October 19, 2023

A Year of Tremors and Triumphs: A Retrospective on the Crypto Industry

By Mathis Bitton and Elizabeth Haas, PhD


The past year has seen the cryptocurrency industry undergo a profound transformation, marked by a series of events that have left indelible marks. In this retrospective, we delve into the key developments, trends, and shifts that have defined the crypto space over the last year. From the relentless price volatility to the growing institutional interest, evolving regulatory landscapes, the rise of DeFi and NFTs, environmental concerns, and mainstream acceptance, we will explore the dynamics that have shaped the industry and reflect on its future.

I. Price Volatility: The Unpredictable Ride

The cryptocurrency market's propensity for extreme price volatility has long been a defining characteristic, and over the past year, this trait has been particularly pronounced. To comprehend the tumultuous journey that digital currencies have taken, think back to the beginning of the year. At the outset of 2021, Bitcoin, the flagship cryptocurrency, was making headlines for its relentless ascent, surging to an all-time high of nearly $65,000 per coin. The excitement and optimism in the crypto community were palpable, as proponents saw this as a validation of Bitcoin's status as "digital gold" and a hedge against traditional financial instability.

However, this exuberance proved short-lived, as the crypto market's volatility again took center stage. In the months that followed its historic high, Bitcoin experienced a dramatic correction, shedding more than 50% of its value. Ethereum, the second-largest cryptocurrency by market capitalization, followed a similar pattern. Ethereum, which had reached new heights earlier in the year, suffered a significant drop in value.

The rapidity and magnitude of these price swings were nothing short of astonishing. They served as a stark reminder of the speculative nature of cryptocurrencies, where market sentiment, speculative trading, and external factors can lead to rapid and unpredictable price fluctuations. While cryptocurrency enthusiasts celebrated Bitcoin's ascent as a harbinger of broader adoption, the subsequent decline served as a sobering reality check.

Moreover, regulatory developments and government actions played a substantial role in shaping the price landscape. For instance, China's crackdown on cryptocurrency mining and trading activities, including shuttering mining operations in major provinces, sent shockwaves throughout the global crypto ecosystem. Regulatory uncertainties and concerns about potential crackdowns in other countries added to the market's overall volatility.

Beyond these external factors, the price volatility also highlighted fundamental questions about the role of cryptocurrencies in the financial world. Can they truly serve as stable stores of value and mediums of exchange when their prices can experience such rapid and substantial fluctuations? This question, which has persisted since the inception of cryptocurrencies, remains unanswered, and the past year's price swings have only added more fuel to the ongoing debate.

II. Institutional Adoption: From Skepticism to Engagement

Over the past year, the cryptocurrency industry has witnessed a remarkable shift in sentiment from institutional players. Once viewed with skepticism and apprehension, digital assets have increasingly become the focus of serious institutional interest, marking a significant inflection point in the evolution of the crypto space.

The Atlantic Council has built a tracker to capture how many countries use Central Bank Digital Currency (CBDC), virtual money backed and issued by a central bank. In 2020, this number was about 20. Today, it is more than 130. The war in Ukraine and the financial sanctions on Russia have accelerated the rise of CBDC as a potential alternative to reliance on conventional currencies. If the trend continues, it might threaten the supremacy of the US dollar – a development about which US policymakers have every reason to worry and that crypto enthusiasts have every reason to see as a sign of mainstream adoption by the public sector.

Beyond geopolitics and turning to the private sector, at the forefront of this transformation was Tesla's announcement in early 2021 that it had invested $1.5 billion in Bitcoin and planned to accept the cryptocurrency as a form of payment for its electric vehicles. Elon Musk, Tesla's charismatic CEO, played a pivotal role in sparking a wave of institutional curiosity in cryptocurrencies. Tesla's endorsement represented a high-profile vote of confidence in the long-term potential of Bitcoin.

This endorsement was far from an isolated incident. Throughout the year, several major financial institutions began to pivot towards crypto. BlackRock, the world's largest asset manager, hinted at potential investments in Bitcoin futures. Morgan Stanley announced plans to offer its wealthy clients access to Bitcoin funds. Goldman Sachs reopened its cryptocurrency trading desk. In April, Fidelity  – the U.S.'s largest 401(k) plan provider – added Bitcoin to their investment lineup. These moves signaled that established financial institutions were not just paying attention to cryptocurrencies but actively seeking ways to integrate them into their offerings.

One of the most significant developments was approving Bitcoin exchange-traded funds (ETFs) in Canada. These ETFs, which allow investors to gain exposure to Bitcoin without holding the cryptocurrency itself, represented a watershed moment in institutional engagement with digital assets. The approval of these ETFs reflected regulators' growing comfort with the idea of cryptocurrencies as legitimate investment assets. It paved the way for broader retail and institutional participation in the market. That being said, in the United States, where regulators have proven a lot more hostile to the crypto ecosystem, the approval is still pending and uncertain.

The motivations behind this institutional pivot toward crypto were multifaceted. On one hand, cryptocurrencies offered an attractive hedge against inflation, a concern that loomed large in the wake of central banks' massive monetary stimulus measures in response to the COVID-19 pandemic. The scarcity embedded in cryptocurrencies like Bitcoin, with its capped supply of 21 million coins, resonated as a potential store of value in an era of fiat currency debasement.

On the other hand, the blockchain technology underpinning cryptocurrencies presented opportunities for efficiency gains and cost savings. Financial institutions recognized the potential for blockchain to streamline processes such as cross-border payments, settlement, and securities issuance, ultimately reducing operational overhead.

A third factor was the rise of trusted players like Polygon, which bridges traditional companies and the crypto world. For instance, Starbucks partnered with Polygon to unveil Starbucks Odyssey, a new experience powered by Web3 technology that allows Starbucks Rewards members and employees in the United States to earn and purchase digital collectible assets that will unlock access to new benefits and immersive coffee experiences. These experiments, which dozens of other large companies have undertaken, were made possible by the work of trusted partners like Polygon.

Nevertheless, this institutional engagement did not come without its fair share of challenges and questions. Regulatory uncertainty remained a significant concern. Institutions sought regulatory clarity to ensure compliance and minimize legal risks, particularly given the evolving regulatory landscapes in different countries. Additionally, the intrinsic volatility of cryptocurrencies, as highlighted in the previous section, presented its own set of challenges. While cryptocurrencies offered diversification and potential rewards, they also introduced heightened risks. Nevertheless, the crypto industry's journey from the fringes of finance to the heart of institutional portfolios is a testament to its growing relevance in the global financial landscape.

III. Regulatory Challenges: Navigating the Maze

The past year has been marked by significant developments in the regulatory landscape surrounding cryptocurrencies. Governments and regulatory bodies worldwide have grappled with how to approach this rapidly evolving and innovative sector, resulting in a complex and ever-shifting regulatory environment.

One of the most notable regulatory actions came from China, a country known for its stringent stance on cryptocurrencies. In May 2021, China escalated its crackdown by effectively banning cryptocurrency mining and trading activities. Major mining hubs, particularly in provinces like Inner Mongolia and Sichuan, were ordered to shut down operations. The rationale behind this move was multifaceted. China expressed concerns about the environmental impact of energy-intensive mining, the speculative nature of crypto trading, and its potential to disrupt the financial system's stability. This dramatic crackdown sent shockwaves through the global crypto ecosystem, leading to the migration of mining operations to more crypto-friendly regions.

Beyond China, the regulatory landscape remained highly varied and inconsistent. The United States, home to a significant portion of the crypto industry, faced ongoing debates and discussions about how to regulate digital assets effectively. In the infrastructure bill proposed in Congress, some provisions required crypto exchanges to report transactions over $10,000 to the IRS. These provisions aimed to address concerns about tax evasion but also raised questions about user privacy and the practicality of compliance. The bill highlighted the challenge of finding a balance between fostering innovation and ensuring compliance and consumer protection.

The European Union (EU) also made strides in the regulatory arena, proposing the Markets in Crypto Assets (MiCA) regulation, which sought to provide a comprehensive regulatory framework for crypto assets. MiCA aimed to provide legal certainty and establish a level playing field for crypto businesses within the EU. However, these regulatory efforts also sparked discussions about the potential impact on innovation and market competition.

The regulatory landscape extended beyond established economies. Emerging markets, such as Nigeria and India, grappled with how to regulate cryptocurrencies. Nigeria, for example, restricted banks from providing services to crypto businesses, citing concerns about money laundering and fraud. Meanwhile, India considered a potential blanket ban on cryptocurrencies, which triggered debates about stifling innovation and the possible consequences for the burgeoning blockchain industry in the country.

One of the overarching themes of these regulatory developments was the need for clarity and consistency. Market participants, including exchanges, businesses, and investors, sought clear guidelines to navigate the evolving landscape. Regulatory uncertainty can hinder innovation and investment, which prompted calls for greater collaboration between the industry and regulators.

While regulation presented challenges, it also offered potential benefits. Regulatory clarity could pave the way for institutional adoption and greater mainstream acceptance. Additionally, it might help mitigate risks associated with fraud, scams, and money laundering, fostering a safer environment for participants. As the crypto industry matures, finding the right balance between innovation and regulation remains an ongoing challenge that will shape its future trajectory.

IV. DeFi and NFTs: Decentralized Revolution

The past year has borne witness to the explosive rise of two groundbreaking sectors within the cryptocurrency space: Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs). These two movements have redefined how we think about finance, ownership, and digital assets, ushering in a decentralized revolution with far-reaching implications.

  • DeFi: Rethinking Traditional Finance
    DeFi emerged as a revolutionary force in the crypto industry, challenging traditional financial intermediaries and reimagining how we interact with financial services. DeFi platforms, powered by blockchain technology and smart contracts, enable users to access a wide range of financial services, including lending, borrowing, trading, and yield farming, without traditional banks or financial institutions.

    Aave, Compound, and MakerDAO are among the leading DeFi protocols that have garnered significant attention and adoption. Users can earn interest on cryptocurrency holdings by supplying liquidity to these platforms, while borrowers can access loans backed by their digital assets as collateral. This peer-to-peer, decentralized approach to finance has democratized access to financial services, allowing individuals around the world to participate in a global, permissionless financial ecosystem.

    However, the rapid rise of DeFi has not been without its challenges. Smart contract vulnerabilities, hacks, and regulatory uncertainties have exposed the risks associated with these decentralized platforms. Yet, the DeFi space continues to evolve, with ongoing innovations aimed at addressing these issues while expanding the ecosystem's capabilities.

  • NFTs: Redefining Ownership and Value
    The NFT craze that swept the world over the past year has redefined how we perceive ownership and value in the digital realm. NFTs are unique digital tokens that represent ownership of a specific digital asset, be it art, music, collectibles, or virtual real estate. Unlike cryptocurrencies like Bitcoin or Ethereum, NFTs are indivisible and cannot be exchanged on a one-to-one basis.

    Beeple's $69 million sale of digital artwork at Christie's auction house and the explosion of CryptoPunks as digital collectibles are emblematic of the NFT frenzy. Musicians, artists, athletes, and creators from diverse fields have embraced NFTs as a new way to monetize and connect with their audiences directly. This has transformed the concept of digital ownership, as NFTs allow creators to retain control and receive royalties on their creations long after their initial sale.

    While NFTs have opened up new opportunities for creators and collectors, they have also generated questions about copyright, intellectual property, and environmental concerns. The carbon footprint associated with NFT minting on energy-intensive blockchains like Ethereum has raised sustainability issues that the industry is actively addressing through solutions like Layer-2 scaling and transitioning to eco-friendly blockchains.

  • The Synergy of DeFi and NFTs
    One intriguing development in the crypto space has been the convergence of DeFi and NFTs. DeFi protocols have begun incorporating NFTs as collateral, enabling users to borrow against their valuable digital assets. This intersection has introduced new opportunities for liquidity management and yield generation, further blurring the lines between finance and digital art.

    Additionally, NFT marketplaces have integrated DeFi features, allowing users to stake, lend, or trade their NFT holdings. This synergy has expanded the utility of NFTs beyond collectibles and art, positioning them as financial assets with inherent value.

    The convergence of these two sectors promises new opportunities and challenges, setting the stage for continued innovation and disruption in the years to come. The decentralized revolution is in full swing, reshaping how we interact with digital assets and the financial world.

V. Environmental Concerns: The Cost of Crypto

The environmental impact of cryptocurrency mining and blockchain technology has become a pressing concern over the past year. As cryptocurrencies gained mainstream attention and adoption, so too did the scrutiny surrounding their energy consumption, particularly in the case of Bitcoin. This section explores the crypto industry's environmental challenges and the innovative solutions emerging to address them.

The pioneering cryptocurrency Bitcoin relies on a consensus mechanism known as proof-of-work (PoW) for transaction validation and block production. PoW involves miners solving complex mathematical puzzles to validate transactions and add them to the blockchain. This process requires immense computational power and consumes significant amounts of electricity.

As Bitcoin's price surged and mining became more competitive, miners invested in increasingly powerful hardware. The result was a significant increase in the Bitcoin network's energy consumption, with some estimates suggesting it consumed more electricity than entire countries. This raised alarm bells among environmental advocates, who highlighted the carbon footprint associated with Bitcoin mining.

The environmental debate surrounding Bitcoin revolved around two primary issues: carbon emissions and electronic waste. Bitcoin mining, primarily conducted in regions with abundant, often coal-based, electricity sources, contributed to carbon emissions, exacerbating concerns about climate change. Additionally, the rapid obsolescence of mining hardware generated electronic waste, adding to the environmental toll.

Acknowledging these concerns, the crypto community and industry began exploring alternative consensus mechanisms and innovative solutions. The most prominent alternative to PoW is proof-of-stake (PoS), which Ethereum, the second-largest cryptocurrency, transitioning to. PoS consumes significantly less energy than PoW, as it doesn't require miners to perform energy-intensive computations.

The transition to PoS was one of many solutions in play. Several crypto projects emerged with a focus on sustainability. Chia, for example, introduced a "proof-of-space" consensus mechanism, which leverages unused storage space on hard drives instead of computational power. This innovation aims to reduce the energy footprint associated with cryptocurrency mining while promoting environmental sustainability.

Layer 2 scaling solutions, such as the Lightning Network for Bitcoin and Optimistic Rollups for Ethereum, promised to improve scalability and reduce the energy consumption of blockchain transactions. By conducting off-chain transactions and settling them on the main chain only when necessary, these solutions aimed to alleviate the network's burden.

Furthermore, some mining operations explored renewable energy sources as a more sustainable means of powering their operations. Renewable energy, including solar and hydroelectric power, can mitigate the carbon emissions associated with mining.

The crypto industry's response to environmental concerns demonstrated its adaptability and commitment to sustainability. While PoW-based cryptocurrencies like Bitcoin face ongoing scrutiny, the shift toward PoS, the development of eco-conscious cryptocurrencies, and the adoption of renewable energy sources by mining operations represent tangible progress.

The crypto community's proactive approach to addressing these issues demonstrates its commitment to reducing the environmental impact while maintaining the core principles of decentralization and innovation. As the crypto industry continues to evolve, the pursuit of environmental sustainability will remain a critical aspect of its development and acceptance on a global scale.

VI. Mainstream Acceptance: The Road to Utility

Over the past year, cryptocurrencies have made significant strides toward mainstream acceptance, shedding their image as a fringe technology associated with the dark corners of the internet. One of the most tangible signs of cryptocurrencies' mainstream acceptance is their integration into traditional payment systems. Major payment processors, including PayPal, Visa, and Mastercard, have embraced digital currencies, allowing users to buy, sell, and hold cryptocurrencies within their platforms. This integration has provided millions of users access to cryptocurrencies as a medium of exchange.

Several businesses, ranging from multinational corporations to local coffee shops, have also begun accepting cryptocurrencies as payment. The likes of Microsoft, Overstock, and even fast-food chains like Burger King and Starbucks have joined the growing list of companies that recognize the utility of cryptocurrencies in facilitating transactions. This acceptance has opened the door for individuals to use cryptocurrencies in their daily lives, gradually normalizing their use in commerce.

Beyond payments, cryptocurrencies have gained recognition as legitimate investment assets. Institutional investors, including hedge funds and asset managers, have allocated significant portions of their portfolios to digital assets. Tesla's purchase of $1.5 billion worth of Bitcoin early in the year served as a watershed moment, signaling to other corporations and institutional players that cryptocurrencies could serve as a store of value and a hedge against inflation.

Institutional-grade cryptocurrency products, such as Bitcoin and Ethereum exchange-traded funds (ETFs), have gained approval and traction in major markets like Canada and the United States. These ETFs provide a regulated and accessible way for institutional and retail investors to gain exposure to cryptocurrencies, further legitimizing them as an asset class.

Regulatory recognition has played a pivotal role in cryptocurrencies' journey to mainstream acceptance. While regulatory challenges remain (as discussed in a previous section), ongoing efforts to define clear regulatory guidelines have provided a level of trust and safety for market participants. Investors and businesses alike are more willing to engage with cryptocurrencies in jurisdictions with established regulatory frameworks.

However, the path to mainstream acceptance has its challenges. Cryptocurrencies' price volatility, regulatory uncertainties, and scalability issues continue to hinder broader adoption. Additionally, the industry must address security, fraud, and user education concerns to foster trust among a broader demographic.

Nonetheless, the opportunities presented by mainstream acceptance are substantial. Cryptocurrencies offer financial inclusion to the unbanked and underbanked populations, facilitate cross-border transactions, and enable innovation in various sectors beyond finance, including supply chain management and healthcare.


While challenges persist, the crypto industry's ongoing maturation, combined with regulatory efforts and the involvement of institutional players, suggests that the path to mainstream acceptance is well underway. Cryptocurrencies are no longer confined to the fringes of the financial world but are increasingly becoming integral to the global economy. As the industry continues to evolve, cryptocurrencies are poised to redefine how we transact, invest, and interact with financial systems, ultimately reshaping the future of finance and commerce.

Overall, the crypto industry's evolution over the past year is a testament to its dynamic nature. Price volatility persists, institutional engagement deepens, regulatory challenges persist, and mainstream acceptance gathers momentum slowly but surely. These nuanced dynamics show that the crypto industry is far from static; it is continually adapting to an evolving global landscape. As we look ahead, the crypto sector remains a force that warrants close observation and continues to redefine the boundaries of finance, technology, and innovation.

Mathis Bitton is a Ph.D. candidate in the Harvard Government Department studying political theory and intellectual history. Mathis received a B.A. and M.A.  in Political Science from Yale College.

Elizabeth Hass is an adjunct professor at the NYU School of Professionals Studies, the founding director  of the NYU SPS Emerging Technologies Collaborative, and a partner at NYCP - where she writes about cities and technologies.