2021 was another banner year for cryptocurrencies.
Digital currencies continued to go mainstream with interest building in non-fungible tokens (NFT) and ownership spreading beyond just Bitcoin, (BTC -0.37%) a sign that blockchain-based tokens are here to stay.
Most cryptocurrencies were winners in 2021, easily outperforming the S&P 500, which gained 27%. Below are four of the biggest gainers last year.
4. Solana (Up 11,120%)
Of all the Ethereum (ETH -0.07%)-killers, Solana (SOL 0.42%) seems to be the most credible. The proof-of-stake cryptocurrency gained steam in 2021 as it found itself a popular alternative to Ethereum in the NFT boom. Trading volume in Solana picked up sharply in February as NFTs captured the popular interest. While Ethereum is the most popular option for minting NFTs and smart contracts, Solana has also gained in popularity.
Solana has a number advantages over Ethereum, including speed. Solana is able to process as many as 50,000 transactions per second thanks to a proof-of-history model layered on top of its proof-of-stake system, while Ethereum can only handle 15 to 45 transactions per second. Solana also has a much smaller gas fee than Ethereum, as the leading proof-of-stake crypto at times charges $100 per transaction.
With those kinds of advantages, 2022 could be another strong year for Solana, especially if NFTs continue to grow.
3. Terra (Up 13,000%)
Terra (LUNC 0.28%) was a big winner in 2021 thanks to one of the more ambitious and comprehensive strategies in cryptocurrency. Terra is a stablecoin, meaning it's designed to avoid the volatility that occurs with most cryptocurrencies, but it's not like Tether, which is pegged to the U.S. dollar and trades in tandem with it.
Terra is pegged to the dollar through an algorithm, and those tokens are known as UST, but it's gained value because of connection to Luna, Terra's native token, which is distributed to Terra holders every time a new UST is created. Luna tokens have gained value as Terra has gained more interest, and holders collect fees, like credit card transactions, when Terra's stablecoins are used.
Terra was started in South Korea and remains most popular, but as a stablecoin, its ability to be used as a payment solution gives it a better chance of gaining widespread utility than something like Bitcoin, which is too volatile for most merchants to accept.
2. Axie Infinity (up 18,300%)
Unlike the leading cryptocurrencies Bitcoin and Ethereum, Axie Infinity (AXS) is a crypto token in a blockchain-based game of the same name. The value of the token skyrocketed in 2021 as Axie gave tokens to early adopters of the game and allowed them to be used for staking, or an earning interest with crypto. Currently, Axie Infinity promises an 88% APR. Essentially, players can get rewards for playing the game, which was developed by Sky Mavis, a privately held company now valued at $3 billion.
Axie tokens have pulled back more than 50% from an all-time high in November, a possible sign that interest in the game is cooling off, but it still has a market cap of $3.5 billion. As a game-based token, Axie is likely to be more volatile than other larger cryptocurrencies as its functionality is not as broad as Ethereum or Bitcoin.
1. Shiba Inu (up 45,000,000%)
Shiba Inu's (SHIB 2.10%) run in 2021 was historic as the meme coin was basically unknown and not traded on any major exchanges. However, the surge in Dogecoin in spring attracted interest in Shiba Inu, which became the next memecoin to deliver blockbuster results. Shiba Inu's growth was propelled by additions to major exchanges like Coinbase and Binance and by whales making big purchases in the cryptocurrency.
The coin peaked in late October but has since faded, falling by more than 60%, a sign that the bubble may have burst. Shiba Inu bulls are still holding out hope for the coin to reach $1, but that seems nearly impossible as the coin is worth just $0.000033 (four zeros) with more than 500 trillion in circulation.
Still, its gains are a reminder of the power of memes, and it wouldn't be surprising to see another memecoin surge in 2022.