NFT and SNL: crypto keeps pressing into the mainstream

Elon Musk often tweets about it. It was parodied on “Saturday Night Live”. Dubbed “NFT” by Collins Dictionary, an acronym for non-fungible token, it is the word of the year.

Institutional investors looked for ways to enter, and the first bitcoin ETFs began trading. Individual merchants bought crypto on their phones when they weren’t snapping GameStop Corp.

According to the Pew Research Center, approximately 16% of the US population has or has cryptocurrencies. In 2015, Pew found that only 1% of Americans owned or had cryptocurrencies. According to Crypto.com, the number of people holding cryptocurrencies globally has more than doubled this year to nearly 220 million.

Crypto prices remained volatile as ever. The price of bitcoin doubled from January to April. It fell by more than 50% from April to July. A few months later it doubled again, breaking the record of nearly $70,000 in November. It’s trading around $50,000 now, yet it’s valued at around $29,000 at the beginning of the year is about 70% higher.

In percentage terms, bitcoin’s gains actually represent one of its weaker years. In 2020, the digital currency grew by over 300%. In dollar terms, however, 2021 was the biggest year for cryptocurrency to date.

According to CoinMarketCap, the total value of the cryptocurrency has more than tripled at its peak this year, from a low of $1 trillion in January to $2.98 trillion. (Recently that has dropped to about $2.4 trillion.)

Coinbase Global Inc., which operates the second largest crypto exchange, went public in April to much fanfare. It became the most prominent of a crop of publicly traded crypto-focused companies, including Galaxy Digital Holdings Ltd., Marathon Digital Holdings Inc., and Riot Blockchain Inc.

However, Coinbase’s stock has been as volatile as the assets that trade on its exchange. After closing at a November high of $357.39, it closed 25% lower than a record high at $268.15 on Thursday.

Two notable new uses of crypto technology fueled increased interest in crypto.

The first was NFTs, which are digital tokens like bitcoin but differ in that each one is unique. Artist Beeple caught the attention of the art world in March with the sale of a digital image and associated NFTs for $69 million. Artists, musicians, celebrities like Martha Stewart, and companies like PepsiCo Inc created non-fungible tokens.

According to nonfungible.com, NFT sales recently totaled about $14.1 billion last year, up from just $65 million a year ago.

The other popular usage was “decentralized finance,” or DeFi for short. DeFi is essentially a broad, catchy phrase for banking services – primarily lending or lending cryptocurrencies – offered on blockchain-based platforms. The total amount on the DeFi platform, a figure called the total value locked, recently increased from $19 billion at the beginning of the year to $259 billion, according to the DeFi Llama website.

Those two uses have given the Ethereum network a big boost, which acts like an open version of an app platform like Android or iOS. Many DeFi and NFT services operate on top of Ethereum. According to research firm Into the Block, the network processed more than $2 trillion worth of transactions in each quarter of 2021. This is three times the amount in the fourth quarter of 2020.

All this activity has attracted venture capital. VCs, who first invested in bitcoin in 2013, put more money into the sector in 2021 than every other year combined. In the US alone, venture funds invested $7.2 billion in the crypto space in 2021, according to data from Pitchbook. Globally, venture capital invested $29.4 billion.