Opinion 2021 and the Summer of Crypto

2021 and the Summer of Crypto

July 24, 2021

From a technical perspective, it is easy to label bitcoin as a network that combines decentralized nodes into a dynamic ledger of token creation and token transaction. But, this also comes with a special twist that is related to the outside world. It is not only traded for fiat money but also comprehended inside of a system that combines things like inflation, global regulatory movements, and currency devaluation. Also, unlike a few years ago, bitcoin and crypto, in general, are no longer a playing field fit for only those who are inclined to libertarian notions, tech, and esports or detest government control of currency. Instead, globally famous brands like Tesla Motors, SpaceX, Square, and Microstrategy all own significant amounts of cryptocurrencies in their corporate coffers.

Also, it is important to note that El Salvador is now a country that recognizes BTC tokens as a currency parallel to its official state currency of the US dollar. All of this is a showcase that the role of cryptocurrencies, as well as the space that they inhabit, is changing rapidly. Furthermore, it is essential to understand that it is not only changing, it is also evolving in its ability to inhabit different roles in a range of ecosystems, including those of entire countries. As the summer of 2021 unfolds, many are wondering where the process of this change and evolution will lead to. The future might not be clear, but it is apparent that the impulse behind the crypto sails is only growing stronger, just like the same sails are rapidly expanding on the go.

Abundant Volatility

The bitcoin network got its start over a decade ago, thanks to Satoshi Nakamoto, a mysterious figure who remains an elusive individual (or group) to this day. In the early days of the network, it was a project that was used by a small group of tech-oriented professionals. Most of them wanted to somehow improve the state of the global financial system, which is why they employed BTC tokens for investment and trading, but also as a means of transaction of value. The entire setup was largely ignored by most of the general public until 2012 when the BTC token began to grow in value. In 2013, the price of a single BTC token jumped over 1,000 for a short while, which still managed to bring the first focus on the same venture outside of the IT circles.

Nearly five years after that and the collapse of the price, the same network and its token hit another huge milestone. In 2017, the price of a BTC token reached 20,000 USD. Yet, that moment too was followed by a big drop in value and a number of years of silence, as the traders like to call them. That marked the start of the Crypto Winter, which lasted up until the end of 2020. At that moment, a new bull run began and brought the price of bitcoin to an incredible 65,000 USD. But, like clockwork, once again, the price slumped and got to the present range between 30,000 and 40,000 USD, roughly speaking. So, in many ways, the history of the bitcoin network – along with all other digital currencies – is a history of rampant volatility. Summer of 2021 is a perfect example of this notion, no matter where the price gauge might move in the coming months.

Move Up or Move Down

With other digital currencies, the combined market capitalization of all cryptocurrencies is at around 1.6 trillion, out of which ethereum and bitcoin take the biggest chunk. Yet, the market is very wide and includes everything from very expensive jokes, like dogecoin, to modestly ambitious projects and novel concepts, but also a whole bunch of scams and fraudulent networks that are just waiting for their latest financial victims. That too will remain a constant in the time to come, no matter what kind of developments take place in the overall market cap of the crypto market, or its individual tokens and their prices.

As usual, the eyes and the minds of the public are squarely set on the future movement of the crypto markets, not the present changes or the past developments. Currently, the market cap of the bitcoin network alone sits at around 700 billion USD. That is about 6 percent of the valuation of the entire gold supply on the planet. The same number shows that the bitcoin network already reached a substantial size, all despite a nearly 50 percent cut in price value. This alone is for many the crowning reason why the same network deserves attention and focus from even those who do not otherwise believe in the crypto realm.

Institutional Genie

Another major element has cast a brand new light on the crypto ecosystem this summer, and that is the appearance of wider institutional adoption of these digital currencies. Companies began buying crypto at the start of the year but did not stop even when the prices tanked. Instead, businesses like Microstrategy seem fully behind the notion of crypto becoming much more valuable than it is at the present moment. Their approach dictates a mindset which does not bite with the questions of when it will take place.

For these businesses, the same might occur later in 2021, but also a year or two after that. It might even take longer, but the effect is the same – they are buying crypto and holding most of it. While some might be trader up and down in a manner of regular investor who wants to make a quick profit, many are clearly doing the entire thing with a distant future in mind. The power of that approach is that it not only dedicates a company to the cryptocurrency (or more of them) but that it in turn strengthens the entire crypto ecosystem. That makes it a self-feeding beast.

Summer’s End

The summer of this year will quickly come to a close. It might propel the crypto markets into a new bull run or push them down into bear territory. But, even with the instability and volatility of the future, the fundamentals have changed drastically. All of those changes are in favor of cryptocurrencies firmly stepping into their second decade.