Crypto Game Look-Back - Is 2021 the Turning Point for Crypto?

As investors become more interested in cryptocurrencies, forex brokers are feeling a new urgency to offer crypto trading to clients, though the crypto hype seems to cool down somewhat in the beginning of the last month in 2021.

The price of a single Bitcoin was over $57,000 on November 30, 2021. That's an increase of around 11,400%. At the start of December 2021, the price of bitcoin and several other major cryptocurrencies plummeted. The price was reduced by $10,000, bringing it to $45,000. The recent turmoil comes in the wake of concerns over the latest Covid variety, high inflation in the U.S and UK, and threats from future regulation of crypto assets.

Though predictions for its demise have been a constant for Bitcoin since its debut a little more than a decade ago. Most have been to little avail. Since breaking into the mainstream consciousness, Bitcoin has jumped more than 5,000% over the past five years.

Both Ethereum (ETH) and Dogecoin have seen popularity boost as well throughout 2021. The former had a growth of over 42,000% compared to where it was five years ago, and the latter has seen a price rise of roughly 110,000% up until November 30, 2021.

According to Bloomberg, 28% of all institutions surveyed currently invest in cryptocurrencies — and of those, nearly a third said they plan to increase their crypto allocations next year. Overall, 8% of all institutional investors surveyed-meaning all those who do and don't currently invest in digital assets — plan to increase their allocations next year.

There is no doubt that an increasing number of brokers have either launched or expanded their crypto services since the beginning of 2021.

More brokers started to dabble in crypto

In February, tastyworks, a brokerage firm based out of Chicago, IL, has launched crypto trading on its award-winning platform, including four of the most actively traded cryptocurrencies: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. 

In March, Swissquote Bank Europe​, Switzerland's leading provider of online financial and trading services, announced the launch of a Cryptocurrency trading service. With this trading service, Swissquote Bank Europe's clients could own and trade a range of cryptocurrencies from one multi-asset bank account.

In June, Switzerland based retail FX brokerage group Dukascopy​ has launched cryptocurrency trading for LIVE and DEMO users of the Metatrader4 platform. The trading instruments include CFD's on Bitcoin, Ether and Litecoin vs USD.

In September, Interactive Brokers​, one of the biggest US-based brokerage firm, announced the launch of cryptocurrency trading. Clients could trade popular cryptocurriencies like BTC, ETH , LTC and BCH from the TWS platform or via the IBKR mobile app.

Big brokers continue to expand crypto products

Another obvious trend in the industry is that many large brokers, such as eToro, continue to expand their cryptocurrency products.

In May, eToro has added four new cryptoassets to its investment platform, including Aave(AAVE), Compound(COMP), Yearn.Finance(YFI) and Decentraland(MANA), taking the total number of cryptoassets on eToro to 23. 

In July, eToro announced the launch of MAKER (MKR), a special governance token that cannot be mined, and ENJIN (ENJ). The launch of MKR and ENJ​ brought the total number of cryptoassets available on eToro to 27. 

In October, eToro added Polkadot, the world's 9th largest digital asset, and Filecoin, the 24th most valuable cryptocurrency to its investment platform. The launch of Polkadot and Filecoin​ brought the total number of cryptoassets available on eToro to 31. 

In November, eToro further extended its crypto trading lineup with 4 new additions: Chiliz (CHZ), SushiSwap (SUSHI), Quant (QNT) and Axie Infinity (AXS). These new additions brought eToro's total crypto offering to 40 cryptoassets.

Other numerous big-name financial companies also get involved

In addition to forex brokers, other financial industry participants including investing banks, exchanges, even fintechs, are also stepping into the game of digital asset.

In March, Goldman Sachs has relaunched cryptocurrency trading desk​ and planed to deal bitcoin futures and non-deliverable forwards. Goldman Sachs first set up a cryptocurrency desk in 2018, just as bitcoin’s price falling from records highs, before ditching the idea of a trading desk dedicated to crypto assets, citing regulatory uncertainty. 

In May, Citi announced that it was weighing up the launch of crypto services to respond to the rising interest of clients. Its interest in digital asset-related services was driven by the "very rapid" accumulation in interest from clients, according to Itay Tuchman, Citi's global head of foreign exchange. 

In July, JPMorgan has offered retail clients access to Bitcoin exposure​, effective July 19, making it the first major bank to expand access to crypto trading beyond only ultrawealthy clients. With the new service, the American banking giant has given the green light to its advisers to provide clients with access to five cryptocurrency funds. 

Crypto Regulation: A Double-Edged Sword

The sensational cryptocurrencies have attracted a number of new players to the game in this year. But as a virtual asset, it is defined differently in different countries, hence different regulatory frameworks. There is, inevitably, anarchy to a certain extent without a unified regulator.

At present, there are two major groups among the countries of the world. First of all, we have countries with an iron fist against it, including China, Russia, South Korea, Turkey and Nigeria, etc. As a massive economy, how China treats crypto assets will most definitely exert considerable impact on the entire community. The central bank of China had met with the four major commercial banks along with payment giant, Alipay, since June 2021, and required them to stop processing cryptocurrency-related transactions.

In addition, China furthered its actions against crypto mining, and consequently, Bitmain, a China-based as well as one the world's largest mining hardware manufacturers, had to suspend its sales​ at the end of June.

Following the country's intensified crackdown on crypto mining and trading, Chinese users are unable to access the websites of CoinGecko, CoinMarketCap and TradingView​ when it came to September.

Although acknowledged legitimate, cryptocurrencies are forbidden to be used as payment in Russia.

In Nigeria, all crypto-related accounts had been ordered to shut down back in February, and cryptocurrency trading is outlawed too.

Turkish president, on the other hand, made a statement in a public event that his administration has no intention to adopt any cryptocurrency, and they are "at war" with crypto assets.

South Korea is not killing crypto once and for all, but the country is strengthening the regulation​ through legislation to make sure that it doesn't provide a shelter for money laundering or financial crimes.

Some other countries, namely the second group, are more crypto-friendly, including the U.S, Australia, some European countries such as the UK, yet they still regulate the market.

Cryptocurrency exchanges are legal in the U.S and fall under the regulatory scope of the Bank Secrecy Act (BSA). The U.S Securities and Exchange Commission (SEC) has indicated that it considers cryptocurrencies to be securities, and applies securities laws to digital wallets comprehensively in an approach that will affect both exchanges and investors alike. By contrast, The Commodities Futures Trading Commission (CFTC) has recognized Bitcoin and Ethereum as commodities and allowed other virtual and cryptocurrency derivatives to be traded publicly on exchanges that it regulates or supervises.

In some extreme cases, such as El Salvador​, announced Bitcoin as its fiat currency, and vowed to facilitate mining with state power. Of course, such extreme attitude to embrace crypto is, in fact, believed by many, including the people of El Salvador, to be a bad idea.