Preference for Bitcoin-based products, like ETFs, crumbled down markedly in 2021. Bitcoin has lost market dominance spaces against other digital assets, but it remains an absolute leader.
A cleanup of non-transcendental cryptocurrency projects, such as those based on memes or some non-fungible tokens (NFTs), would be coming this year.
This idea is what the blockchain analysis firm CryptoCompare maintains in its most recent report entitled: Market Dynamics and Evolving Trends.
Bitcoin is in its fourth halving cycle, a period in which the miners’ rewards get divided in half. During 2016-2020, a lot of speculations arose; it was the case of Initial Coin Offerings (ICO).
It is worth remembering that, at that time, these projects were popular among investors. Disbursements approached at least USD 7.8 billion in 2018, before falling precipitously to USD 371 million, CryptoCompare recalls.
Now, and two years after the fourth Bitcoin halving closes, there is a new mania. These are the projects linked to DeFi, NFT, and meme coins. According to the company, many of these projects will disappear, and only the most popular will stand.
The company also states that, while the most popular of these projects would survive, it is more than likely that many of these, which provide no additional utility to buyers, will end up failing and disappearing, along with other cryptocurrency projects that do not add value to the ecosystem.
NFT and its Lack of Usefulness
In the same narrative, CryptoCompare warns against NFTs. According to the company, many projects would fail in an eventual market crash after challenges with this technology. CryptoCompare also criticizes that money laundering and market manipulations are crimes that proliferate in NFTs. So it is no wonder that collectible tokens are a winner-take-all market.
In the end, they warn that the NFT market is one of the most prone to manipulation and is arguably the riskiest area of cryptocurrencies, even though, during 2021, these tokens flooded all industries. They recommend market participants tread carefully in this space.
Bitcoin It is Still King
On the other hand, the CryptoCompare report presents that bitcoin has lost a lot of dominance in the cryptocurrency market due to the growth of other assets and projects. However, despite the drop, it remains the absolute leader of the Crypto ecosystem.
According to the firm, BTC experienced a significant loss of its dominance in 2021, compared to 2020. In figures, Bitcoin dominated 70.98% during the first year of the COVID-19 pandemic. But, one year later, that dominance crumbled down to 39.79%; a decrease of 44%, approximately.
New projects expanding cryptocurrency use cases led to the decline of bitcoin dominance in a matter of a year. Those projects are related to Ethereum (ETH) and decentralized finance, in addition to other minor cryptocurrencies, such as Solana (SOL), Binance Coin (BNB), and Tether (USDT), whose market dominance grew.
For the company, these new initiatives have taken the shine off Bitcoin, and now the ecosystem has a lot of promising projects that can attract new investment away from Bitcoin.
By: Jenson Nuñez
