Dispatch #67: Crypto 2021 Wrapped, Part One

6 min read

In this patch of your weekly Dispatch:

  • Bringing you a look back at the year that was
  • The first theme is Institutions and Regulation
  • Stay tuned for part deux next week
  • Bonus: Tweet of the year

The Big Idea

True Institutionalization as a New Era of Regulation Looms

For years, the institutions were just around the corner, they said. When the Intercontinental Exchange announced Bakkt in 2018, the crypto community was sure it would be the thing to drag us out of the bear market (spoiler alert: it wasn’t). Last year, though, marked the start of a very different institutional narrative.

Against the backdrop of Paul Tudor Jones’ “Great Monetary Inflation” thesis and Michael Saylor’s Bitcoin treasury buy, 2021 got off to a rollicking start when it came to new categories of institutional buyers. That has persisted throughout the year and even flowed into new dimensions.

Alongside that financial mainstreaming, however, has come more mainstream regulatory attention as well. Gone are the days of politicians brushing crypto off. Instead, we’re seeing a more concerted effort to fold crypto into existing policy frameworks – with mixed results so far.

Let’s break down some of the most important things that happened in these areas.

The Year In…


We can still remember like it was yesterday how we were sliding down the slopes in February when Tesla announced that it had purchased $1.5B in Bitcoin for its balance sheet. This would ultimately rocket BTC to its new all-time high above $60,000. While Elon’s subsequent walk back of his enthusiasm for Bitcoin would help take some of the wind out of the sails of corporate treasury Bitcoin, that did nothing to stop the onslaught of traditional finance entrants into the market.

Storied investment houses like Morgan Stanley started offering Bitcoin to their high-net-worth clients. Banks like Bank of New York Mellon and US Bank joined the fray as crypto custodians, one of the juiciest lines of business in the industry. And, of course, there was the launch of the first approved Bitcoin Futures ETF in the US (although many still clamor for a spot equivalent).

While much of the focus was on BTC (with a side of Ethereum), some institutions are already making strides into other, newer parts of crypto as well. Notably, Visa bought a Cryptopunk NFT and many others are in the midst of figuring out their metaverse strategies (although for more on the metaverse, you’ll have to wait until next week)!

The Year In…

US Regulation

If 2019 – the year that Facebook announced Libra – was the first year that most US lawmakers had ever heard about crypto, 2021 will go down as the year that they actually started to pay attention. Their hand was forced, and not by the industry. When the Treasury Department via allies in the Senate snuck in a last-minute “pay for” into the must-pass Infrastructure Bill that would redefine basically everyone in the crypto ecosystem as a “broker,” it set off an absolute firestorm of lobbying. While the provision ended up sticking in the final text of the bill due to procedural issues, the crypto industry found its voice and showed Washington D.C. that it was a force to be reckoned with.

Another seminal moment came in the December hearing before the House Financial Services Committee featuring the CEOs of companies like FTX, Circle, and Coinbase. The tone was radically less antagonistic and more productive than almost anyone intended. At the same time, big battles loom. Some high-profile politicians like Elizabeth Warren have set themselves up as enemies of stablecoins and DeFi, and we’re likely to see more confrontation in the year to come.

The Year In…

Global Regulation

The US was far from the only country taking a deeper dive into crypto regulation this year. The UK’s Financial Conduct Authority tightened ship around activities like derivatives and leveraged trading. India swung wildly back and forth on rumors of banning (or was it regulation?), an issue that remains unresolved.

Still, the loudest regulatory stance of 2021 was undeniably that of China. A mining ban announced in May sent the vast majority of the country’s mining operations elsewhere, totally transforming the geographic composition of Bitcoin hashrate in the process. Months later, crackdowns on exchanges and crypto trading signaled a confirmation that China is truly pushing to be an entirely crypto-free country. To what extent that has to do with their forthcoming digital yuan is a question that we may have a better answer for in 2022.

The Year In…

El Salvador

It’s impossible to wrap up the year in Bitcoin in 2021 without mentioning El Salvador. When Jack Mallers took the stage at the Bitcoin Conference at the beginning of the summer, no one expected that his “surprise announcement” was that the elected president of a sovereign nation was going to make Bitcoin legal tender, but that’s exactly what happened. In early June, El Salvador passed a bill making BTC legal tender and at the beginning of September, the law went into effect. In a fundamental way, this marks the beginning of a different era for Bitcoin.

And given that El Salvador has already swapped out certain IMF loans for a Bitcoin-backed bond, perhaps it is also the beginning of a new era of geopolitics as well. It’s too early to know how the El Salvador experiment will play out, but it’s something that almost no one could have imagined happening in 2021 that will reverberate for years.

The Year In…


We’ve had our fair share of developments in the institutional/ regulatory realm this year. Securing swathes of licenses across the world and going through the arduous task of passing a real-time reserves audit through Armanino was just a part of the story. All of that didn’t stop us from developing Nexo Prime – an institutional-grade crypto prime brokerage with advanced trading and custody capabilities which we’re rolling out at full speed. Our latest institutional move involved the collaboration with Fidelity Digital Assets through which we expect to onboard traditional finance companies into the digital asset ecosystem. While bringing all of this out to the market, we wasted no time and actively engaged with regulators in meaningful discussions and will remain one of those companies that always reserves a seat at the table for these rather serious talks. Buckle up ‘cause 2022 will be a big year for Nexo in every way imaginable.

The Year’s Most Interesting Data Story

The Utter Resilience of Bitcoin

Since the early days, China has been a like-it-or-not part of the Bitcoin ecosystem. China-based mining operations have at times represented up to 70% of the hash power in Bitcoin’s network. So it was a remarkable and – for many – a nerve-wracking thing to see China’s Vice Premier announce a true ban on Bitcoin mining, and to watch around 50% of the total hash power leave the Bitcoin network over the next month.

Yet six months later, Bitcoin has effectively completely recovered. Hash power stands roughly equal to where it did before the ban. Mining difficulty is only 3.5% away from all-time highs. Bitcoin’s unflappable resilience has been affirmed. And in the meantime, the network has been significantly de-risked. Threat of Chinese takeover of mining operations? Gone. Environmental considerations? A lot better with no more Chinese coal powering the network. At the end of the day, the scariest story of the year for Bitcoin ended up being it’s greatest triumph.

Tweet of the Year

The First Bitcoin Country

What to Watch for Next Year:

  • Will other digital assets follow Bitcoin into the institutional framework?
  • Will the US finally commit to a regulatory regime for crypto?
  • Will any countries follow the lead of El Salvador in adopting Bitcoin?

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