There was “a broader range” of investors that wanted exposure to crypto last year, with many of them seeking access to new products such as bitcoin (BTC)-backed exchange-traded funds (ETFs), decentralized finance (DeFi), and non-fungible tokens (NFTs), a new report from Coinbase has said.
In the report titled 2021 Year in Review, produced by Coinbase’s institutional arm, the exchange said that it had a growing number of institutional clients last year “beyond asset managers and financial services firms.” It further stated that many of its existing clients wanted broader exposure to crypto beyond just bitcoin, and that this “reflects the growing number of use cases for crypto.”
And although bitcoin remained the top asset for clients seeking crypto exposure, Coinbase noted that 2021 was a much weaker year for bitcoin than 2020, with a return of 58% in 2021 compared to 300% the prior year.
According to the report, this weaker performance in 2021 can mainly be attributed to three factors:
- the withdrawal of the COVID-10 pandemic-related fiscal and monetary stimulus around the world;
- price support from the bitcoin halving in May 2020 waning;
- crypto maturing as an asset class.
Meanwhile – and contrary to what some other experts have expressed recently – the exchange described bitcoin’s correlation with other financial assets as “low,” although it added that it is now “higher than in previous years.”
“Over the preceding 12-month window, BTC registered correlation coefficients of 27.4% with the S&P 500, -3.5% with the U.S. core aggregate bond index, almost zero with gold, and 25.6% with the MSCI EM [Emerging Markets],” the report said.
Commenting on ethereum (ETH)’s performance over the past year, Coinbase said that the asset made “important gains against BTC”, “with the ETH/BTC currency pair reaching all-time highs by early December before falling lower.”
“We think this reflects positive sentiment about the broader cryptocurrency ecosystem, as ETH outperformed in both rallies and sell-offs,” the report said.
It added that “while BTC arguably remains a ‘store of value’,” last year’s ETH performance was boosted by the growth of its platform, “driven by the continuing rise” in DeFi, decentralized applications (dapps), play-to earn gaming, and the NFT market.
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