Crypto investors earned a whopping $163 billion in 2021 for a nearly 400% increase over 2020’s $32.5 billion gains, according to blockchain data company Chainalysis.
Predictably, most earnings, some 93%, came from Bitcoin and Ethereum, while more gains were made in Ethereum than bitcoin, but only by a few billion dollars, and both hit all-time highs.
Increased demand for Ethereum was possibly driven by DeFi’s rise (decentralized finance fintech) in 2021, as most DeFi protocols are built on the Ethereum blockchain and use Ethereum as their primary currency.
“While there are still risks the industry must work to mitigate, the data not only shows that crypto asset prices are growing, but also indicates that cryptocurrency remains a source of economic opportunity for users in emerging markets,” the Chainanalysis report said.
However, Chainanalysis stressed that the gains numbers are only rough estimates of how much crypto investors made during the year as it is based on analysis of moving funds, not knowledge of individual investor trading performance. The analysis also does not take into account taxes on gains made.
Regionally, the U.S., the UK and Germany are the top three countries in terms of volume of crypto trading, followed by China. For this year, China will fall behind even further due to the country's crackdown on crypto.
Over the past year, China has been relentless, waging an ongoing crackdown on bitcoin mining, culminating in a full ban in September. In January, the Russian central bank announced that it would also seek to ban all cryptocurrency trading and mining, but those plans have been put aside amid the war on Ukraine.
Crypto in the United States accounted for a significant portion of the estimated gains reported by Chainanalysis, accounting for $47 billion of the total gains.
The UK and Germany took the second and third spots, accounting for $8.1 billion and $5.8 billion, respectively.
Despite the restrictions on cryptocurrencies, Chinese investors made $5 billion in gains in the second part of 2021.
Still, based on trends from the first quarter of this year, some experts feel that investors might see lower gains this year.
Bitcoin has dropped to a six-month low, losing nearly a quarter of its value as the selloff of riskier assets spread to cryptocurrencies following regulation concerns in the United States and abroad.
According to CoinMarketCap, the crypto market is currently valued at $1.8 trillion, down more than $1.2 trillion below its all-time high of $3 trillion last November.
Last year, bitcoin and other cryptocurrencies witnessed steady value increases thanks to growing acceptance by Wall Street and some of the world’s biggest and most recognizable institutions and companies.
Since the pandemic started, cryptocurrency has been the fourth most-traded asset, following real estate, stocks, mutual funds and bonds.
Yet, few prominent investors have shied away from cryptocurrencies as they await more regulatory clarity from US agencies.
Last month, Bloomberg cited anonymous sources as saying that the Biden administration is weighing an executive order that could lead to regulations on cryptocurrency.
According to the news agency, the administration is first considering an executive order that would require federal agencies to study the crypto industry and recommend appropriate oversight, which could include “regulation, economic innovation and national security”.