In 2021, the crypto market's value skyrocketed from $965 billion to as much as $2.6 trillion, according to a Morningstar analysis of data from CoinGecko. The market capitalization now sits around $2.1 trillion.

Bitcoin — the original and most popular cryptocurrency — alone saw its value jump from $615 billion to a high near $1.2 trillion during the year, while the market cap of other cryptocurrencies combined soared from $350 billion in January of 2021 to as much as $1.5 trillion, Morningstar found.

To calculate the market cap of the crypto market, Morningstar looked at the value of the top 100 coins rather than attempt to incorporate them all. Why? There are thousands of coins that don't add much to the total market capitalization of crypto, explains Madeline Hume, senior research analyst at Morningstar and author of the report. So Morningstar's market cap estimate is based on the value of bitcoin and the 99 other biggest cryptos.

Signs of crypto's growth are all around us. Investors can now buy and sell bitcoin, ether and dogecoin similarly to how they trade stocks and bonds with trading platforms like Coinbase and Robinhood. Late last year, U.S. investors got their first bitcoin futures exchange-traded fund (ETF), and President Joe Biden signed an executive order last month to establish the first-ever federal U.S. strategy on cryptocurrencies. A recent survey from Quinnipiac University found that 43% of adults say they think cryptocurrencies will become a dominant economic force in the long term.

"In 2021, cryptocurrencies demonstrated that they are a force to be reckoned with," Hume says. The market has "reached a level of magnitude and reach that demands the attention, if nothing else, of the financial systems, asset management and market participants."

Why did cryptocurrency investing skyrocket?

Investors are being exposed to cryptocurrency left and right, from both companies they're familiar with and newcomers — and it's all led to more interest in crypto.

Over the last few years, there's been greater crypto adoption by non-crypto-native businesses, Hume says. For example, Tesla CEO Elon Musk announced earlier this year that merchandise from the vehicle manufacturer can now be bought with dogecoin, and in 2021, the digital payment platform Square changed its name to Block and shifted its corporate strategy to involve more crypto.

While crypto offerings by businesses that weren't originally crypto companies, like Robinhood, were certainly drivers of crypto adoption, there has also been a greater prominence of crypto-native businesses.

Just look at the Super Bowl this year: Crypto.com, FTX and Coinbase garnered massive attention for their advertisements during the big game.

Meanwhile, developments within the cryptocurrency market, like non-fungible tokens (NFTs) and decentralized finance — a.k.a. DeFi, which offers financial instruments like loans via blockchain technology instead of traditional intermediaries like banks — have captured people's interest and attention.

Some of the innovations we've been hearing about for a long time are becoming realities. "It's no longer just a bitcoin-driven rally or market. It's really unfurling in a bunch of different directions," says Hume.

What comes next for crypto?

Cryptocurrency is still a speculative asset, which makes its performance difficult to predict. But based on the soaring interest in recent years, crypto shows no sign of slowing down.

Morningstar anticipates that the adoption of blockchain technology in the future will be driven mostly by existing players, Hume says. We've already seen this move from Visa, which offers a debit card funded by a user's Coinbase balance. Last year, Mastercard announced a partnership that would make it easier for merchants, banks and financial-technology firms to integrate cryptocurrency into their products and services. TurboTax recently teamed up with Coinbase to allow customers to get their tax refunds in crypto.

Meanwhile, lesser-known coins are getting more attention. Bitcoin’s market share was pretty much locked in a zero-sum dance with ether up until around 2021, meaning that whenever bitcoin's share fell it was because ether's rose, Hume says. But ether hasn’t gained significantly more market share than it’s had in a while and bitcoin's has begun to fall.

"A lot of other cryptocurrencies are finally starting to come to the floor," Hume says. Some of these coins were developed in 2017 or 2018, so they lagged behind bitcoin and ether, but now they've had enough time to get the technology right. Their rise in popularity is in part because the Ethereum network has been a victim of its own success: The more people that use the network, the more expensive it is to transact on the network, so users are looking elsewhere to avoid those high fees, Hume says.

But as the cryptocurrency market continues to grow, there needs to be better disclosure and greater scrutiny in order to have more transparency, Hume says. Currently, there's not a lot of information investors can reference when it comes to disclosure. And while it was probably smart of regulators to watch the space unfold before cracking down on it, it's reached a point where this asset class is just too large to ignore anymore, she adds.

"While we believe that this is a highly speculative asset class and the fundamentals are extremely slippery, the investors that are currently engaging with this space and participating in it deserve access to good quality information just like everybody else," Hume says.

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