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12.31.21

The best of 2021 and some resolution materials

We’ve come to the end of the year – congratulations! News will return in January but wanted to focus this week on a three-minute summary of (almost) everything that happened in 2021, some of the best reads from the year, and share relevant guides for those who have 'crypto deep dive' on their resolution list for 2022.

🎆 2021 in three-ish minutes:

  • All-time highs, everywhere: Prices grab headlines and pull in users, talent, and capital. They matter, even if they are intellectually less interesting. Bitcoin hit almost $69k, Ethereum hit $4.8k, and crypto’s market cap tripled YTD to almost $3T in November.

  • Web3 rebrand: If you were wondering if venture capital would make its mark on crypto, the great ‘rebrand’ to web3 offered a very tangible answer (as did the $30b+ in capital invested). Crypto is scary, nebulous, technical; web3 is the natural evolution of the world wide web. I use both terms semi-interchangeably and absolutely-unapologetically. FYI, this newsletter will see no such rebrand.

  • The year of NFTs: We will look back on ‘NFTs in 2021’ as the catalyst for the mainstream adoption of crypto and the most tangible evidence of it reaching a critical mass. OpenSea did more volume in August ($3.4b) than the entire NFT space had done cumulatively before 2021, allowing digital art, communities built on profile avatars, and new-age gaming platforms to emerge with full force. Nike acquired an NFT company, Adidas launched its own NFT, Soethby’s sold over $100m in NFTs, and Visa bought a CryptoPunk. And all of that came after someone paid $69m for Beeple’s Everydays: The First 5000 Days.

  • Regulations: Two of the world’s most influential governments are very much engaged. China banned crypto for the nth time, though this one might be for real. With Bitcoin mining banned, the narrative that China controls Bitcoin mining can finally be thrown out the door – the US now holds a 35% ‘market share’ of Bitcoin’s hash rate, up from 4% earlier in 2021. Here in the US, SEC Chairman Gary Gensler has come out swinging, aggressively going after DeFi, crypto lending, and stablecoins. There was also that controversial $1.2t infrastructure bill that tried swiping at the crypto industry, giving the crypto community an opportunity to flex its political muscles for the first time; commence the politicization of crypto.

  • Governments: While some governments were banning crypto, others were embracing it. El Salvador’s President Nayib Bukele introduced a bill to make Bitcoin legal tender in his country. The bill passed, a new wallet was rolled out, and it’s now difficult to argue that Bitcoin doesn’t operate at a nation-state level.

  • Institutions: Crypto sentiment among institutions changed dramatically in 2021. Public companies began accumulating Bitcoin as a reserve asset, large banks that criticized crypto previously are now productizing it, and blue-chip institutions are piling into crypto funds. The SEC approved an ETF for Bitcoin futures, one that became the fastest to $1b in assets (3 days); a Bitcoin Spot ETF seems inevitable.

  • Ethereum challengers: Ethereum held its place as #2 on the charts but rising demand also meant rising gas fees, pushing builders and users to experiment with contenders such as Solana (+11,000% YTD), Avalanche (+3,950%), and Terra’s Luna (+1,530%), among others. These other chains are building their own vibrant communities and ecosystems, though Ethereum still holds a meaningful ‘first-mover’ advantage with meaningful protocol upgrades to come in 2022. Welcome to the multichain world.

  • The ‘metaverse’: Metaverse is the clubhouse favorite to win buzzword of the year. If you thought maintaining your real life was hard, wait until you have to keep up with your digital one, too.

  • DAOs are here and they are everywhere: 2021 marked an inflection year in the popularity of DAOs. The best example is also the most fun: ConstitutionDAO, a DAO put together in a matter of days to bid on a Sotheby’s auction for a rare physical copy of the US Constitution. The DAO lost – the $47m crowdfund wasn’t enough, sadly – but highlighted just how quickly and effectively internet-driven communities can mobilize with a shared vision. The money was returned to contributors.

  • Play to earn: Axie Infinity has grown from 500 users to over 2m in the last year, validating the play-to-earn thesis and becoming a legitimate counter to the common criticism that crypto has no real-world value. Axie’s success has made tangible the intersection of gaming and fintech; the gaming-crypto crossover narrative is just beginning. Packy McCormick has your Axie and P2E primer here.

  • Learn to earn: There are 200-300m people globally who have interacted with crypto. Successfully onboarding and educating new users is the most critical KPI to crypto’s adoption going forward. Enter RabbitHole, a learn-to-earn platform built to onboard the next billion crypto users. If you are new to interacting with crypto, try out RabbitHole – it gamifies learning how to use applications and develop skills for the web3 world.

📖 Twelve great crypto/web3 reads from 2021:

My father was a baker so anything that can be done in 12 should actually be done in 13. A shameless inclusion of a recent piece put together yours truly on how crypto is eating fintech: https: /medium.com/@wallyhansen/crypto-is-eating-fintech-b791a7d15796

👨‍🏫 👩‍🏫 Primers for the 2022 resolution-ers:

[Disclaimer: Any opinions expressed are solely my own and do not express the views or opinions of my employer. Because the information included in this newsletter is based on my personal opinion and experience, it should not be considered professional financial analysis or advice.]

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