Why 2021 is the year of institutional adoption of cryptocurrencies？
For those who have been exposed to cryptocurrency, they have heard the phrase “the institution is coming,” more or less. Before 2021, institutions that publicly invest in cryptocurrencies were rare, but in 2021, institutions’ interest in cryptocurrencies has increased significantly.
In the hottest news of institutions entering the crypto field, Tesla’s $1.5 billion Bitcoin investment surprised everyone. Another US-listed company, Microstrategy, has accumulated Bitcoin before them and will continue to buy Bitcoin every time it drops. It currently holds up to 3.66 billion U.S. dollars in Bitcoin.
Not only did the company join the crypto game, as we all know, the first country to declare Bitcoin as a valid legal tender was El Salvador. In early December, an encrypted trading platform also sponsored the sports industry through cryptocurrency. At the same time, even U.S. states are considering cooperating with Bitcoin, such as Miami, which is considering distributing Bitcoin proceeds to its residents, and the mayor of a small town in Missouri also expressed the hope that through mining, the town’s residents will be brought family income of $500 or $1,000 every year. Mining is one of the channels through which cryptocurrency is obtained. According to the official introduction, the newly launched Antminer L7 is equivalent to the income of 20AntminerL3+, and its robust hash rate will bring more revenue to everyone.
Bitcoin’s large transaction volume grows five times
Bitcoin has always been the biggest benefactor of most needs. In addition to doubling the price this year and reaching a maximum of nearly 70,000 U.S. dollars, several indicators are showing that not only has the price risen, but the transaction volume in the blockchain has also increased significantly.
The best indicator to show this is a transaction volume of more than $100,000, classified as a significant transaction in IntoTheBlock. The transaction volume of these transactions has increased from the weekly transaction total of $381B in early 2021 to the maximum value of $2.39 this month: This shows how much weight is exchanged on the Bitcoin blockchain alone but does not consider what other blockchains have already seen A lot of traffic. 2021 is a year when intelligent contract platforms such as Ethereum, Solana, or Avalanche have been widely adopted.
Ethereum is in high demand, and the cost of a single transaction is as high as $50
The reality is that institutional needs have been seeking exposure to the benefits provided by decentralized finance (DeFi). The traditional financial rate of return is usually an order of magnitude smaller than the rate of return in DeFi. Ethereum is still the “king” of the innovative contract blockchain. Despite losing market share in the last few months of the year, it still has the lowest liquidity, options, and agreement risks.
An essential indicator of the demand for the Ethereum chain is the transaction fee in USD. The fee paid in U.S. dollars also depends on the price of Ethereum, which helps to gauge this demand because the use of the network requires the purchase of Ethereum.
Considering the total daily payment fees paid in the Ethereum blockchain and dividing it by the number of daily active users, one can conclude that each active address on the Ethereum pays for the use of the blockchain on average every day $413. This amount may be incompatible with many retail customers, suggesting that most institutions may use blockchain.
The number of addresses using USDT has doubled.
Nowadays, any investor involved in cryptocurrency needs to use stable coins at some point. Either by moving funds along the blockchain or by buying and selling cryptocurrencies. It requires stable coins. USDT is still an asset mainly used for cryptocurrency trading pairs conducted on centralized exchanges, and so far, most of the trading volume still occurs there.
Institutions usually transfer funds between these centralized exchanges or use custodial services. Therefore, the number of addresses using USDT has become an important consideration for this activity.
Currently, USDT is the leading stable currency among these centralized exchanges. However, other regular currencies such as DAI or USDC have also seen considerable growth. These cases better reflect the increase in DAI and USDC in the DeFi protocol.
Therefore, as these indicators show, institutions already “exist.” They invest in different cryptocurrencies and use the DeFi protocol. In addition to the recent macro-uncertainty that has caused recent volatility in the cryptocurrency market, the interest of institutional investors continues to rise.