Bitcoin Realized Gains Soared Last Year

  • 2021 was a stellar year for Bitcoin.
  • Realized gains were up more than 5x for the entire crypto ecosystem.
  • A stabilizing macro environment could bring back this positive momentum.

Back to the Future

2022 has been a difficult year for Bitcoin with year-to-date losses of over 10% adding on to other losses incurred in November and December 2021. The uncertain macroeconomic and geopolitical context has brought Bitcoin down along with other asset classes. The Federal Reserve’s latest hawkish pivot made things worse for the markets. The prospects of a recession and potential stagflation are also rendering all markets increasingly jittery. Whereas the near future still seems difficult to predict, it may be useful to put this period in the context of last year’s stellar year for Bitcoin and the broader cryptocurrency ecosystem. Once the macro environment stabilizes, one can hope that similar gains will eventually return. After all, Bitcoin is an asset class that is only 13 years old. These bouts of volatility are a normal part of a revolutionary asset class’s early development.

Record-Breaking Gains

According to recent data by blockchain analytics firm Chainalysis, cryptocurrency realized gains soared in 2021. They estimate that investors realized worldwide gains of $162.7bn in 2021, which is more than five times higher than 2020’s $32.5bn. This jump in realized gains was driven, among other factors, by the all-time record high prices of Bitcoin and Ethereum. Despite the year-end correction, Bitcoin ended 2021 up almost 60% for the year and produced realized gains of $74.7bn according to their estimates. This is in addition to Bitcoin’s transaction volumes reaching all-time highs. This data is all the more impressive in light of China’s Bitcoin mining ban in 2021 and the number of attacks the sector has received from the media and legislators around the world. Chainalysis’s data is based on transaction data and web traffic data, which allows them to estimate where these gains were realized. The US easily topped the list of countries with most realized gains. The realized gains in Bitcoin in the US jumped from ~$4bn in 2020 to over $20bn in 2021. This was followed by the UK, Germany, Japan, China, Turkey, and Russia. Japan had the highest proportion of realized gains from Bitcoin in the top-ranking countries, as Bitcoin gains were estimated to be five times higher than gains from Ethereum.
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Another fascinating aspect to the data released by Chainalysis is that there are countries that are outliers in terms of crypto gains when compared to their GDP. These are countries that seem to have disproportionately high levels of crypto adoption. This is an interesting trend to watch, as it may help predict where sovereign adoption may happen next or where the population will likely reject their fiat counterpart in favor of Bitcoin the fastest. According to the data, five countries are notable outliers. These are Turkey, Vietnam, Ukraine, the Czech Republic, and Venezuela. Venezuela and Turkey are particularly interesting, as the data seems to show that people naturally flock towards cryptocurrency, and Bitcoin in particular, when they lose faith in their governments and their respective fiat currencies. Venezuela ranks 78th in GDP but 33rd in terms of cryptocurrency realized gains, which are estimated at $1.1bn. Turkey, for its part, ranks 11th in GDP but 6th in terms of cryptocurrency realized gains, estimated at $4.6bn. Disproportionate crypto usage in certain countries thus indicates that crypto, and Bitcoin in particular, is becoming a natural viable safe-haven alternative to fiat and not just an alternative investment asset class.

Despite a difficult 2022, recent data shows that realized gains in Bitcoin and the broader cryptocurrency ecosystem soared in 2021. The total worldwide gains increased over fivefold driven by all-time highs in the price of Bitcoin and Ethereum. Countries with particularly difficult macroeconomic conditions seemed to outperform. This is a promising sign that Bitcoin is becoming a safe-haven alternative to fiat.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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