Erik Weijers, a year ago

Fidelity: crypto is here to stay

In a report, Fidelity looks back at the year 2021 for Bitcoin and crypto in general. What expectations do they have, based on the developments that are important in their view? Fidelity is one of the largest asset managers in the world, with over four trillion dollars under management. One of the main conclusions: the fact that the Bitcoin network has recovered so quickly from China's ban is very encouraging. A second conclusion: stablecoins and defi are slowly coming of age.

The fact that an institution like Fidelity publishes a report so matter-of-factly about a sector that was not taken seriously until a year or two ago is in itself an important signal. It signifies an increasing acceptance of crypto. This is also what Fidelity itself posits: 'Overall, we would say 2021 was a year that further confirmed digital assets have arrived and are here to stay. '

Important developments for Bitcoin

As is well known, China issued a ban on Bitcoin mining in the spring of 2021. Since much of Bitcoin's hashrate was accounted for by miners from China, it fell by nearly fifty percent. But the fact that the hashrate was back to its former level within about six months, Fidelity calls "truly amazing”. Fidelity calls the this development a true test that Bitcoin has passed with flying colors.

Indeed, the fact that China has banned mining removes a risk that was previously real: namely, that the Chinese government would attack the network by hijacking the hashing power of their country's miners. This 51% attack is now no longer possible: as a result of the ban, the hashrate has received a better global distribution.

The rapid recovery of the hashrate sends another important message, according to Fidelity. That is that miners - the parties who have the most at stake, namely the survival of their businesses - are optimistic about the future price of Bitcoin. Otherwise, they would not have added rigs so quickly. They apparently believe in the long term.

The most important developments apart from Bitcoin in 2021

According to Fidelity, the most important developments in 2021 outside of Bitcoin are:

  • The tremendous growth of stablecoins: a growth from under $30 billion in circulation to over $140 billion. Fidelity believes it is beneficial that the dominance of USDT (Tether) has become smaller. Indeed, it is the stablecoin with the most questionable reputation in the eyes of regulators. The breakthrough of algorithmic stablecoins such as DAI and Terra is a good development, according to Fidelity: it makes users (and regulators) to not have to rely on the reserves of the party issuing the stablecoins. This is because the collateral of an algorithmic stablecoin is based on blockchain assets and therefore easier to audit.
  • NFTs: the sale of Beeple's NFT for 69 million dollars was one of the events that suddenly turned all eyes of the art sector to these digital collectibles. This will create more future interest from institutional investors.
  • Maturing decentralized finance (defi): the most important development in Fidelity's view is the growth of cross chain bridges, which will increase the capabilities and usability of defi.
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