2021 in review pt 4 of 5: Institutional Adoption Accelerating

27 Dec 2021

2021 in review pt 4 of 5: Institutional Adoption Accelerating

2021 saw more corporations adding bitcoin to their treasuries, while the bitcoin investment vehicle landscape evolved as ETPs gained traction.

Source: MicroStrategy, Square, Tesla, Meitu, Aker

The defining trend of the first quarter in 2021 was the rise of bitcoin as a corporate treasury strategy among large publicly listed companies. MicroStrategy evangelized its strategy to other corporations in February. Later on, Tesla, Square, Aker and Meitu announced bitcoin purchases. However, in the months that followed, no new companies followed suit. Since April, MicroStrategy is the only company that has added bitcoin to its treasuries. MicroStrategy bitcoin treasuries account for 71.4% of the BTC held by publicly listed companies with bitcoin on their balance sheet. Tesla stopped accepting bitcoin payments due to environmental concerns. While we deem bitcoin to provide huge societal benefits, the ESG-narrative might disincentivize new corporations to follow the BTC trend. 2022 prediction: MicroStrategy will continue to buy bitcoin, while interest elsewhere will be muted.

The year money started flowing into the crypto industry: M&A activity

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Source: Architect Partners

In 2021 we saw 172 crypto-related M&A transactions – almost three times as many as in the previous record year, 2018. The M&A activity has increased throughout the year, with 50 M&As taking place in Q4 alone. In addition to a record-breaking number of M&As in 2021, we have also seen some massive funding rounds for private crypto companies. The Block estimates the number of crypto unicorns to be at least 64. Some of the biggest M&As this year has been SPAC-mergers, where crypto companies went public by merging with publicly traded companies.

The year money started flowing into the crypto industry: Public listings

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We saw many crypto companies go public in 2021. Coinbase was by far the biggest crypto public listing this year - and the seventh biggest U.S. public listing of all time. 2022 prediction: We will see even more crypto companies going public in 2022 than we saw in 2021, and several of them will have valuations of more than $5 billion.

Grayscale - the premiums that turned into discounts

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Source: Grayscale, NYDIG, yCharts

The notorious Grayscale premiums evaporated in 2021. Grayscale’s flagship fund ended a five-year long streak with premiums in February as the Grayscale arb-trade got crowded. The abysmal performance of the close-ended Grayscale funds: GBTC returns YTD: 14.8%, BTC returns YTD: 77.32% ETHE returns YTD: 217%, ETH returns YTD: 455% BCHG returns YTD: -83%, BCH returns YTD: 37% LTCN returns YTD: -97%, LTC returns YTD: 28% 2022 prediction: GBTC discounts will narrow as we approach the ETF verdict in June.

Investment vehicles’ holdings grew by more than 140,000 BTC in 2021

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Source: Bytetree

2021 has been a massive year for bitcoin-related investment vehicles. The maturing market has led financial regulators to finally approve spot-based ETFs and physically backed ETPs in certain jurisdictions, in addition to the approval of the futures-based ETFs in the U.S. This has caused more BTC to get absorbed into investment vehicles, which saw their aggregated funds growing more than 140,000 BTC in 2021, with ETF’s seeing a continuous uptrend in its market shares. 2022 prediction: Exchange-traded bitcoin investment vehicles will hold more than 1 million BTC by the end of next year.