for the decline in DeFi benchmark interest rates is that more stablecoins are pouring into the DeFi ecosystem, which in turn depresses market interest rates. In addition, the additional incentives conferred by liquidity mining have also begun to decline. Many DeFi agreements will provide both borrowers and lenders with their own native tokens as liquidity incentives. Once the incentives begin to shrink, the motivation of the borrowers and lenders will also begin to decline. This will further push interest rates downward.
In the second half of 2021, the crypto market once again staged a plot of “first mainstream coins rose, and then small market value coins rose”. Meme tokens (referring to ideas spread in the community, and recognition or recognition of a certain shared subculture Realistic cognition. Like Dogecoin, SHIB and community type tokens, collectively referred to as MEME), the emergence of new forces has created a myth that guarantees millions of times. Next, various variants of ICOs and emerging high-risk currencies began to become hot, and market chaos reappeared. As the end of the year approaches, the cryptocurrency market has experienced severe fluctuations and large fluctuations, and the current price gap has also narrowed. The ultra-high positive correlation between BTC and ETH has continued to decline in the second half of the year. It is generally believed that institutions have begun to control the market and diversify investment. of.Affected by multiple factors, the uncertainty of the future trend of the encryption market has further increased.
Although a large number of institutions and asset allocation needs have entered the crypto market, crypto finance is still a financial market dominated by speculative demand, and there are huge risks and uncertainties. The upcoming 2022 may be an important turning point for encrypted finance. It is to move forward and complete the transition from reckless to mainstream; or another major crash and sorrow will be the direction that various financial research institutions will focus on next year.
2. The central bank’s digital currency is ready to go
Along with the wealth effect of cryptocurrency and market chaos, the global central bank digital currency is also developing rapidly. According to data from Peking University, according to the latest survey released by the Bank for International Settlements, 80% of central banks around the world said they are studying digital currency technology, and about 20% of central banks said they are likely to issue digital currencies in the next six years.
Fed Chairman Powell stated at a press conference in April that the United States is engaged in a rigorous plan to understand the technical and policy issues related to digital currencies. Powell said that the U.S. dollar is the world’s reserve currency, which means that the U.S. dollar is used far more than other currencies in transactions around the world.He said that the United States does not need to rush to act on the digital currency, and that it is more important to act cautiously and correctly.
However, only one month later, Powell again indexed in public conversations. The Federal Reserve will publish a research paper on the U.S. Central Bank version of digital currency (CBDC); and the former chairman of the US Commodity Futures Trading Commission (CFTC) Chris Giancarlo said in June that if the United States Without CBDC, it will become a backwater. The United States must be open to this innovation; the US House of Representatives Financial Services Committee held in July the “Hope and Risk of Central Bank Digital Currency” with the participation of the National Security, International Development and Monetary Policy Subcommittee. “Hearing; In August, Fed Chairman Powell issued a public statement saying that “digital currency orthography is becoming more and more important.” This series of events also represents a subtle turning point in the US attitude towards the issuance of central bank digital currency.
Compared with the ambiguous attitude of the Federal Reserve, other countries generally have a positive attitude towards central bank digital currencies. The central banks of France, Sweden, Japan, South Africa, South Korea, India, Russia, Thailand, Jamaica, Indonesia, Chile, Ghana, the United Kingdom, Brazil, Kazakhstan and other countries have established a central bank digital currency project team or conducted CBDC testing in 2021. Work.
(Source of data on digital currency progress of some central banks: Companion Customer Data TBanic Digital Financial Terminal)
The Central Bank of Egypt announced in April that it would allow local banks to issue digital currencies on their own under supervision. The Central Bank of Iran hopes to adopt a cryptocurrency program to promote the central bank’s digital currency.
In June, the Monetary Authority of Singapore (MAS), the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank jointly launched an international challenge for retail central bank digital currency (CBDC) solutions to encourage payment innovation and solve 12 major issues in the three key areas of CBDC tools, CBDC distribution and CBDC infrastructure.
Europe’s attitude towards CBDC has also been relatively positive. On June 30, member of the European Central Bank Management Committee and President of the Bank of France Francois Villeroy de Galhau stated that if the digital euro and the European payment system are not promoted, Europe Sovereign control of its currency will be at risk. On the 14th of the following month, the European Central Bank announced the launch of the digital euro project, aimed at solving key issues such as the design and issuance of the digital euro. The President of Ukraine also signed the Payment Services Law in the same month, allowing its central bank to issue CBDC. Currently, more than 30 European banks are currently building a retail system for instant transactions and payment cards to compete in the market currently dominated by foreign companies such as Visa and Mastercard.
In the field of cross-border payment exploration, Australia, Malaysia, Singapore and South Africa jointly conducted a central bank digital currency cross-border payment experiment in September to evaluate whether this can reduce transaction settlement costs and improve convenience. On November 3, when the Hong Kong Fintech Week was held, with the support of the Hong Kong Innovation Center of the Bank for International Settlements, the Digital Currency Research Institute of the People’s Bank of China, the Hong Kong Monetary Authority, the Bank of Thailand and the Central Bank of the United Arab Emirates jointly issued a multilateral central bank digital currency bridge The project use case manual, to explore and try multilateral cross-border payment. In December, the Swiss National Bank and the Bank of France stated that the first European Central Bank Digital Currency (CBDC) cross-border payment experiment was also successful.
In October 2021, Nigeria, the strongest country in Africa with a population of 200 million, officially issued a central bank digital currency. Unlike the research and testing of other countries, the “African Lion” Nigeria is a country that officially issued CBDC and promoted it by the government to the private sector. It will also be a milestone event in the history of CBDC.
In 2021, China’s digital renminbi exploration will be remarkable. The digital renminbi wallet has been directly connected to six large banks, including Industrial and Commercial Bank of China, Agricultural Bank, Bank of China, Construction Bank, Postal Savings Bank, and Bank of Communications, as well as 50 APP application scenarios such as Meituan, JD, Eastern Airlines, and Ctrip. In the 10 pilot cities, various commercial banks cooperated with the People’s Bank of China Digital Currency Research Institute to conduct multiple rounds of red envelope activity tests.
(Data source of red packet data in digital RMB pilot cities: TBanic Digital Financial Terminal)
In September, at the Service Trade Fair Financial Services Special Exhibition held in the Shougang Industrial Park, the People’s Bank of China Digital Currency Research Institute, six major banks, and Internet giants gathered at the Service Trade Fair to showcase digital RMB applications. The digital RMB application scenarios surrounding the Beijing Winter Olympics are also under intense preparations. At the beginning of next year, the digital renminbi will be unveiled around the world with the help of the Dongfeng Winter Olympics, further catalyzing the implementation of the digital renminbi.
(Data source of some application scenarios already supported in the Digital RMB APP: TBanic Digital Financial Terminal)
Companion guest data collated and included the central bank’s announcement. Data shows that as of October 2021, my country has opened a total of 140 million digital RMB personal wallets, 10 million corporate wallets, more than 3.5 million application scenarios, 150 million cumulative transactions, and a transaction volume close to 62 billion yuan.
Central bank digital currency (CBDC) has also become one of the hot topics discussed at the Group of Twenty (G20) summit. G20 countries generally believe that central bank digital currency cannot be rejected and must be issued.
During the transition from metal currency to banknotes, China was the first to give birth to Jiaozi. At that time, 16 large merchants provided endorsements and it was one of the earliest banknotes. Later, with the development of Jiaozi, a large number of various types of Jiaozi issued by private institutions appeared, causing chaos similar to today’s virtual currency. Later, the Northern Song Dynasty government banned the circulation of other Jiaozi and only allowed Jiaozi issued by 16 merchants. After being used, 16 merchants were further completely banned from being used for payment, and the government exclusively provided “official payment”, which is very similar to the development process from encrypted digital currency to central bank digital currency.
Compared with the enthusiasm of the cryptocurrency market, the central bank’s digital currency is still in the early stages of exploration. In the Warring States era of digital currency, cryptocurrency is like the “nomads” of the financial world. It will not disappear because of policy suppression. It will dominate, stare at the world, and stare at the entire financial market. It will coexist, compete and complement each other for a long time with the “farming nations” (that is, the digital currencies of central banks). This will become a main axis of the development of the digital financial market. Therefore, the study and research on the cryptocurrency market can help us The central bank’s digital currency better knows itself and the enemy, and competes with cryptocurrencies worldwide.
3. Metaverse, digital collections and the rise of Web3.0
In the summer of 2021, a group of strange-looking villains composed of 10,000 irregular pixels suddenly became popular. What is surprising is that a single avatar can be sold in Ethereum equivalent to tens of millions of dollars; Since then, with the rise of the international digital collection platform Opensea. From encrypted art and games to avatars and texts, the rise of NFT has ignited people’s endless imagination of the Metaverse and Web 3.0, and it has also made the capital market crazy.
From March 2021, Companion Data released the Metaverse Value Index for the first time in the industry. The index has risen by more than 10 times, and its constituent stocks and constituent tokens have received great attention from international investment institutions. For a time, new concepts such as virtual reality, digital humans, industrial Metaverse, and agricultural Metaverse have emerged one after another.
And digital collections have also begun to go out of the circle with the popularity of the NFT concept and enter thousands of households. Companion guest data collation and collection of Alipay’s public data show that since Alipay first issued the Dunhuang Feitian payment code digital collection on June 23, 46 sets of 237 digital collections totaling 2.945 million digital collections have been issued through AntChain. As of 23:59 on November 11 Sales reached 37.787 million yuan.
The secondary market for digital collections has also begun to flourish. Some collections purchased for 19.9 yuan have risen to tens of thousands or even hundreds of thousands in a month. At the same time, blockchain-based games have also emerged in large numbers, and there has been a “game is mining” form, that is, buying game equipment, playing games through customs to obtain new NFT equipment, and selling equipment can make money. Some chain games have very high profits and high risks. Many projects claim that “games run on blockchain distributed storage” and so on, which are obviously not feasible for large-scale games with relatively high playability. In fact, these games are generally very simple. It is not so much a game based on the blockchain, as it is just a few ordinary games plus the economic system of blockchain tokens.
Beginning in October, the regulatory authorities have successively negotiated with related companies such as Tencent and Alibaba. Half a month ago, both Tencent and Ali modified the NFT words of related products on the platform and turned them into the current “digital collection”. Both Tencent and Ali clearly stated in the user regulations that digital collections cannot be traded and speculation is prohibited.
In the second half of the year, with the emergence of a large number of Metaverse support policies and industrial parks in various parts of the country, various types of Metaverse-concept investment funds and innovation and entrepreneurship competitions have also sprung up. Under the circumstances that the concept of Metaverse is “technology” or “science fiction”, whether NFT digital collections protect “copyright” or “property rights”, and whether Web3.0 is a “technology concept” or a “marketing concept” are still inconclusive. The capital market has begun to speculate on Metaverse, Digital Collections and Web3.0-related subjects. If cryptocurrency is a market dominated by speculation, the current bubble and risk in the Metaverse market may not be too much. However, it cannot be denied that the world based on “digital nativeness” of Metaverse has indeed opened a new window for the digital currency application scenarios that are lingering at the door of the digital transformation centered on “digital twins”.
(Source of Metaverse Value Index: Companion Customer Data TBanic Digital Financial Terminal)
Different from the positive attitude towards cryptocurrency, the tech tycoons are surprisingly calm and conservative. Twitter founder Jack Dorsey said that Web3.0 is just “a trick for VCs to gain eyeballs”, and Tesla founder Ma Skr mocked Metaverse “Probably no one wants to tie a screen to his face all day.” In fact, the American science and technology community has always said that “blockchain will be falsified, but cryptocurrency will live forever.” Some tech bigwigs scoff at the application of blockchain technology outside of finance. It may be that they are all against Metaverse and Web3. 0 Reasons for negative attitudes.
The support and evangelists of Metaverse also fought back. In response to the doubt that VC has the majority of the profits of Web3.0, Binance CEO Changpeng Zhao replied, “Blockchain can solve this problem. The Web3.0 project passed Global financing allows investors to participate.” Anderson Horowitz Fund (a16z) partner Balaji Srinivasan also gave his rebuttal. He stated that “Web3.0 offers the possibility of something better, not a guarantee.”
The debate surrounding Metaverse, Digital Collection and Web3.0 will not have an answer in 2021, and they will continue until 2022 or beyond. Let us wait and see what new impacts the development of these new technologies will bring to the financial market.
Fourth, the global migration of crypto miners
2021 may be one of the most important moments in the history of crypto mining.
In the first quarter, due to the sharp increase in the price of Bitcoin, a large amount of funds were attracted to the crypto mining industry. Chinese mine owners are actively constructing consumption parks with local governments to prepare for the flood season. By the second quarter, the Chinese government suddenly issued a severe policy to comprehensively combat Bitcoin mining. In a short period of time, almost all domestic mines were shut down, and the Bitcoin computing power of the entire network plummeted by 40%, which became the history of Bitcoin. One of the biggest declines.
How much electricity does Bitcoin consume? According to the data released by the Cambridge University Research Center compiled by Companion Customer Data, as of 2020, the world has consumed 14.937 billion kWh for Bitcoin mining in one year. From the comparison of data, some The electricity generation of small and medium-sized countries is even less than the electricity consumed by Bitcoin mining in one year. China used to be the world’s largest mining market, with mining volume accounting for three-quarters of the world’s total, and a large amount of electricity consumption, which is a major obstacle to China’s carbon neutrality goal. This is also widely regarded as the main reason for China’s ban on crypto mining. one.
(Data source of global Bitcoin computing power distribution changes after supervision: Tbanic digital financial terminal of peer data)
In the first half of 2021, the number of bitcoins in miner addresses peaked in May-2.14 million. After the introduction of China’s regulatory policies, miners’ Bitcoin holdings quickly decreased by 100,000 in a short period of time, or 5% of the peak value, which was enough to cause selling pressure on short-term Bitcoin prices.
Since the Chinese government banned crypto mining, more than 90,000 bitcoins have left miners’ addresses within two days. The net outflow recorded two sharp declines of 30,000 bitcoins, which means that the bitcoins leaving the miner’s address are as much as 30,000 more than the total number of bitcoins from their reward or hoarding. The continuous increase in the outflow of miners and the negative net outflow strongly indicate that the addresses of the miners have been sold during the entire mining migration process to withdraw funds.
Because the market was in a big bull market before the ban was introduced, miners generally accumulated huge profits and possessed the economic foundation for global migration. When the ban was first issued, Kazakhstan was a better migration destination than the United States. Kazakhstan has low electricity prices, friendly policies, and is relatively close. Unlike the United States, it has high punitive tariffs. However, with the advent of winter, Kazakhstan began to experience serious power shortages, and the government of Kazakhstan also began to crack down on gray mines that were not approved. Under such circumstances, many Chinese companies announced their bid farewell to Kazakhstan and once again moved to Russia and the United States. The United States has a good market-oriented mechanism, good laws and policies, and power infrastructure. The difficulty lies in high tariffs and high construction costs. But under the current circumstances, the United States has almost become the only option for large miners. The United States is headed by Texas, and almost every major Chinese mining company has offices in Texas. In addition, some mining companies have moved to African countries where electricity prices are very low due to cost considerations.
After 6 months of transfer, the computing power of Bitcoin’s entire network in December 2021 has returned to the situation before everyone in China was mining.
(Source of data on Bitcoin’s entire network computing power: Tbanic Digital Financial Terminal)
At the same time, due to compliance considerations, crypto mining companies will continue to promote listing in 2021. At present, there have been North American listed mining companies led by Marathon, Riot, Bitfarm, Hive, Hut8, etc., as well as such as Ninetowns, Bit Mining, BTBT, etc. Mining companies dominated by Chinese capital. Next year, Bit Deer, etc. will also be listed. However, there seems to be no news about the listing of the two giants, Bitmain and Shenma. The transformation of mining companies to listed companies will improve the financing capabilities of encrypted mining companies, causing miners to turn from the original main selling force to long-term holders.
According to the speculation of professionals, the Bitcoin computing power of the entire network will rise to 300EH/s in 2022. At the same time, the price of Bitcoin may fall as the Fed raises interest rates. Therefore, the overall profit of the mining industry will be greatly reduced. The realization of Ethereum 2.0, that is, the high probability of converting POW to POS will also be completed in the middle of 2022, which will have a significant impact on the encryption mining industry.
V. Awakening of global regulators
As the price of cryptocurrency rises and this new type of alternative asset becomes more and more important in the financial system, as well as the continuous exploration of digital currencies by central banks of various countries, the regulatory review of digital financial markets by countries around the world has rapidly increased this year. Today, due to the rapid growth of the scale of digital assets, the role played in illegal activities such as money laundering and the potential risks to investors, global regulators are increasingly addressing the regulatory issues of digital assets.
Among the major countries in the world, the attitudes and lines of digital financial supervision are not completely consistent.
China mainly adopts a total ban on virtual currencies and vigorously develops the attitude of digital renminbi. In 2021, China completely banned mining and bitcoin trading. Huobi Exchange cleared all users in mainland China, and other exchanges also closed or went overseas. In terms of digital renminbi, although it is still in the testing stage, there have been many cases of fraud and money laundering using digital renminbi in China, the judicial authorities have cracked many related cases, and the central bank has also adjusted the digital renminbi account rules.
The United States mainly followed the route of “compliance + strong supervision”, which promoted the listing of Bitcoin ETFs and the IPO of Coinbase Exchange. At the same time, it has tightened supervision on Binance. In December, Maxine Waters, Chairman of the Financial Services Committee of the U.S. House of Representatives, presided over a hearing on the theme “The Future of Digital Assets and Finance: Understanding the Challenges and Benefits of U.S. Financial Innovation.” Members of the House of Representatives sought to pass The hearing comes to gain a deeper understanding of encrypted assets and to debate the correct regulatory rules for the market. During the nearly five-hour hearing, executives of six large-scale crypto-asset-related companies made their appearances and testified, explaining to everyone the promising future of crypto technology.
European countries generally have adopted an open attitude towards cryptocurrencies, but they have also expressed concerns about regulatory issues and are formulating relevant regulatory policies. The Central Bank of India originally planned to completely ban the existence of cryptocurrencies, but this bill was delayed and has not been passed in Parliament for a long time. The Japan Tax Agency has updated the cryptocurrency guidelines and plans to strengthen the supervision of cryptocurrencies. South Korea has strengthened its anti-money laundering management of cryptocurrency exchanges, closed 90% of domestic unlicensed exchanges, and plans to impose a cryptocurrency transaction tax in 2022.The Central Bank of Russia is also considering implementing a ban on cryptocurrencies.
In 2022, regulation will become an important theme of global digital currencies. Countries all over the world are thinking about how to implement regulatory policies in such a rapidly growing and rapidly changing field. Governments around the world are paying attention to content related to the encryption industry, from stablecoins to decentralized finance. They are worried that retail investors will suffer heavy losses due to volatility, chaos, or so-called carpet scams, and how to deal with this new alternative asset Carry out taxation and other issues.
Written at the end:
(Data source of 2021 memorabilia: Tbanic digital financial terminal of companion customer data)
Looking back at 2021, it was a magnificent year, and it was also a year in the history of finance and digital currency. Since Satoshi Nakamoto opened the Pandora’s Box at 14:10 pm on October 31, 2018, from encrypted digital currency to central bank digital currency, to NFT, Metaverse and Web3.0, the digital financial industry has gone through 13 Years. Digital currency has also evolved from a geek plaything to a new type of alternative asset that affects the world. In this process, some people come and some people leave; the Zhu building, the banquet guests, the building collapses; there are laughter, tears, innovation, and chaos. The companion guest data contains all these data and records all this history. , This will be a precious memory for digital finance practitioners.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/year-end-summary-memorabilia-of-the-digital-currency-industry-in-2021/
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