As far as the evolution of the cryptocurrency world is concerned, 2021 is quite a compelling year: we have seen the rise of many blockchains, challenging the dominance of Ethereum, multi-currency hitting record highs, NFT boom, new A milestone and a step towards the actual mass adoption of cryptocurrencies.
According to the quarterly report released by CoinGecko, the trends that are shaping the future of the market are highlighted.
The following is a quick breakdown of the 7 most important characteristics describing the current state of the industry. To understand its development direction, you need to understand the following trends:
The rise in the market value of cryptocurrencies and the beginning of the altcoin season
In April 2021, the value of the cryptocurrency market exceeded US$2 trillion for the first time. Driven by the rising prices of Ethereum and Bitcoin, this indicator has almost doubled in a short period of time. The prices of both tokens set a record high, and the market value of Bitcoin remained at the $1 trillion mark within a week.
Bitcoin continued to dominate the market, gaining a 65.2% share, but this indicator fell 5.7% from the previous quarter. The current trend is the rise of altcoins, and the market is entering the altcoin season. The main indicator that altcoins dominate the market is the decline in the market value of Bitcoin relative to the total market value of other encrypted assets, leading to a surge in altcoin prices. Therefore, this may be a good opportunity to diversify your altcoin portfolio.
Bitcoin has repeatedly hit new highs
In the first quarter of this year, Bitcoin’s price return rate was 103%, and it has repeatedly set record highs. The main driving forces driving Bitcoin to reach the new milestone are:
- Bitcoin is listed on an exchange-traded fund (ETF), introducing additional investment tools for institutional and retail investors.
- Institutional investors and listed companies entering the market buy Bitcoin as an asset to hedge against inflation (listed companies hold 0.95% of the total supply). Coinbase’s IPO and general acceptance in the crypto market.
- Visa, Mastercard, and PayPal use encrypted currencies and support encrypted payments.
- Increasing inflation.
These factors indicate that the demand for Bitcoin is growing, while the supply of tokens is still limited, only 21 million.
The growth of DeFi market value and the rise of DEX coins
Since the beginning of this year, the market value of DeFi has increased by 382%, reaching a record high of US$95.7 billion. The total value (TVL) locked on the Ethereum and Binance smart chains reached 72 billion U.S. dollars.
DeFi’s continued growth in the first quarter is related to the corresponding growth of other departments within DeFi. During this period, the supply of Ethereum stablecoins almost doubled, the volume of DEX transactions increased by 2.5 times, and the total outstanding loans increased by 3 times.
About 50% of the total market value of DeFi holds DEX native tokens, such as UNI, SUSHI, CAKE. All three tokens experienced substantial growth in the first quarter. For example, on January 1, the price of a cake was about 0.64 US dollars, and at a certain point in time, the price rose to 44.18 US dollars.
The multi-chain future of cryptocurrency
The multi-chain model continues to be popular. Therefore, the project is escaping the rising costs on the Ethereum network, exploring alternatives and new audiences.
- Projects like SushiSwap, Tether, bZx, etc. are entering the Avalanche ecosystem.
- Many companies are preparing to publish on Polkadot.
- Fantom’s ecosystem is growing and welcoming new platforms.
The multi-chain nature of the project is usually regarded as the future of blockchain technology. This is why projects that achieve interoperability and free flow of liquidity within several blockchains will continue to grow and gain more users.
Binance Smart Chain is slowly cannibalizing the Ethereum market
In the first quarter of 2021, Binance Smart Chain (BSC) became the second most active blockchain, with a 61% increase in user base. The blockchain is reaching its peak, which can be illustrated by many indicators:
- The number of active wallets increased by 50% month-on-month.
- The number of daily active wallets reached 105,000.
- BNB, the native token of the network, has become the third largest cryptocurrency by market value and hit a record high of US$690.93.
The BSC ecosystem continues to develop and expand, but dApp developers still pay close attention to DeFi. This provides many opportunities for projects to find their niche-many join the network specifically for this purpose.
Develop Ethereum scaling solutions
Generally speaking, the growing interest in DeFi and encryption technologies highlights the well-known problems that Ethereum has encountered in terms of scalability and network congestion.
Due to strong demand, gas costs have risen by nearly 400%. In response to this problem, Ethereum introduced the layer2 solution. Currently, there are four main expansion solutions: Optimism, Polygon, ZK Rollup and xDAI.
- Projects such as Uniswap and Synthetix chose Optimism.
- Popular NFTs like OpenSea and Decentraland have migrated to Polygon.
- Balancer and Cuve are working on the ZK Rollup solution.
- xDAI attracts smaller projects.
Looking to the future, the project must consider the technical characteristics of the existing layer 2 solutions and services. Many projects may follow Uniswap and Synthetix, keeping in touch with greater liquidity and larger projects.
NFT market is booming
The NFT market has exploded in early 2021. The total market value of the NFT market reached 27.9 billion US dollars, accounting for 10% of the global art market sales.
- The largest proportion of NFT sales comes from collections and artworks such as Cryptopunk, Hashmasks, and Beeple.
- Sports is the second largest category. Some popular projects are NBA Top Shot and Topps MLB.
- Axie Infinity and other NFT games based on Enjin and Ultra platforms account for a large part of the sales.
- Metaverse’s sales account for 8% of NFT’s total sales. Metaworld is another digital reality where people can play, work and buy goods.
People’s interest in the NFT product market will not fade in the short term. Famous musicians, artists and athletes have all joined this craze. In addition, people are selling NFTs for charity and reselling artworks for millions of dollars. The key here is that any project that wants to stand out must have a unique product or solve NFT-related issues.
At the beginning of this year, there were many changes in the market, bringing more users on the chain, and new blockchain use cases. However, most of the problems faced by all users and dApp developers are the same: scalability, interoperability, user experience, token price stability, etc. Considering the number of projects and new names that emerge each month, the company’s breakthrough method is to solve the problems that all market participants are trying to solve.
*Data source CoinGecko