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Crypto: The biggest winners and losers of 2021

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Yahoo Finance’s David Hollerith breaks down the best and worst performing cryptocurrencies in 2021 from bitcoin and ethereum to Squid coin and other blockchain projects.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Crypto has had a series of high and low moments this year. Yahoo Finance crypto reporter David Hollerith has been reminiscing a bit for us this morning. David.

DAVID HOLLERITH: Yeah. I mean, I think at this point, Brian, it's a little redundant to say that crypto has had a good year. But if we're thinking about the best performers of the year, the cryptocurrencies that stand out are those that try and do something similar to Ethereum, which means they're meant to be used for blockchains that use smart contract platforms. So that means it's where people can create NFTs or get involved in decentralized finance, things like that.

So the top gainers we're seeing in that area are tokens like AVAX, Sol, Matic. But the one that stands out as the best-performing is Luna, which is the token that powers the Terra protocol. So Luna has seen a gain of 17,000% this year, which is obviously enormous. And there's a lot of explanation for why that is. Partly, it has to do with the fact that Ethereum has very high transaction costs, so there's a lot of extra demand for people to look forward to the next smart contract blockchain to use.

But Terra also has a stablecoin which has also recently advanced in value. It's the highest-valued algorithmic stablecoin. So it's sort of been tested, especially in December, at the beginning of December when we saw that crypto crash. And stablecoin was sort of tested in a way that it didn't unpeg from its value, which is obviously-- that's what breaks a stablecoin. So we've seen all of that together. And there's just a lot of riding momentum on Terra's potential. So that is the biggest gainer as of this week, at least. So--

JULIE HYMAN: I mean, when you're talking about multiple thousands of percent, what's a few days here or there? But David, what's interesting to me about these huge outperformers-- to compare them to Bitcoin, which has almost doubled this year, but of course has a lot of ups and downs-- these guys that are up multiple thousands of have also had lots of ups and downs, but many fewer people have heard of them and are trading them, presumably, compared with the more establishment coin like Bitcoin. So it's just interesting to me to see some of these obscure coins and wonder who's doing all the trading of them versus something like a Bitcoin.

DAVID HOLLERITH: Yeah. I mean, it's a very good question. I mean, I think even with Bitcoin, it's such a new asset that a lot of people are still wondering about that. I mean, I think the answer with Bitcoin is that it's not traded a lot, typically. People usually buy it, and they hold it.

But these smaller coins, they're working in the DeFi ecosystem a lot of times. So people are doing these complex trades where they'll take a token and then stake it or hold it to get another one, to make another trade. It's financed with LEGOs, sort of. So there's a lot of very complicated ways it's done. And I think a part of what's going on now is a lot of people are trying to figure out how it's used. And especially in decentralized finance, that's the bottom of all of this, is people are trying to figure out, besides finance for the sake of finance, how these products will actually be used in terms of actually having a real physical gain or advantage for people.

JULIE HYMAN: Yeah. And it also gets to one of the-- to me, at least, one of the conundrums of crypto, which is that it's supposed to be, on the one hand, a solution to the lack of transparency or the alleged lack of transparency in traditional finance, but it's also not very transparent as we try to figure out who holds this stuff and all of that. But we talked about some of the best performers. What are some of the worst performers on the year in terms of cryptocurrencies, David?

DAVID HOLLERITH: Yeah, well, there's about 6,000 crypto projects out there, and plenty of them have not performed well. So worst is a pretty relative term in a way. But I think one that stands out to most people is Squid Game Token, which was this cryptocurrency scam that was based off of the-- it was named after the popular Netflix series. And that was a $12 million scam, which by in turn is actually not the biggest scam in crypto that's happened this year. But that token fell a lot.

Another scam-- or not scams, necessarily-- a non-scam bad performer was the token for this DeFi project called Bogged Finance. So what happened there was hackers actually leaked all of the funds and got away with it. So typically, worst performers in this area are not your typical slow-moving cryptocurrencies. That doesn't seem to exist. It's mostly things that turn out to be hacks or scams.

BRIAN SOZZI: It truly remains the Wild West out there in crypto land. David Hollerith, thanks so much.