Cryptocurrencies in 2021: the year in review

Bitcoins, NFT and Elon Musk. The cryptocurrency market consolidated in the atypical 2021 and promises to continue revolutionizing the Internet and societies.

Cryptocurrencies have been around since 2009 when a hitherto unknown Satoshi Nakamoto first proclaimed the word 'Bitcoin' in small forums. More than a decade later, they have become popular, capturing the interest of social media users. And now, in 2021, hit not only by the pandemic but by inflation, political crisis, and more negative economic situations for a large part of the population, they have become a way to generate income and make a living.

Pandemic and the massification of cryptocurrencies

The onset of the pandemic in 2020 caused more people to move to what we now assimilate as 'teleworking.' In their daily interaction with cyberspace, cryptocurrencies became a recurring theme that they saw, became interested in, and began to follow. According to a report by Statista, cryptocurrencies had an explosion in these last two years. Binance, a global crypto marketplace, complements the information by pointing out that the reasons for their use are different but range from "saving and generating passive income" amid the crisis to "facing the socio-political changes" presented by users.

Interestingly, statistics show that the countries with the highest adoption of cryptocurrencies suffer from inflation or constant political crisis. In 2021 alone, the five countries with the highest growth were Nigeria, Vietnam, the Philippines, Turkey, and Peru. And as already consolidated in the region, Argentina and Venezuela command the list. And of course, the market is led by bitcoin, the largest and most popular currency of all. This has been in the news this 2021 for multiple reasons, but mainly because of its value.

After starting the year close to 30 thousand dollars, according to data from the CoinMarketCap service, it reached a record 65 thousand dollars per unit in April, doubling investors' money. But, for reasons we will see below, the price has been fluctuating, in the so-called "red market" or "bear market": its value went as low as 29 thousand dollars per unit, causing panic. The figure would have to endure months in this trend to only, in September, overcome the barrier of 40 thousand dollars and enter the new peaks of October and November, where the bitcoin reached a value of 68 thousand dollars. Closing December, we are averaging 50 thousand dollars. Whether bitcoin goes up or down, the rest of the cryptocurrencies behave the same way, so, in general terms, users have experienced a "roller coaster" during the year: they were in the news for their significant gains in some months, but also for the high negative figures they occupied.

China and its interest in disappearing them

The usual cycle for the value of cryptocurrencies is to go up, then down. But much of the market value declines this 2021 were in the wake of China, one of the countries with the largest number of investors in the world. The Asian country has already been against cryptocurrencies in previous years, but it had a couple of actions in particular in this one.

The first step towards its control was to ban mining farms. These large computer sites used a lot of energy: hundreds of graphics cards worked 24 hours a day to validate transactions on the blockchain of cryptocurrencies such as Ethereum to earn new coins. The energy expenditure was enormous and generated, in addition, blackouts and power outages for surrounding areas.

By September, however, China declared all transactions in this digital money illegal because they "may disrupt the economic and financial order." Was this the first time it had done so? No. In 2013 and 2017, the government made the same suspensions. However, for experts, this time, "the blockade was more detailed and comprehensive."

Bitcoin and the entire market suffered, especially with these two measures but could recover in a matter of weeks. Moreover, as mining moves to other countries such as the United States and Kazakhstan, the value of cryptocurrencies would organically rise again.

But the bans were not gratuitous. In addition to cryptocurrencies emerging as forms of the economy without government actors (and China is a country controlled in almost all its areas by the system), China was also preparing for the launch of its cryptocurrency, the digital yuan, intrinsically associated with the value of its local currency. are these types of currencies important? Quite a lot, so you should know how they work.

The Elon Musk effect and meme coins

But more curious was the case of the man Time magazine called "the most influential man" of 2021.

Elon Musk, CEO of SpaceX and Tesla and the world's richest person, became a standard-bearer for cryptocurrencies. However, his involvement makes experts doubt whether it is genuine support or just another way to grow his money.

The most significant case was accepting bitcoin as a form of payment for its electric cars, allowing it to have a "real" value in the world beyond the Internet. This caused a huge rise in its value in the midst of what we are already talking about was its first stage of growth in the year.

However, Elon Musk himself would bring down the cryptocurrency (and the market) by stating months later that he would suspend these transactions due to their high environmental impact. As we pointed out above, cryptocurrency mining requires electricity as if it were a factory, consuming the entire industry, per year, energy values similar to those of whole countries such as Argentina. The decision would bury the crypto world in months in its lowest values.

Elon Musk has been labeled a price manipulator. However, as a natural person and CEO of his companies, he has bought bitcoins, EthereumandDogeto stores them, so any variation in the price directly affects him. So then, pushing up the price with his sayings would benefit him to withdraw profits. On the contrary, collapsing their values with his controversial tweets would allow him to continue buying new coins at minimum prices to generate the highest possible profitability.

And that was not the only type of involvement he had in the year. If already in 2020 he announced that he was a supporter of the Dogecoin, this 2021, he helped create many more new coins with no actual use, and that these rose to record highs. The most common cases were with his tweets related to dog breeds: he adopted one that he named Floki, and the community immediately created a cryptocurrency that rose in value meteorically. Today, each tweet of the eccentric character is a virtual currency within the category of meme coins.

Squid Game Token Scams

But the fact that anyone can create their cryptocurrency with only the interest of making money makes this a dangerous world.

Just as it happened with Musk's publications, any popular topic was turned into cryptocurrency, trying to prey on the unwary in Ponzi schemes that could not be regulated in any way.

The most famous case was the Squid Game Token, based on the favorite Netflix series 'The Squid Game.' Innocently, dozens of media shared the creation of this coin as a "curiosity" born from the fever of Korean production. However, they forgot to investigate its provenance (something that any cryptocurrency has available on the Internet): it was a scam where users could buy the coins but not sell them.

This is how the Squid Game Token became valued at 2800 soles amid so much deception and publicity. And it would only be a matter of time before the truth would be discovered: the criminals removed the funds from the cryptocurrency, stealing 3 million dollars and leaving thousands of investors without any dollars.

According to the massification, scams have been growing, with false promises of becoming a millionaire overnight. Remember, nothing can guarantee you to multiply your money in this world, so if someone promises you, they probably want to take your savings.

Learn about the actions of cybercriminals and the most common cases in this year's report.

The case of El Salvador

El Salvador became the first country in the world to legally accept bitcoin this year, making it a legal tender in which people could pay, and sellers could accept its use.

This was carried out "thanks" to the self-proclaimed "coolestdictator" in the world, NayibBukele. The young ruler ran as a countercurrent and, despite criticism, elevated the cryptocurrency to official status, despite warnings from institutions such as the World Monetary Fund.

Their main argument was remittances since a large part of the Salvadoran economy came directly from the United States. These amounts had to pay commissions in banks and agencies, which the cryptocurrency system reduced to a minimum.

Whether its application was correct or not will be left to the debate of the specialists, but from the beginning, there was a significant opposition to it: burning of bitcoin ATMs, marches, and more. Despite this, it did not stop, and the Central American country has had this system in place for almost three months.

Bukele also became a holder (a term for someone who holds coins waiting for their revaluation) of bitcoins, buying at every market crash. "Buy the dip" was his motto, accumulating millions of dollars on behalf of the government.

With profits from his investment in the cryptocurrency, Bukele has arranged the construction of hospitals with the benefits of bitcoin and has even indicated the realization of a "BitcoinCity" in the country, where there will only be one type of tax. Accompanied by a plan to mine cryptocurrencies with energy from the country's volcanoes, the president is confident that this will be the step that will lead them to be one of the first-world countries in the future.

NFTs and play-to-earn

But if there is one thing we can take away from 2021 in the world of cryptocurrencies, it is the emergence of NFTs and play-to-earn games.

NFTs or non-fungible tokens are not exactly cryptocurrencies, but they are based on the same cryptographic technology that makes them unique in the world. They can be anything, a simple image, a PPT file, or a sound, but with blockchain certification behind them.

This caused thousands of NFTs to hit the market with sky-high speculative prices. Just recall the case in which a pixel (yes, a pixel) was sold for $1.36 million on their um. This case has been repeated throughout the year in what has been described as the largest speculative bubble in recent months.

These digital files went a step further when they became "games" (in quotation marks, because in reality, many of them were played just by clicking on the screen to win money).

Play-to-earn games became a trend among millions of people. Users bought NFTs to enter the market and clicked to complete missions. If they were successful (which depended, for example, on the chances of a number coming up on a virtual die), the "player" received a daily amount of cryptocurrencies, which could be claimed every 15 or 30 days and converted into real money on the market.

The clear winner of this trend was the video game Axie Infinity, which required the purchase of three creatures (Pokémon type) to engage in battles against other players. If you won your matches, you got SLP currency, which was accumulated every 15 days to be released and traded on the market. How much are we talking about? In its most vital months, when the SLP cost 30 cents a unit, buying the creatures cost $1,000, and it was possible to earn $400 biweekly. With the coin's prices oscillating between 3 and 6 cents, the player can earn between 100 and 150 dollars.