Despite being the most well-known cryptocurrency, Bitcoin faced a volatile 2021. While it delivered a staggering 516% return in just six months, its momentum plateaued as market factors like regulatory risks and retail-driven trades influenced its price swings.
The cryptocurrency saw major moves, particularly around significant events like the U.S. presidential election and COVID-19 vaccine rollouts. At one point, Bitcoin correlated with the S&P 500 Index and even commodities, reflecting its perceived role as an inflation hedge. However, towards the latter half of 2021, its volatility softened, with fewer drastic price swings compared to earlier in the year.
“A lot of traders have made life-changing money in 2021 and have been waiting to take profits until after the turn of the year to delay tax payments until 2023,” noted Sergio Silva, sales director at Fireblocks. This could lead to additional selling pressure in early 2022.
Ethereum’s Rapid Growth Fueled by Blockchain and NFTs
While Bitcoin remained in the spotlight, Ethereum (ETH) quietly outperformed it. The Ethereum blockchain benefited from growing adoption among financial technology firms, but what truly pushed Ether ahead was the explosive rise of non-fungible tokens (NFTs) in the art and gaming industries.
NFTs became a multi-billion-dollar industry, leveraging Ethereum’s smart contract capabilities to tokenize digital assets. This surge in blockchain-based applications made Ether a preferred asset for investors looking beyond Bitcoin’s store-of-value narrative.
Measuring Ethereum’s outperformance over Bitcoin while accounting for volatility reveals that ETH reached levels last seen in mid-2018, signaling a fundamental shift in market sentiment.
The Bigger Picture: Blockchain as a Software Revolution
Industry experts suggest that Ethereum’s dominance reflects a deeper shift in the tech landscape.
“It’s not really that clear to the world at large, to the mainstream, that what’s really happening with Bitcoin, with Ethereum, with this whole bucket of technologies…is really a revolution in software development,” said Graham Jenkin, CEO of Coinlist, in a Bloomberg TV interview.
Jenkin emphasized that blockchain technology is reshaping the way software is built, distributed, and operated. Ethereum’s rise is not just about price gains—it represents a structural transformation in digital infrastructure, setting the stage for its continued relevance in 2022 and beyond.
What’s Next for Ethereum and Bitcoin?
As 2022 begins, Ethereum is expected to retain its momentum, especially with the anticipated transition to Ethereum 2.0, which promises faster transactions and reduced energy consumption.
Bitcoin, on the other hand, may continue facing macro-driven price swings, influenced by regulatory developments, institutional adoption, and inflationary concerns.
The competition between Bitcoin and Ethereum is far from over, but 2021 proved one thing: Ethereum is no longer in Bitcoin’s shadow—it’s leading the charge into the future of blockchain-based finance.