2021 has been a pretty amazing year for crypto as a whole and while COVID-19 was an unexpected theme for the year 2020, it is still here with us and it looks like it will persist in our daily lives for just a bit longer. While it is fun to look back on a wild year for this ever maturing asset class, it has become somewhat of a year-end tradition for Maven 11 Capital to look forward. This year we will start off with a short review of our predictions last year and how these played out - tomorrow we will release the outlook into the new year with 10 new predictions for 2022.
1. Institutions make a grand entrance into the space
As we can see in the graphic below, the amount of market leaders from various industries that joined crypto space in 2021 is truly astonishing. Whether it’s Tesla purchasing USD 1.5B worth of Bitcoin, VISA buying its first NFT (CryptoPunk), or PayPal launching crypto payments on their platform; crypto created a buzz in the world like never before. To state that our first prediction played out pretty accurately would be an understatement.
2. Decentralized Finance will surpass USD 100B total value locked
When we made our prediction at the end of 2020, the total value locked in DeFi was roughly USD 14B. We thought that a 700% increase in a year may be a bit bold, but it seems that our team has incredible forecasting skills. Maybe we should open a betting division within the fund? At the time of writing, TVL in DeFi sits comfortably at USD 102B while the peak occurred in November with roughly USD 112B deposited to decentralized protocols.
3. Ethereum 2.0 will see over 10 million Ether staked
We were close, very very close but this time we missed the 10 million target by a tiny bit. The ETH 2.0 staking contract currently holds 8,800,450 ETH, a 400% increase since January 1st 2021. While the start of the year was rather slow in terms of new staking addresses (new entities), since May this year we’ve seen a 200% increase in unique depositors, which can possibly be explained by increased trust in the staking contract and Ethereum as a whole. It is also worthwhile to point out that liquidity pools such as Lido have been increasingly popular in recent months, topping out at 1.5 million ETH deposited to their contracts.
4. Regulatory the good and the bad
Regulatory developments were definitely a big theme in 2021. From the expected good, such as the Bitcoin futures ETF approval. To the bad, where DeFi projects got some headwind from the regulatory side and had to geofence US clients from their front ends. Overall our prediction was mostly correct with some of the fears we had also having played out. Unfortunately, regulators sometimes fail to see the nuances of innovative technology and implement rules industry-wide where a more balanced and tailor-made approach might be a better fit…
5. NFT’s will go mainstream
2021 was definitely a year of NFTs. Celebrities, athletes and rappers - they all jumped on the NFT train and never looked back. Some of them used the opportunity to make a quick buck, but NFTs definitely proved themselves as something especially suitable for the current zeitgeist in technology. The number of new artists in the NFT space skyrocketed last year, with March 2021 having been especially great for the sector that saw more than 10k new artists onboarded to the space. OpenSea’s monthly sales were truly extraordinary in the second half of the year, during which the platform generated more than USD 10B in sales.
6. Payment use-case to thrive
This is one of the predictions that didn’t play out at all like we predicted. Libra/Movi was never launched and it does not seem clear whether we will see any type of launch in the near future. We definitely saw sustained stablecoin growth, but those stablecoins haven’t found their utility yet on the payment side of things. PayPal did adopt cryptocurrencies, but we have yet to see a lot of growth numbers on merchant payments from that type of activity. Our one correct prediction was the continued development of CBDCs, although admittedly these are moving somewhat slower than expected.
7. The venture model transforms
This prediction was spot on. Over the past year, we have seen the venture market become increasingly competitive. This had led to venture capital funds needing to offer more than just capital. A watershed moment in this trend was the Sushiswap proposal for their treasury diversification. Additionally we have seen new ways of funding popping up. Investment DAOs such as theLAO and Metacartel Ventures have gained significant traction, while multiple DAOs (e.g. OlympusDAO) have started their own venture arms that either function through direct investments or grant programs, and we’ve especially seen “angel investors only” fundraises have started to gain popularity. It’s safe to say the venture model has radically transformed, and we expect that it will continue to do so.
8. Banks will offer crypto custody and trading
Many large banks, such as Citigroup, JPMorgan, and Wells Fargo started offering crypto trading and exposure to wealth-management level clients, and Morgan Stanley restarted their crypto trading desk. However, we must admit that retail banking has not fully embraced crypto trading and investment exposure for retail clientele yet; the approval and anticipated launch of the first (futures-based) Bitcoin ETFs did allow retail users to get this type of exposure. While crypto didn’t fully make its way into retail banking, those same banks did make their way into DeFi, with Société Générale applying for a USD 20M MakerDAO loan in exchange for on-chain bond tokens issued by the French bank and the Swiss SEBA Bank looking to onboard onto Aave’s institutional platform Arc to allow their clientele to access those DeFi services.
9. The first Decacorn decentralized application will arise
One year ago, we were confident that the first Decacorn would arise in the DeFi space. After several Unicorns had been discovered in the DeFi space during 2020, we were confident that 2021 would bring us the first Decacorn. We were right sooner than we thought, as Uniswap crossed the magical barrier of USD 10B in March 2021 and peaked at almost USD 23B in May. Since then, DeFi as a whole has underperformed the wider market, but we remain optimistic on DeFi and specifically DeFi 2.0 as you might read from our predictions for 2022.
10. Smart contracts will get hacked and exploited
Even though we would like to be wrong on this prediction, it was spot on as smart contracts continued to get hacked and exploited at the largest scale ever. Some nuance is in order though. The biggest exploit this year was for around USD 600M, although the exact amount is somewhat contested as some capital lost in the hack has been retrieved. However, it wasn’t on a DeFi project like predicted. It was actually on a cross-chain interoperability protocol called Poly Bridge. This seems to be a space where exploits will happen more and more often, as innovative technologies are implemented.