The Big Picture
- Bullish momentum continues to rule the market sentiment throughout the first quarter of 2021. The total market cap soars 144% from $787B to $1,919B in Q1, 2021, according to Coingecko.
- Institutional sector participation in the market marks all-time-high (ATH) with several public firms and investment funds that either announce Bitcoin investments or launch cryptocurrency products.
- Network effect has passed onto institutional investors on Bitcoin in 2021 with a large wave of adoption (Figure 1). Joining forces with Grayscale, Square and MicroStrategy, Tesla did not only add Bitcoin into its balance sheet but also allowed its users to purchase Tesla cars by Bitcoin. The institutional adoption continues to spread like wildfire, in the context of highly-concerned global economic status post-Covid-19.
Figure 1: Bitcoin Mass Adoption in QI/2021
- Grayscale, for the first time in the past 3 years, has added 5 new tokens into its investment product lines, providing indirect access to crypto for accredited US investors and institutions (Figure 2). The latest batch includes Basic Attention Token, Chainlink, Decentraland, Filecoin and Livepeer. In the meantime, the largest institutional Bitcoin-hodler also expands its current portfolio of existing crypto assets, accumulating a higher stake of those coins’ total supply.
Figure 2: Grayscale holding over coins’ supply
Figure 3: Bitcoin Price Returns in Q1 & Q2
The Summer Time
- Figure 3 depicts that Quarter 1 2021 has seen the best return since 2017. The market size is double with bullish sentiment carried over from the second half of last year.
- Quarter 2 has been a pivotal period of the crypto cycle ever since 2017. Either carrying on the previous bullish momentum or cooling down the bear, crypto summer brings a fresh vibe for new trends. Q2 2017 was the start of the peak half a year later. Q2 2018 marked the market’s second rebound before the crypto winter. Q2 2019 was the best performed season for that year. Q2 2020 witnessed a great recovery from Black Thursday. Forecasting Q2 2021 from a limited dataset would not be a piece of wise advice, yet a green quarter can be the modest expectation.
The Trillion-Cap Assets Universe
- Bitcoin market capitalization has surpassed the 1 trillion USD mark for the first time ever in the last quarter. The next milestone for Bitcoin is Silver before achieving its ultimate goal, e-Gold (Figure 4).
- Needless to say, Bitcoin was the best-performer among the trillion cap asset universe in the first quarter of 2021. The cryptocurrency skyrocketed 102%, with the market cap finishing the first bullish round at 1.1 trillion USD.
Figure 4: Bitcoin among other trillion cap assets
- The second-largest cryptocurrency, Ethereum is on the right track for its potent network upgrade, the eth2.0 staking event. At the end of Q1 2021, the total staked Ether reached 3,611,147 ETH, equivalent to $6.7B or 3.13% of the total circulating supply.
- Polkadot has risen as one of the most competent Ethereum challengers. Figure 5 depicts how the ecosystem’s public awareness has grown. The Google search trend for “Polkadot” keyword peaked twice in the first three months of 2021. Correspondingly, DOT price reached ATH in late February.
Figure 5: Polkadot Price vs. Google Search
- The Polkadot ecosystem has expanded rapidly in many aspects. More and more wallets now support Polkadot with respect to the rising demand from the users, which also explains why the quantity of multi-chain wallets already outnumbered that of Polkadot-only wallets in the ecosystem (Figure 6). That is not to mention the fact that the project is still under development for its fully functional mainnet.
Figure 6: Polkadot-supported wallets
Binance Smart Chain
- The next candidate for an Ethereum-challenger title is Binance Smart Chain (BSC). Daily transactions of BSC have surpassed Ethereum for the first time in Quarter 1, 2021 (Figure 7). Since then, it continued to perform well and ended up almost 3x over Ethereum on the metric.
Figure 7: Daily transaction on Ethereum and Binance Smart Chain
- BSC’s flagship, PancakeSwap, also surpassed Uniswap, SushiSwap, and Curve to be ranked as the top 1 Decentralized Exchange (DEX) by 24h volume. All of these achievements have contributed largely to upward demand pressure on the price of BNB, the utility token of the BSC ecosystem. As the result, BNB marketcap has passed Tether and Cardano to be the top 3 biggest altcoins, following Bitcoin and Ethereum, for the first time since the inception.
- Following the trend of 2020, DeFi is still on fire. The Total Value Locked (TVL) in DeFi platforms has almost tripled since the beginning of the year, reaching nearly 65 billion dollars in both Ethereum and BSC. The pie is still growing; no one seems to be eating each other’s piece, just yet.
Figure 8: TVL on Ethereum and Binance Smart Chain
- As Figure 8 demonstrates, Ethereum is still the dominant player when it captures $51.5 billion in total economic value, quadrupling that of BSC at the end of March. Meanwhile, BSC has risen as an ideal protocol for DeFi projects, proved by its escalating TVL from just a few million to now $13 billion, and that seems to be just a start.
- According to the leading explorer DappRadar, there are 4764 Dapps in the crypto space, 46,5% of which are running on top of Ethereum, while BSC is a home for 276 dApps or 5,8% of the pool. However, BSC looks more ‘DeFi-focused’. Out of 503 DeFi projects, 33,2% is based on Ethereum while 41,4% uses BSC. In summary, despite Ethereum’s adoption being more impressive, BSC is still a redoubtable challenger in the DeFi corner.
- Without DEX, the DeFi greenfield would never have taken the spotlight for 2020. Thus, the year of 2021 is undoubtedly the right time for DEX to mature and possibly become mainstream. With optimized usability, deeper liquidity, and emerging composability, the DEX ecosystem is as strong as ever.
Figure 9: Monthly DEX volume (source: Dune Analytics)
- Figure 9 points out that DEXs have already processed more transaction value in Q1 2021 than all previous periods combined. Notably, the volume hit ATH of nearly $77B in February, carrying on the exponential growth momentum. In the Ethereum-powered DEX sector, Uniswap represents more than double Sushi’s volume, gaining around 50% of the market share (Figure 10).
Figure 10: Top DEX volume in Q1 2021 (source: Dune Analytics)
- February also marks the highest-ever level of monthly revenue for Ethereum miners, roughly half of which has come in the form of transaction fees. The revenue numbers reflect the price of ETH, which exceeded the $2000 mark briefly this month. Data collected in Figure 11 shows that, for the first time, Ethereum miners have brought in more than $1 billion in revenue for the month of February.
Figure 11: Ethereum miner revenue in Q1 2021
- Despite its burgeon, the DeFi ecosystem is in somewhat of a bottleneck crisis, as more and more projects are developed and launched on the Ethereum network with growing transactions’ volume, causing gas fees to skyrocket. The good news is that a group of layer-two (L2) scaling solutions has already bloomed around Ethereum. They are offering variable avenues to scale Ethereum for the mass. A variety of L2 models is displayed in Figure 12.
Figure 12: Ethereum scaling solution model
- Layer-2 protocols are perhaps the greatest hope for Ethereum devotees at the moment. In short, layer-2 chains operate on top of the Ethereum mainchain but function in a much more efficient way with drastically reduced transaction fees and a few-second transaction speed. One such Layer 2 technology is rollups, which take much of the burden of computation and storage out of the blockchain, utilizing it just for its security sake.
- Figure 13 mapped out many projects inheriting L2 technology in which the cutting-edge ZK-Rollup technology is well-positioned to be a leader. Overall, as long as Ethereum block space is expensive, scaling solution demand is still high.
Figure 13: Ethereum scaling solution map
- Well-known since 2017 with the CryptoKitties phenomenon, NFT segment silently exists alongside other crypto major trends for years. Covid19 seems to be a catalyst for NFT frenzy in Q1 2021. From art, trading cards to music and other collectibles, things are now on a digitizing trend when offline exhibitions, concerts or auctions have found it hard to cope with social distancing situations.
Figure 14: Crypto art market share in Q1 2021
- Figure 14 shows how well Nifty Gateway is dominating the marketplace for the crypto art segment. Following up are SuperRare and Foundation.
- Meanwhile from the NFT sales from projects’ point of view, we have the major names including NBA Top Shot by Dapper Labs, CryptoPunks, Hashmasks, etc. (figure 15) The all-time sales boom matched with their impressive market cap growth up to 1800% in Q1 2021. The rise of these projects aligns closely with how well the relevant traditional market is transforming into digital. NBA Top Shot is an example. Partnership with NBA and NBA Players’ Association was a crucial milestone in the sport NFT field and blockchain industry as a whole. One successful case will lure a gigantic wave of adoption because nothing can bring people together better than sport.
Figure 15: NFT collectibles market share in QI/2021
We hope you enjoyed a little journey back to the first start of 2021. A road is still long and time is all we’ve got. In an unpredictable world like crypto, nothing is certain. Trade responsibly, and we look forward to another lookback in the next quarters!