Crypto Crystal Ball: Who Saw It Coming and Who Didn’t Quite Get It Right?
So far, the year 2021 has been a tale of two halves, with the run-up in BTC price until April, followed by stagnation at the price it began the year. However, this data point doesn’t do justice to the underlying activity in the crypto industry — from giant strides in the world of decentralized finance (Defi) to the boom in non-fungible token (NFT) marketplaces. Both these developments are a testament to Ethereum’s robust blockchain technology. One thing I’ve learned from tracking the industry is the numbers seldom give you the entire picture.
To decipher the oracles of the crypto industry, I’d first like to review the defining events of 2021 in chronological order. The events come in three types: landmark, inevitable, and unfortunate. I will opine on the significance of each of these events and look back to see (and verify) if any of the investors, founders, or operators saw it coming.
I wish to make a habit of this fascinating exercise in the years to come. So, let’s dive in!
Inevitable: Tesla adds BTC to Balance sheet (Jan ’21)
Tesla, a public-listed company, added BTC to its balance sheet, as opposed to holding cash. In my opinion, the fear of rising inflation (MMT vs. BTC — as predicted by Balaji S), perpetuated by the Fed’s appetite for printing US dollars, is serving as an eye-opener for many companies and their management to rethink their stores of value. Michael Saylor of MicroStrategy has been an early advocate for this trend. Additionally, Alex Adelman of Lolli and Alexander Leishman of River Financial accurately predicted this inevitable outcome before the start of 2021.
Landmark: $1 Trillion market capitalization for BTC (Feb ’21)
The market capitalization of BTC hit the one trillion-dollar mark in February when the price of a single BTC touched a value of roughly $60,000. A milestone moment for BTC maximalists who feared that the regulatory crackdown would come before this achievement. Such an achievement was due to the institutional participation in the months leading up to the price rise. Qiao Wang of DeFi Alliance, Linda Xie of Scalar Capital, and Jason Lau of OKCoin were the accurate predictors of this prognostication.
Inevitable: PayPal launches Crypto Checkout Services (Mar ’21)
It might seem like a no big deal that PayPal allowed its customers to avail a crypto checkout option. However, there is a deeper trend of adoption here that PayPal has moved early on — adopting cryptocurrencies as a medium of exchange. PayPal is one of the notable players in the financial payments space, and such a move sends out a strong message to its competitors (Stripe, Klarna) of what it sees as the future of transactions. In this regard, Lauren Stephanian of Pantera Capital rightly predicted that large financial technology companies would adopt crypto to increase their offerings and attract customers.
Landmark: Beeple sold an NFT for $69 million (Mar ’21)
In an eye-popping sale, Beeple sold a piece of digital art for $69 million. As reported, “NFTs, or non-fungible tokens, are unique files that live on a blockchain and can verify ownership of a work of digital art.” The creator economy is underway. From the large swath of sweeping changes, Meltem Demirors of Coinshares was on point when she said, “digital art and online creator economies are going to explode, and tokenization is going to turn creative economics upside down.”
Landmark: Coinbase IPO (Apr ’21)
The Coinbase IPO was one of the game-changing events of 2021, offering a sense of legitimacy while simultaneously paving the way for the next generation of crypto founders. The story of Brian Armstrong’s resilience, perseverance, and belief in his idea serves as an inspiration for entrepreneurs worldwide. So, who predicted a pure-play crypto company would make it to the public markets? Joey Krug of Pantera Capital, Su Zhu of Three Arrows Capital, and Larry Cermak of The Block were the early visionaries who foretold this ground-breaking feat.
Inevitable: a16z announces $2.2 B Crypto fund (Jun ’21)
Andreessen Horowitz is one of the most prestigious venture capital firms in the valley, with one of the finest investing records in the private markets. They boast of successes like Instagram, Slack, and GitHub as a testament to their capability to identify trends like social networking, workplace communication, and educational technology before the rest. Therefore, it comes as no surprise that they have announced a $2.2 billion fund to back the next wave of innovations in what they believe is the future — the crypto-enabled economy.
Unfortunate: China crackdown on BTC mining (Jun ’21)
China’s crackdown on BTC mining, along with Tesla’s backpedalling on BTC as a form of payment, was one of the most disappointing events of the year. The primary reason for this crackdown is the lack of surveillance that cryptocurrencies offer compared to their digital yuan counterpart. Additionally, crypto also threatens the economic control that the CCP has exercised over its citizens over time. While some sources cite energy concerns over mining operations for this crackdown, China’s recent stance on the Ant Group and Didi makes its position on power and control very clear.
Landmark: El Salvador recognizes BTC as legal tender (Jun ’21)
Arguably, one of the biggest wins of the year for the crypto industry came when the El Salvadorian president Nayib Bukele announced that the country would accept BTC as a legal tender, making it the first country in the world to do so. I don’t think any of the crypto experts saw this coming last year.
Although the first half of the year has witnessed monumental events, it was not without its fair share of misses. The crypto oracles who predicted a bitcoin ETF, like Matthew Walsh of Castle Island Venture and Joshua Rivera of Blockchain Capital, are far from seeing it come true.
The $100k price for a BTC also seems a fair distance away given the downturn caused by the energy concerns, price volatility, and Chinese crackdown on mining. Joey Krug of Pantera Capital will have to wait longer, possibly longer than 2021, to see that aspiration come true.
Nonetheless, the crypto industry is fast evolving into a black hole for talent and capital for both young builders coming fresh out of college and the more senior folks looking to capitalize on the new economy. The rate might not be apparent to those viewing from the outside, but for the insiders, the words of change written by Hemingway ring true, “Gradually, then suddenly.”