Crypto Market Report 2021 - Coin98 Insights

10/01/22
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To help you get a rounded overview of what happened in 2021, as well as make predictions for the market in 2022 and prepare for what is coming to find opportunities.

2021 has been a memorable year for all crypto investors with lessons or profits earned.

To help you get a rounded overview of what happened in 2021, as well as make predictions for the market in 2022 and prepare for what is coming to find opportunities, it’s our pleasure to bring you the market report - Coin98 Insights report for 2021.

Hopefully this report will support you in wrapping up 2021, and be well-prepared for 2022.

To read the full report: https://c98.link/Coin98Insights-CryptoMarketReport2021v1

Highlights in 2021

In 2021, there have been many events happening regarding the general growth and mass adoption of crypto: from the adoption of Bitcoin ETF trading, the implementation of EIP-1559, to the participation of big companies, organizations, or countries in the crypto market by accepting the use of BTC, ETH,...

Here are a few notable growth numbers of the crypto market over the past year:

  • Number of projects on the market (according to Coingecko): Increased by 200% compared to 2020, reaching 11,000 projects;
  • The TVL of the market increased more than 400 times: From 600 million USD to 230 billion USD;
  • The amount of stablecoins increased nearly 4 times;
  • DeFi users increased by 460 times compared to the end of 2020;
  • The blockchain layer-1 coins of major ecosystems have grown rapidly, as the ROI of FTM, LUNA, MATIC, SOL are about 20, 16, 15, 14 thousand percent, respectively;
  • The capitalization of the entire market increased strongly: A growth of more than 380% from the beginning of 2021 to the end of the year, from $600 billion to $ 2,000 billion of the entire market.

The BTC dominance decreased significantly, proving that the cash flow into the market is not only to invest in BTC but also to invest in many other developed niches in the market. Stablecoins supply in the market increased sharply with the rise of many new stablecoins, ecosystems, application niches in the market in turn grew and attracted the attention of investors.

Large companies and organizations have also been gradually accepting to hoard and use BTC as an asset to hedge and divide risks for their portfolio. Microstrategy, Tesla, the Ukrainian government, or Grayscale,... were among the biggest names in the group of institutional buyers of BTC in the past year.

Venture Capitals in 2021

The heat of the crowdfunding market in the crypto market last year was enormous. More than 1,300 projects were invested in by large to small funds in 2021. More than 30 billion dollars was invested in projects - 4 times larger than in 2018. Towards the end of 2021, more projects were invested in with larger investment amount, promising a booming 2022 in the capital raising market.

Among the invested projects, up to half of the projects were invested in from the seed round, while most of the invested seed round was in November (when the number of projects receiving seed round investment accounts for 80% of deals in the whole market), proving that investors still mainly invest in new projects rather than projects that have been operating for a long time.

The closer to the end of the year, the more exciting the fundraising market was with many announced deals. The peak was in November, as nearly 5 billion USD of capital was announced in the market - nearly 10 times higher than the lowest month of February.

That was also the month with the most deals - 139 deals, just higher than that number of May by 7 deals, but the amount of capital raised was more than double. This proves that towards the end of the year, projects were invested in more in terms of investment amount.

The market-leading investment funds in the past year increased their investment in both the number of projects and the amount of investment.

Among the leading large funds in the market, a16z invested in the most projects with 56 deals, Polychain Capital invested in 55 projects, while Spartan and Parafi invested in 52 and 50 projects - that's about 4 projects every month in 2021.

Towards the end of the year, the capital raising market was more active, signaling an even more exciting year for investment funds in 2022.

DeFi in 2021

2021 was an explosive year for DeFi. The TVL on ecosystems increased sharply, the TVL increase happened not only in one ecosystem but in many different ecosystems. 5 ecosystems had their TVL greater than 10 billion USD, 16 ecosystems had their TVL greater than 1 billion USD.

Ecosystems with strong growth in TVL also had extremely strong growth in terms of price of blockchain layer-1 tokens - SOL, LUNA, AVAX, MATIC, BNB,...

To find investment opportunities in DeFi across ecosystems, perhaps finding opportunities in big platforms on which DeFi is still underdeveloped is a good choice for investors. To seek these ecosystems, the ratio of Marketcap/TVL is an important indicator.

By the end of 2021, this index on Near was the highest, proving that DeFi on Near is the least developed compared to Near's marketcap, the potential of DeFi on Near is under-discovered in comparison to other blockchains. Thorchain is the second on the list, followed by BSC, Harmony, and Solana.

Despite the strong growth in the first half of 2021, DeFi 1.0 showed a lot of weaknesses in terms of liquidity inefficiency, lack of scalability, high vulnerability, and centralization of projects. Therefore, DeFi 2.0 was born to solve the above problems, bringing many innovative and breakthrough new solutions.

To address scalability, DeFi applications have been expanding to various Layer 1 and 2 solutions. To solve the problem of unsustainable liquidity through farming, projects about owning liquidity were born.

To solve the problem of centralization of projects, DAOs have improved and upgraded their operation process to be more transparent to the community. In order for TVL to be used more effectively, many solutions such as LP management solutions or mortgage unlocking were born.

In the niches that address the liquidity inefficiency in the market, there have been many projects with different solutions: unlocking collaterals, Protocol-Owned-Liquidity, efficient LP management,... Towards the end of 2021, the DeFi market saw more innovation, not just expanding existing ideas horizontally onto different chains - a very good sign for the market.

Each problem has different solutions, and within those solutions, new problems are always born. Therefore, DeFi 2.0 is not the destination of DeFi, but just a stepping stone for DeFi to continue to develop and grow in the coming year. Therefore, it is extremely important for investors to understand the market problems and find projects that solve those problems early.

Among the niches of DeFi 2.0 below, which one do you think will grow strongly in 2022? What problems with DeFi that are yet to be discovered by the market? Please comment below to share and discuss with us!

NFT and Gaming in 2021

2021 witnessed a strong explosion of NFT and GameFi projects across multiple platforms.

After the boom of Axie Infinity in May 2021, games began to grow rapidly, more game projects were created, and funds were also devoted to games. Game projects have had an extremely hot growth season with the top projects having the ATH ROI of up to 45,000 percent.

The growth of the game market also brought to the market a new sector - gaming guilds. Starting with the success of Yield Guild Game, a lot of guilds were created with the purpose of connecting people who own NFTs but don't play games with people who want to play games without owning NFTs.

Because of their clear cash flow and rapid growth, these guilds quickly reached the valuation of billions of dollars, but the existing guilds still have many problems to solve in the near future, such as the lack of quality games to create scholarships or the difficulty of managing scholarships. By solving these issues, gaming guilds are likely to see strong growth in 2022.

However, NFT/Gaming projects still face many problems. The current games on blockchain are still in the early stages, there are not many high quality games, and all of them need more time to develop in the near future in terms of both gameplay and infrastructure to meet the demand of players.

Not only games, but NFT collectibles also grew rapidly. The explosion in NFT volume on Opensea during the third and fourth quarters of 2021 is proof of this growth. In a short period, NFT sets are continuously released on many different platforms and have no use case (only collectible value).

This is one of the biggest problems with NFT sets in recent times. To solve this problem, projects that create NFTs need to have unique usability for the NFTs, rather than just an online photo for collection.

Metaverse has also been one of the hottest sectors that received a lot of attention from both crypto investors and the worldwide community. Metaverse is a virtual world that allows people to have the freedom to do what they want with the provided infrastructure.

However, currently, Metaverse is only in the early stages of development, no application has reached the level of Metaverse, and we - as the investors and builders in the space - need to continue to closely watch in the coming year.

DAO in 2021

The communities behind the projects all developed as well as the projects’ revenue in 2021. DAOs in the past year have witnessed strong growth in both the quantity and quality, the number of assets managed by DAOs, as well as the infrastructure applications that support DAOs to operate.

Perhaps the highlight of the DAO business over the past year has been the creation of the Constitution DAO - a DAO set up to jointly auction one of the 13 copies of the US Constitution. Although the auction was not successful, it is also a big step forward in the DAO field, as a community with the same goal can create a DAO together to help accomplish that purpose.

DAOs also have various departments with many different tasks, and all serve the purpose of the whole DAO. If you want to work in the crypto market, then finding opportunities in DAOs in 2022 is a great opportunity and cannot be ignored.

However, current DAOs still face many problems in terms of legal regulation, operation, infrastructure, and smart contract risks. In the next year, DAOs will need to continue to improve the above issues to grow.

For DAOs to continue to grow in the coming year, these issues need to be addressed. Although this is one of the areas where it is difficult to find investment opportunities, understanding how DAOs operate will help you have a more comprehensive view of the market to look for investment opportunities in the future.

Trends in 2021

In 2021, the trends continuously overlapped: from the IDO trend in early 2021, to the memecoin trend, then to the explosion of gaming applications, metaverse-oriented applications, and finally to the strong development of DeFi 2.0, as well as the airdrop trend that lasts throughout the year.

Trends pull money moving quickly between different ecosystems and categories, bringing high ROI for investors who see trends early.

The airdrop and retroactive trend is the longest trend, taking place in the whole year of 2021 and most strongly at the end of the year, with many projects having launched huge airdrops for project users. The largest airdrop in the entire market is the airdrop of dYdX, then the Ethereum Name Service and ParaSwap, with the largest total airdrop value of nearly $2 billion.

However, towards the end of the year, the conditions to win the airdrop became more and more difficult, because of the high rate of speculators who suspect the airdrop. In addition, the projects also used the airdrop as a method to advertise their project, as well as attract customers of other applications to their applications.

The retroactive game has changed its rules, what do you think about this game next year?

What trends do you think will be the next trends in 2022? What trends will lead the market this new year?

The growth of blockchain layer-1 and layer-2 solutions in 2021

The strong growth and adoption of the market make it impossible for Ethereum to meet the scalability that the market requires. New layer 1 and layer 2 solutions have received great attention and popularity from the community in 2021.

Layer 1 blockchains alternately grow: from BSC to Solana, Avalanche, Terra, Polygon, and many other blockchains,...

Layer 2 solutions are no less competitive, led by Optimistic Rollup solutions such as Arbitrum, Optimism, and Boba Network.

The ecosystem stimulus packages of blockchains effectively supported the strong growth of Layer 1 solutions in 2021. More than 13 stimulus packages have been launched into the market in the past year with a total value of about $9.6 billion, with the value of stimulus packages ranging from $100 million to $5 billion.

The biggest stimulus was Hedera Hashgraph's $5 billion package in mid-September, followed by BSC's $1 billion and Near's $800 million. September was the month with the most incentive packages announced, with six stimulus packages totaling more than $6 billion.

In 2022, layer 2 on Ethereum will receive a lot of market attention, with the already existing interest of the crypto community in Optimistic Rollups solutions like Arbitrum, Optimism, or Boba Network, as well as the community's expectations for ZK-Rollups solutions.

Optimistic Rollup solutions have had an explosive year of growth, with a rapidly expanding ecosystem as well as the amount of TVL on the platform.

There is no reason to stop these solutions from continuing to grow in 2022, as the interest of the market in these solutions grew towards the end of the year, and there is much expectation that Arbitrum and Optimistic Ethereum will launch their own tokens in the next year.

The battle between layers 1 and 2, or even the battle between Optimistic and ZK solutions will still be fierce because each solution has its own advantages and disadvantages.

Conclusion

2021 was a year of strong growth for the crypto market - an exciting year with many developments, many trends, many new blockchains, and the money flow among them. It’s Coin98’s honor to be here with you in the crypto market, to witness the market's upcoming glorious moments in 2022 - this new promising year.

To read the full report: https://c98.link/Coin98Insights-CryptoMarketReport2021v1

For more 2021 Report of other Ecosystems, do not miss The 2021 Year In Review Report Series

If you want to discuss more Terra or the whole crypto in general, you can join the Coin98 Community through these channels:

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