Don't blame me, but I couldn't resist the temptation of closing out 2021 with a list of crypto's 2021 greatest hits. While I came up with a bunch, I had to narrow it to three.
Greatest Hit #1: Jaw-dropping Research
There's no doubt about it: One of the greatest crypto hits of 2021 had to be the two bombshell research reports from mainstream financial powerhouses.
The first from consultancy behemoth Deloitte surveyed executives from around the world and found that blockchain would fundamentally change the way they conducted their businesses. And this seismic shift wasn't happening 10 or 20 years down the road. Nope, these corporate heads saw the shift happening in the next 24 months.
And that wasn't all. A staggering 81% of the executives thought that blockchain was both scalable and adoptable. And that means that getting their businesses in the blockchain game was not only doable, but it could grow with their businesses. In fact, three quarters said they didn't have much of a choice: If they didn't get in the blockchain game, they were going to lose competitive advantage.
"Blockchain is driving change in the holistic financial ecosystem, from deposit-taking to payments, lending, investing, and trading anything of value. The very nature of financial instruments, from money to stocks, and the infrastructure for any type of transactions is changing – for the better."
And most eye-opening: A whopping 80% of executives thought that digital assets would replace fiat currency within the next 10 years.
The second bombshell report came from finance giant Bank of America. And this report doesn't pull any punches either. They say simply that the "digital universe is too large to ignore." And while that's nothing new to blockchain enthusiasts, for a big Wall Street and Main Street bank to admit that is big news indeed.
And while the report acknowledges the dominance of Bitcoin, it says that the real sweet spot is in the transformative power of smart contract platforms like Ethereum:
"In the near future, you may use blockchain technology to unlock your phone; buy a stock, house, or fraction of a Ferrari; receive a dividend; borrow, loan, or save money; or even pay for gas or pizza."
The report also says that one of the biggest risks is the regulatory outlook. But that risk, if managed properly, may prove to be a positive for the space. And that's because investors will see blockchain and crypto less as the Wild West and more like a traditional marketplace.
Greatest Hit #2: Crypto Regulation is Coming
And that brings us to our second greatest crypto hit of 2021: Regulation.
For people around blockchain, its decentralized and lack-of-central-authority features were two of its most appealing aspects. Plus, its capability to bring a democratization to the global financial playing field was a huge deal.
But the fact is it was only a matter of time before some type of regulation hit the space. The question was how much and how hard.
The good news is that U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler and Federal Reserve Chairman Jerome Powell have both said that they were not going to ban cryptocurrencies. And if you read between the lines, it looks to me like we're likely to see crypto rules coming down the road.
But before rules can be made, regulators will have to decide how crypto will be viewed as an asset: It is a commodity, currency, security? Then they will have to decide whose turf crypto belongs to: The SEC, CFTC, Fed? And finally, those rules would have to design a clear path for tax treatment and reporting. In fact, if they can just clearly answer these questions, we would make big progress.
Is crypto regulation a good thing? For the most part, yes. It will give clear direction to crypto and blockchain participants about what can and can't be done. And that makes the space more appealing for the average investor.
Greatest Hit #3: The First Bitcoin ETF
Last but certainly not least on my list of the greatest crypto hits of 2021 is the first Bitcoin ETF, the ProShares Bitcoin Strategy ETF (BITO). When it launched in late October, it hit $1 billion in assets under management (AUM) in record time: Just two days.
As I said in November, BITO is like other ETFs that don't invest directly in the underlying asset. Rather, BITO invests in futures contracts on the asset. They don't take delivery of Bitcoin but will settle the contracts in cash.
While there are investors that are looking for a Bitcoin ETF that invests in the underlying, fact is this futures-based variant is the only way that regulators were going to sign-off on the first Bitcoin ETF. So, to me, it was the only way to go.
One of the issues is that BITO's managers will buy BTC contracts to try to mimic the rise and fall in BTC itself. But it won't be exact. So, unlike the S&P 500 SPDRs, for example, it's difficult for most investors to sync the price of BITO with the price of BTC.
That said, there's no way around the fact that BITO is a huge bullish signal. Plus, it opens up crypto investing to a massive marketplace that, otherwise, may not have taken the plunge into crypto.
But if you're going to take the plunge with BITO, keep your total crypto investment, including BITO, to just 1% to 2% of your portfolio.
This is my last installment in the INO.com Trader’s Blog for 2021. And I wanted to take a moment to wish you and yours the happiest and most joyous holiday season. I hope you get as much out of reading these installments as I do writing them. And don't worry: I have a ton more to talk about in the blockchain and crypto space in 2022. I can't wait to get started!
Disclosure: This contributor may own cryptocurrencies mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.