Since 2021, the market value of cryptocurrencies has increased more than threefold. There were 8,532 cryptocurrencies worldwide with a total market value of $2.48 trillion, which is about 22% of the market value of gold. 

So far, the world's top five cryptocurrencies are Bitcoin, ETH, Binance, TeDA and Solana, with a cumulative market share of more than 70%. As the earliest application of blockchain technology, Bitcoin is the world's most traded cryptocurrency, with a unit price of $55,000 and a market capitalization of $1.03 trillion. But as other cryptocurrencies have sprung up, Bitcoin's market share has gradually declined, from 70% in early 2021 to around 40% in November.

Cryptocurrency application area

According to the research of Chainalysis, the countries with the highest degree of cryptocurrency adoption are concentrated in developing countries such as South Asia, the Middle East and Africa. The TOP5 countries are Vietnam, India, Pakistan, Ukraine and Kenya.

Local residents use most cryptocurrencies to cope with currency devaluations, make payments and conduct business activities, mainly through peer-to-peer (P2P) platforms, mostly for small transactions of less than $10,000.

The reason is simply that their central banks' credibility and banking systems are fragile, so citizens seek safer stores of value. Peer-to-peer transfers via cryptocurrency exchanges can bypass money flow management and private wallets can act as a kind of offshore bank account to store wealth.

In addition to the asset substitution caused by the above factors, inefficient payment systems, limited and high-barrier financial services also make people more willing to use cryptocurrencies.

Crypto market growth driven

1. Introduction of stablecoins

Stablecoins are essentially "anchoring" cryptocurrencies that aim to maintain the same value as an underlying asset (usually a legal currency such as the U.S. dollar or another asset of stable value) by anchoring it. Mainstream stablecoins use different anchoring mechanisms to maintain value stability, the most common of which is to use off-chain assets as collateral or to use algorithms to regulate supply and demand through arbitrage mechanisms.

Due to its role in bringing stability to the cryptocurrency market, the total market capitalization of stablecoins exceeded $100 billion in 2021, five times the size of a year ago, and the average daily trading volume continued to climb.

2. The introduction of smart contracts

It is mainly the large-scale application of Ethereum and Solana, two major public chain platforms with smart contract functions (similar to infrastructure platforms, highways).

The biggest difference between Ethereum, as the 2.0 phase of blockchain technology, and Bitcoin is the introduction of smart contracts (computer programs that automatically execute contracts when certain conditions are met). Through the Solidity language of Ethereum, you can create advanced smart contracts. Different smart contracts can call each other and obtain data to achieve multi-layer nesting and unified information transfer. This technology has driven the development of Defi (decentralized finance) and extended blockchain applications to non-financial sectors such as arbitration, auditing, domain names, logistics, and healthcare.

The price of ETH has risen 467% so far in 2021, with trading volume surpassing that of ether. Ether currently has a market capitalization of about $488 billion, making it the second largest market share.

The development of Solana is due to the increasing congestion and high transaction costs of the public chain network represented by Ethereum.

As the best performing blockchain in the world, Solana's network can handle 50,000-65,000 transactions per second (compared to the Bitcoin network's 5 per second), and it also has the advantages of using less energy and having the lowest transaction costs (less than $0.01 per transaction).

Solana is justifiably hot. Its native cryptocurrency SOL has seen explosive growth since the beginning of this year, with unit prices up 10,466% as of November 27, climbing to $59.4 billion in market capitalization, ranking fifth among cryptocurrencies by market capitalization.

Defi exploded

As a decentralized financial application based on Ethereum, Defi uses smart contracts to realize traditional financial activities such as transactions, lending, ABS and insurance. The core value is to improve efficiency and reduce transaction costs. For example, it eliminates the need for the traditional exchange to open an account in real name, cash in and out, market maker bilateral quotation and other links.

Thanks to this, the Defi market size grew from $15 billion at the end of 2020 to $110 billion in September 2021, accounting for around 10% of the entire cryptocurrency market. People in the United States, Vietnam, Thailand, China, the United Kingdom, and India are most likely to use Defi.