NFT Craze And Institutional Participation Fuels The Crypto World

The cryptocurrency rally continued in Q1 2021 fueled by the craze surrounding non-fungible token (NFT) and rising participation from institutional investors, according to CoinGecko’s latest crypto report.

The CoinGecko Q1 2021 Quarterly Cryptocurrency Report, released earlier this month, looks at the state of the crypto industry, outlining the major developments and trends that emerged the past quarter.

In Q1’21, total market capitalization of cryptocurrencies broke past US$2 trillion, jumping 146% during the quarter and 900% from April 2020, while trading volume surged 155%.

Top 30 market cap and spot trading volume (Jan 2020 – April 2021), CoinGecko Q1 2021 Quarterly Cryptocurrency Report, April 2021

More than half of the crypto market capitalization belongs to bitcoin, which recorded multiple all-time highs this past quarter and soared to more than US$64,700 in April 2021. Ether, the second biggest cryptocurrency, grew 159% in value to over US$2,100.

Despite these staggering growth rates, bitcoin and ether underperformed compared to competing networks and cryptocurrencies such as Binance Coin (BNB), which recorded a 710% growth, Cardano (ADA) at 555%, and Polkadot (DOT) at 294%.

Top 5 cryptocurrency price returns (Jan – Apr 2021), CoinGecko Q1 2021 Quarterly Cryptocurrency Report, April 2021

Institutions, corporates drive crypto bull run

Cryptocurrencies’ current rally is fueled by institutional investors and corporate adoption. Electric carmaker Tesla bought US$1.5 billion worth of bitcoins earlier this year but recently sold 10% of its holdings, Bloomberg reported on April 27.

Fidelity Investments is looking to launch an exchange-traded fund (ETF) that tracks the price of bitcoin, a March 24 filing with the US Securities and Exchange Commission (SEC) shows. The ETF, called Wise Origin Bitcoin Trust, will aim to match an index that takes spot prices from various bitcoin markets.

Fidelity Investments was among the first major financial firms to embrace cryptocurrencies as an asset class, establishing in 2018 Fidelity Digital Assets, a subsidiary that has since deployed its cryptocurrency custody and trade execution operations.

PayPal just launched a new cryptocurrency checkout service, allowing more than 375 million customers to shop using cryptocurrencies at millions of online merchants, while Visa became last month the first major payment network to settle transactions in USD Coin (USDC), a stablecoin co-founded by Circle and Coinbase, and powered by the Ethereum blockchain.

On April 14, US cryptocurrency exchange Coinbase began trading on the Nasdaq, a watershed moment for the crypto industry which saw its first company go public.

According to the CoinGecko report, public companies are now controlling 0.95% of the total bitcoin supply, with software company MicroStrategy leading, followed by Tesla, digital assets broker-dealer Galaxy Digital Holdings, and payment company Square.

Public companies are now controlling 0.95% of the total bitcoin supply, as of April 21, CoinGecko Q1 2021 Quarterly Cryptocurrency Report, April 2021

The NFT craze

Q1’21 also saw NFTs explode in popularity with total market capitalization reaching US$27.9 billion on April 01. On OpenSea and Rarible, two leading NFT marketplaces, trading volumes surged to US$187 million in March.

Sports, gaming, collectibles and metaverses, or shared virtual space, are the four major NFT categories.

Total art trading volume jumped to US$205 million in March, while aggregate sales volumes for collectibles such as CryptoPunks and CryptoKitties, surged to US$157.4 million and US$32.5 million, respectively.

Nifty Gateway currently dominates the art NFT space, accounting for most of trading volume. Nifty Gateway, a startup founded in 2018, was acquired in November 2019 by cryptocurrency exchange and custodian Gemini.

NFT art marketplaces trading volume (Jan 2020 – Mar 2021), CoinGecko Q1 2021 Quarterly Cryptocurrency Report, April 2021

NFTs became wildly popular in the early months of 2021 because of high-profiles sales: NBA Top Shot’s video clip of LeBron James sold for US$208,000 on February 22; 3LAU’s album had brought in US$11.6 million in sales, as of February 28; and digital artist Beeple’s piece sold for US$69.3 million on March 11.

The quarter saw many big brands join the NFT craze. In March, Pringles released a limited-edition flavor called CryptoCrisp. All 50 packages of the new flavor only exist as NFT artwork, and were auctioned off exclusively on the Rarible platform. Similarly, Pizza Hut Canada launched the world’s first NFT pizza as a collectible, while Taco Bell is selling taco-themed digital art.

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