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Highlights
- 2021 was the year of Cs -- corona, capital, credit, cryptos, and climate change
- Three of these, climate change, cryptos and corona dominated headlines across the globe
- 2022 might be the year when the dust settles on cryptos, and emission cuts pledges come true
The year 2021 was more about Cs than any other. The coronavirus pandemic overshadowed every aspect of life -- social, financial and political. Capital and credit remained the top priorities for central banks that kept benchmark rates low to allow individuals and businesses easy access to money.
But if there we three Cs that unarguably dominated the global landscape in 2021, they were cryptos, corona, and climate change.
They impacted the society, economy and politics of all nations. Rising sea levels are becoming a concern in many places; the US and Canada heatwaves made news headlines in summer 2021, and the cryptocurrency market entered a new phase where big institutional investors aided these assets’ further mainstreaming.
1. Climate change
The COP26 conference was a highlight of the year.
Held in Glasgow over a two-week period, the summit closed with an agreement reached by nearly 200 countries. Many analysts had flagged the lack of discussion on methane emissions in climate talks that are usually dominated by carbon emissions.
COP26 saw an agreement by countries on the methane emission issue, besides a pact on carbon trading rules. The year 2022 can see nations taking these talks forward and reaching a consensus on funding among developed countries for the fight against climate change.
What surprised many was the joint pledge by the US and China on cutting emissions. The declaration by the two countries includes a mention of transition toward a net-zero emission economy.
Clean stocks for 2022
In this backdrop, it can be expected that clean energy companies might dominate the global stock market in 2022 and beyond. 2021 was also the year when many big investors including pension funds announced divesting their stake in companies operating in coal and other dirty fuel industries.
Also read: A look at Tesla’s Journey in 2021 and beyond
Entities like Tesla and indices including the TSX Renewable Energy and Clean Technology will remain a close watch in 2022. Tesla’s year-to-date and one-year returns are promising enough to draw the interest of retail and institutional investors. The returns of the TSX Renewable Energy and Clean Technology were subdued in 2021, but green technology stocks are a promising lot.
Tesla’s actual bull-run began in 2020 and catapulted its CEO to a net worth of over US$300 billion at one point in 2021.
2. Cryptocurrencies
Consider these stats. Bitcoin was priced at nearly US$29,000 in the beginning of 2021. In less than four months, Bitcoin rewarded its backers with over a 100 per cent year-to-date return. Some other crypto assets like Axie Infinity, a blockchain game, and Solana, a blockchain network rivaling Ethereum, made a fortune for their backers in 2021.
But not everything in cryptocurrencies was so smooth and rewarding. Bitcoin started losing value after mid-April in the wake of a crackdown in China and negative sentiments due to too much power usage. At one time in July, Bitcoin lost nearly half its value as compared with the April 2021 highs. A few altcoins like the Squid Games crypto token rose and fell like a house of cards.
Also read: Is Bitcoin better than gold as hedge against high inflation?
Cryptos’ mainstreaming in 2021
Despite all this volatility and uncertainty, 2021 could be termed as the year when cryptos became, in some way, a competitor to the stock market.
The S&P 500 has been the heartbeat of the global market for long. In 2021, the Dow entered the cryptocurrency world by launching indices that now track the prices of Bitcoin and Ether. This was a big step considering crypto assets had hitherto remained largely ignored by big institutions. Big banks of the US extended crypto investment services to their clients, and in Canada, the world’s first Bitcoin ETF was green lit by the regulator.
Today, the Toronto stock Exchange (TSX) has a variety of options in the crypto ETF category. In the US too, the ProShares Bitcoin ETF remains a hot topic.
Also read: Is investing in altcoins better than Bitcoin?
3. Covid
Covid is refusing to subside. 2021 saw a resurgence on the back of new variants including Delta and Omicron.
It is uncertain when the coronavirus will fully recede and lives resume to normal. Employers have delayed work from office in the wake of Omicron.
The stock market remained volatile for most parts of the year; however, many indices around the world, including the TSX Composite Index scaled new peaks.
The 3 Cs in 2022
Climate change is here to stay, and countries have yet to deliver on their pledges. Cryptos too are unlikely to go anywhere despite all the negative sentiment and their write-off by investors like Warren Buffett.
As stated earlier, not all stocks related to clean energy can have an identical trajectory. Nor can all crypto assets gain or fall in equal amounts over a particular period.
In 2022, a few stocks related to green energy and a few altcoins like Ethereum’s Ether and Bitcoin, now that it is a legal tender in a country, will stay on the close watch list of investors, both retail and institutional.
Anything on Covid is uncertain, and only time will tell how it unfolds in 2022.
Also read: Can Bitcoin be termed as the ‘asset of the century’?
Viewpoint
The three Cs discussed above have a common element -- uncertainty. Will the nations that have pledged ambitious emission cutting goals produce tangible outcomes to limit global warming? Or is it all rhetoric?
Will the cryptocurrency world survive in the long term amid all the regulatory concerns and underlying hyper-volatility in prices? Or, are cryptos another bubble?
2022 might be the year when at least some of the dust settles on both these uncertainties. But what is certain is these three Cs will be the topics of debates in the coming year as well.
