Cryptocurrency trading has broadened substantially in 2021, and the industry has produced some staggering returns. The liquid digital coins have had a phenomenal performance in 2021, but the smaller coins have seen the most robust returns. On the Tradingview list of best execution, year to date in early August is InsurAce which is up a whopping 12,000% for the year. These robust returns have contributed to strong cryptocurrency trading volumes.
Several illiquid cryptocurrencies have had exceptional performance. Even more liquid cryptocurrencies, such as Etherieum Classic and Cardano, have experienced robust returns. Ether and Bitcoin are up 265% and 36%, respectively. Much of the momentum in the cryptocurrency space has been driven by the increase in the demand for decentralized finance. Cryptocurrencies have gained traction as their payment mechanisms have generated a foothold.
In 2021, a slew of groups, including Wall Street Bets, started to gang up on stocks and cryptocurrencies that were considered by the group to be undervalued. Wall Street Bets is a group of people who enjoy talking about investing. The group started on Reddit and then migrated over to Facebook and Twitter. While many of the group members focused on U.S. stocks such as Gamestop and AMC, several also focused on Dogecoin.
Dogecoin was created by software engineers Billy Marcus and Jackson Palmer in 2013. Palmer branded the cryptocurrency’s logo using a meme and deliberately misspelled “doge” to describe a Shiba Inu dog. Dogecoin, as of early August, had strong cryptocurrency trading and a performance of more than 4,000% year-to-date in 2021. At one point during the year, Dogecoin was up nearly 15,000%.
Dogecoin gained cult status on WallStreetBets, and members decided to push the cryptocurrency value “to the moon.” Dogecoin also runs on a blockchain and uses a form of the mining process to verify transactions on the blockchain. One of the benefits of Dogecoin is that it is quicker than more prominent blockchain cryptocurrencies such as Bitcoin. It can take 10% of the time to verify a transaction on Dogecoin relative to Bitcoin. Another difference between Dogecoin and some of its peers is that Dogecoin has no limit on the number of coins that can be created. Many of the more established cryptocurrencies, such as Bitcoin, have a finite number of digital currencies that can be completed before the process is halted. This concept helps to drive up the price of a cryptocurrency and can increase the popularity of cryptocurrency trading.
You can see from the daily chart of Dogecoin that during Q2, the WallStreetBets group started to implore members to push Dogecoin to the moon, and they helped propel the cryptocurrency to all-time highs. During this period, even Elon Musk jumped into the fray, talking about cryptocurrency and its benefits. The enthusiasm about Dogecoin started to ease in Q3, putting downward pressure on the cryptocurrency. Despite the selloff from $0.70 to $0.20, the cryptocurrency is still up more than 4,000 year to date.
One of the most impressive moves in liquid cryptocurrencies was the performance of Ether. Ether is the cryptocurrency that runs on the Ethereum blockchain platform, its programming language. As a blockchain network, Ethereum uses a decentralized method of verification using miners. Miners are rewarded with Ethereum when they verify a transaction. The medium and the programming language provide an environment where coders can create specific instructions. This type of execution could include a smart contract that is directly performed and executed by the coding that is embedded into the program.
The performance of Ethereum has been stellar as the cryptocurrency pair versus the greenback broke out on the weekly chart. Momentum remains positive as the weekly fast stochastic generated a crossover buy signal.
The Bottom Line
The performance of many of the tradeable cryptocurrencies has been interesting in 2021. The gains have been eye-popping. Many of the coins traded today will not be around in a couple of years, as nobody knows the fate of this new asset class. Some of the more illiquid cryptocurrencies are up thousands of percent year to date. Even the more liquid cryptocurrencies such as Ether, which runs on the Ethereum network, are up a couple of 100-percent years to date at the beginning of August.
There is an exciting difference between some of the more liquid cryptocurrencies and the less liquid types. Bitcoin, Ethereum, and Litecoin are created on blockchain platforms and have a finite number of coins that can be made. Over time, there will be a deceleration in the number of coins that are produced per year. Eventually, no new Bitcoins will be created. Conceptually this put upward pressure on prices. This phenomenon compares to Dogecoin that also runs on a blockchain, but there are no limits to the number of coins created. From an investment perspective, the idea that a currency will have less availability in the future provides a bullish backdrop for an instrument like Bitcoin. An unlimited number of coins could then have less of an upward pull on prices.