Cryptocurrency - “Concorde” of 2021
2021, another disastrous 12-month span for the global economy as a whole, has been a tumultuous year for cryptocurrency, with major currencies going into free fall, then reaching their all-time highs, along with our dramatic introduction to the wonderful world of Non-Fungible Tokens.
Riding the coattails of a record-breaking late-2020 upturn, the young and unstable crypto market was widely predicted to stagnate heading into January. Come May, the predictions seemed to be true, as rates of Bitcoin and Ethereum, to name a few, cascaded to lows of that of the year before. The gyrations were the shock waves of some unfavourable politically induced restrictions to major Chinese investors, rattling investors on the other side of the globe. Nonetheless, as time went by, the aforementioned currencies recovered, both reaching their peaks during the November 8th trading sessions. Overall, the aggregate value of all cryptocurrencies has more than tripled in 2021, attributing to a successful year for the crypto faithful.
One of the more peculiar stories of 2021, it seemed, was the debacle surrounding the recently crowned richest man in the world, Elon Musk, and Dogecoin, the seemingly satirical currency. On the May 9th edition of Saturday Night Live, the mega-billionaire delivered a sketch in which he blasted the cryptocurrency for its many flaws and intricacies. Soon after, Dogecoin’s prices plunged from $0.64 to $0.49 in a matter of hours, wiping out nearly $20 billion of its total market value. Then, out of the blue, Musk announced on December 14th that “Tesla will make some merch buyable with Doge & see how it goes”, in stark contrast to his previous remarks. Has the former Tesla CEO truly been won over by the so-called “meme coin”? “Much wow,” as the famous Shiba Inu caricature might say.
There wouldn’t be 2021 without mentioning the emergence of Non-Fungible Tokens, more commonly referred to as NFTs. For starters, they are a way to extend "ownership" for digital entities like one would do for their physical counterparts. “Non-fungible” items, namely artworks and photographs, are now being traded using blockchain technology, making for digitally unique, non-replicable, and collectible items available for purchase. The lovechild of social media, modern pop culture, and cryptocurrency, NFTs have become the most sought-after commodities in 2021. A $7 billion industry, NFTs have caught the attention of everyone who is anyone from progressive lawmakers raising campaign funds to basketball superstars like Stephen Curry, who launched his new line of tradable NFTs commemorating his breaking of the National Basketball Association’s all-time three-point record.
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However, as with any form of crypto trading, there lies an array of reasons why an inexperienced trader should stay clear of NFTs. First and foremost, as of date, most of the non-fungible parts of NFTs are essentially receipts, acting as a roadmap leading to art hosted elsewhere. Because of this, it is entirely possible for the art piece to dissipate in real life. This is when the NFT becomes functionally useless. Furthermore, NFTs are generated based on their unique token ID; a given piece of art is tied to the identifications within the system. Yet, most NFTs are horrendously laughable soulless pieces of “arts” generated by automated algorithms. Mauro Martino, founder, and director of the Visual Artificial Intelligence Lab at IBM Research, questions this, mentioning how 99 percent of NFTs are worth below $1500. “75% are sold at less than $15, even lower”. This must not come as a surprise. At its core, NFTs are driven by hype, of socialites scrambling to follow the trends, and of inexperienced opportunists trying to make a quick buck. Therefore, as with every other form of cryptocurrency, it is essential that we deeply evaluate the situation before delving ourselves into this ever-booming field as it starts to become more stable.
If there’s one thing this year has taught us, the cryptocurrency market is truly here to stay. What’s to come in 2022? Only time will tell.