Crypto, once viewed a fringe interest, really roared onto the main stage in 2021, gaining legitimacy and interest from all corners of the U.S. The charge was led primarily by the largest and most popular cryptocurrency, bitcoin, as all levels of investors began seeking investment, El Salvador adopted it as legal tender, and the approval of the first bitcoin futures ETFs in the U.S. saw an influx of interest and enthusiasm to the space.
Over the course of the year, bitcoin closed above the $1 trillion market cap marker 121 days out of 365, a far cry from its meager beginnings 12 years ago, reports CoinDesk in their 2021 Annual Review of Crypto. While the popular cryptocurrency only grew 6.7% in the fourth quarter, comparing growth of an $800 billion asset at minimum to the Q4 gains of bitcoin in 2016 when it was a $10 billion asset maximum is a bit like comparing apples to oranges at this point. The sheer size of bitcoin is giving it validity on the global stage.
Image source: CoinDesk
Bitcoin market cap dominance slid in 2021 for the first time, from 70.2% representation in December 2020 to 40.1% representation in December 2021. It’s not for a fault or weakness in bitcoin, however, but instead reflects diversification within the cryptosphere of other digital assets and projects.
Bitcoin has been deemed by high-level SEC officials to not qualify as a security and is one of the only cryptocurrencies to have done so. Bitcoin holds a unique place within the global monetary system, and the projects and tokens that are growing and taking more market cap are not doing so in direct competition with bitcoin. Different tokens and networks are coming to market offering an extremely diverse array of possibilities and use cases, and the shift in market cap dominance reflects this diversification and funding into projects, writes CoinDesk.
The introduction of Lightning Networking, an overlay network on the Bitcoin blockchain that allows instantaneous payments in bitcoin tokens with cheap fees, has helped bring bitcoin back to its roots of a “purely peer-to-peer version of electronic cash,” CoinDesk writes. With El Salvador making bitcoin legal tender last summer, the number of bitcoin tokens that were committed on the Lightning Network grew by 97%, and it currently has a capacity of 3,300 BTC.
Image source: CoinDesk
The dip and recovery of the global hashrate that happened around the time that China shut down all crypto activity has proven the resilience of the network, added greater geographic diversification and therefore risk reduction, and has also improved the emissions to an extent. Most of the miners in China were using older rig setups that relied on coal-driven electricity and therefore had exorbitant carbon footprints. With miners leaving China and setting up in places such as the U.S., there has been a push to use renewable energy sources and improve the overall emissions of the network.
Investing in Bitcoin With Grayscale
For investors who are looking for a way to gain exposure to the largest cryptocurrency globally, Grayscale offers the Grayscale Bitcoin Trust (GBTC). The fund is benchmarked to the CoinDesk Bitcoin Price Index and seeks to reflect the value of bitcoin (BTC) held by the trust with the value of the shares.
The fund allows investors to gain exposure to bitcoin through a secure structure. By gaining exposure in the form of a security, investors don’t have to buy, store, and safekeep bitcoin (BTC) themselves. Bitcoin via the fund is stored in cold storage with Coinbase as the custodian.
GBTC allows investors to have shares that are titled to their name, auditable, easy for financial and tax advisors to account for, and easy to transfer to beneficiaries. The trust is an SEC-reporting company registered pursuant to Section 12(g) of the Securities Exchange Act of 1934.
The fund has an annual fee of 2.0% and currently has $27.2 billion in assets under management.
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