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Cryptocurrencies are becoming increasingly popular. According to Chainanalysis’s research, crypto adoption increased 880 percent in the last year. It must have increased significantly more over the previous two months, with India placed among the fastest-growing crypto markets and crypto users.

It’s difficult to keep up with the rapid pace of digital innovation, which seems to be moving at supersonic speeds. Some of it may appear absurd, such as the joke cryptocurrency tokens. Surely some of it is. However, it is hard to predict the scale of some of these new digital ventures; many individuals in the mid-1990s had also questioned the role the internet would eventually play in the globe.

Numerous governments have made aggressive strides to acknowledge and uplift cryptocurrencies on the regulatory side. Some of these nations comprise Singapore, the EU member states, the UK, Japan, and Canada. These governments have proactively acknowledged and regulated crypto exchanges.

Cryptofication of the globe

Several significant developments in the world of cryptocurrencies unfolded in 2021.

For one thing, new crypto applications such as non-fungible tokens (NFTs) gained traction, with sales of these digital assets establishing record highs at prominent auction houses. Secondly, Bitcoin made inroads towards general acceptability, with large websites like Expedia and Microsoft embracing cryptocurrency as a means of exchange. Finally, in September, El Salvador became the world’s first sovereign to recognize bitcoin as a legal tender.

Additionally, there has been a rise in activity in online communities such as Twitter and Reddit, where even crypto novices exchange information with seasoned investors to gain word-of-mouth advice on price forecasts and trading strategies.

To add, there has been a proliferation of new crypto-exchanges — or trading platforms where fiat currencies may be exchanged for cryptocurrency — and significant investment in the technological infrastructure of existing exchanges. These infrastructural developments have increased cryptocurrency market access and sparked investors’ interest.

The big fishes are swimming into the market

In the previous year, we saw institutional entities like the European Investment Bank (EIB) — The European Union’s lending arm — take a position on cryptocurrency.

In April, the EIB released a 100 million euro Ethereum-based digital bond. Additionally, Goldman Sachs, Banco Santander, and Société Générale participated in the offering. The likes of Microstrategy continue to buy the dip on Bitcoin. Institutional adoption has been identified as a tipping point for mainstream crypto acceptance, and it appears that we are rapidly approaching that threshold.

In totality, the growing availability of merchants accepting cryptocurrencies as a medium of exchange and institutional investment in the field will almost certainly result in the broader adoption of cryptocurrencies as a payment mechanism in 2022.

Decentralized finance (DeFi) is commonly viewed as the next frontier in fintech, following cryptocurrency. DeFi enables the development of decentralized systems that leverage distributed ledger technology to support peer-to-peer lending, generate new financial instruments such as stablecoins, and even implement novel corporate governance models.

On the other hand, tech behemoths are also making their foray into crypto. WhatsApp has introduced a new pilot program that allows a “limited number” of individuals in the United States to send and receive money using cryptocurrencies from within a chat. Novi, Meta’s digital wallet that launched as a trial six weeks ago, powers the functionality, with payments conducted in Pax Dollars (USDP), a stablecoin tied to the US dollar produced by Paxos. The announcement was made by Novi’s new CEO, Stephane Kasriel and WhatsApp’s Will Cathcart.

Another major name that’s been a solid backer of crypto has been former Twitter CEO Jack Dorsey’s Block, formerly known as Square. Following his official departure from Twitter, Jack Dorsey stated that he wanted to return to more entrepreneurial pursuits and focus more on cryptocurrency.

He has since renamed Square to Block, and now Jack Dorsey’s cash app will allow users to send as little as $1 in Bitcoin or shares as presents in the same manner they have been sending cash.

Microsoft is likewise making a gradual push towards cryptocurrency. Microsoft has been granted a patent in the United States for software that it claims may aid users in constructing blockchain applications by supporting the more efficient production of crypto tokens for various distributed ledgers.

Token generation and management can be complicated and time-consuming due to a lack of consistency across blockchains. Microsoft’s patented software consequently specifies a ledger-agnostic way that may aid users in producing tokens and preserving them across different networks.

In July 2021, London-based fintech Wirex used Microsoft Azure to create its bitcoin payment infrastructure. Through Microsoft Azure, Wirex has created 10 connections with currency suppliers, crypto exchanges, and brokers.

Merchant bank Galaxy Digital Holdings has moved its focus to the blockchain and digital currency sectors. In the words of Galaxy Digital’s founder, Michael Novogratz, Bitcoin will be worth $100,000 by the end of 2021.

Just a few months ago, Galaxy Digital Holdings submitted an application to develop a Bitcoin futures ETF with the U.S. Securities and Exchange Commission in a bid to respond to the rising consumer demand in the cryptocurrency industry.

Lastly, Seven Seven Six, the venture capital firm founded by Reddit co-founder Alexis Ohanian, and the popular Polygon Network have launched a $200 million fund to invest in social media and Web 3 initiatives. According to Polygon, the initiative will finance initiatives that investigate new methods for humans to communicate online.

Polygon will supply the infrastructure for the initiatives that the campaign backs. As a layer 2 project based on Ethereum, Polygon intends to alleviate the scalability challenges connected with the main network, enabling it to process a higher volume of data quicker. It has been popular for decentralized applications (dapps), which reached more than 3,000 as of October, while Ethereum struggled from bottlenecks and hefty fees.

These are just some of the notable developments and only a handful of market participants that have been named. As of now, it can be safely concluded that this emerging asset class and the industry around it are drawing a lot of mainstream attention and backing.

Investor Confidence in Cryptocurrencies skyrocket in 2021

2021 has been a tremendous year for cryptocurrencies. The overall market cap of the cryptocurrency hit $3 trillion in 2021, according to research by PitchBook Data.

The growth in market cap came as venture capital funds throughout the world spent nearly $30 billion on cryptocurrency in 2021 (until December 15). This was more than the sum of all the investments that had been made in this technology over the last ten years. The second highest crypto investment was recorded in 2018, with $8 billion invested in the asset class.

The majority of the $30 billion invested in cryptocurrencies in 2021 came from US-based venture capitalists, who raised $7.2 billion of the total. There were a number of significant transactions that helped push crypto investment past the $30-billion mark, including FTX raising $1 billion in funding, Custodian New York Digital Investment Group raising $1 billion in funding, Forte closing a $725-million funding, MoonPay raising $555 million in funding, and Dapper Labs raising $350 million in funding for its NFT platform.

Meanwhile, crypto investments have increased in India as well. While there are no specific estimates, industry analysts say there are 15-20 million crypto investors in the nation with a total crypto holding of roughly Rs 400 billion. India is the 11th most cryptocurrency-adopting country in the world, according to a study by blockchain research platform Chainalysis.

However, there have been rumours that the Indian government intends to outlaw private cryptocurrencies and pass legislation to control digital currency exchange in the country. Some analysts say that crypto investments rocketed up in the wake of the COVID-19 outbreak when traditional assets like currencies, bonds, and stocks were volatile.

Numerous world-renowned corporations have already set the groundwork and are ready to enter the blockchain market if it becomes popular in 2021. Big brands like Amazon, Google and others are being keenly monitored since if and when they create distinctive cryptocurrencies, it’s extremely likely to start a bull run in the market. Meanwhile, users can take advantage of this downtime to brush up on their crypto knowledge and position themselves to gain from the market’s future growth.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.