New York (CNN Business)BItcoin prices have been on a wild ride this year, and they are set to finish 2021 sharply higher than where they began it.
One bitcoin currently trades for just under $49,000, a stunning surge of 66% from January levels. But the top crypto is also down nearly 30% from its record high of almost $69,000 hit in November.
So what's next for bitcoin and other cryptocurrencies?
There is no denying that crypto has gone mainstream. The total value of all cryptocurrencies in circulation stands at more than $2.2 trillion, with bitcoin accounting for about $920 billion of that total.
Ethereum, or ether, is starting to close the gap, too. Ethereum, which is a popular crypto for the smart contracts and non-fungible tokens (NFTs) that have taken the art and collectibles world by storm, has a market value of $475 billion.
Ether prices have more than quintupled this year, from around $730 per coin to nearly $4,000.
There now are also several bitcoin exchange-traded funds (ETFs) for individual investors to choose from. ETFs investing in other top cryptos could be in the cards, too.
"The next possible step is for additional ETFs for other coins to launch. There probably will be an ether ETF in early 2022," said Nick Elward, senior vice president and head of institutional product and ETFs at Natixis Investment Managers. "There probably will be an ether ETF in early 2022."
Major professional and institutional investors, including top fund managers George Soros and Stanley Druckenmiller, have been investing in crypto. Still, the latest pullback is a stark reminder of how notoriously volatile bitcoin and other crypto prices can be.
Less severe crypto winters ahead?
Many investors rushed into bitcoin in 2017 and watched prices surge from about $1,000 per coin to a little below $20,000 by December of that year.
Then came the crash, with bitcoin plunging as low as around $3,500 by the end of 2018. Those prices obviously have recovered — and then some — but it took until December 2020 before the coin got back to the $20,000 mark.
Such breakneck swings in crypto prices are probably here to stay. The key, experts said, is for investors to learn to stomach them and ride out the inevitable ups and downs.
"More than once we have observed a correction in the market," Anton Chashchin, managing Partner of Bitfrost, a digital assets service provider, said in an email to CNN Business. "If institutional investors begin to take profits, then it can cause a ripple effect."
But he added that these large firms will likely keep flocking to bitcoin as a potential hedge against inflation and rising interest rates, which could hurt traditional government-backed currencies.
"Even if the source of institutional investor interest is the Fear of Missing Out (FOMO), all of the institutional decisions have been made after careful consideration. These firms have come around to the potential benefits of cryptos," Chashchin said.
The increased adoption and legitimacy of cryptocurrencies also will likely help mitigate some of the volatility. Prices may still move sharply, but the shifts may not be as violent as in the past few years.
"Having larger institutions with deeper pockets and steadier hands buying cryptos will help," said John Wu, president of Ava Labs, an ethereum-compatible blockchain firm. "They can withstand the volatility."
Moving beyond bitcoin
Natixis Investment's Elward also believes that more fund managers will look closely at cryptocurrencies, and may be likely to move beyond passively run bitcoin ETFs that simply mirror the direction of bitcoin futures.
"Active is a logical fit for crypto investors. I expect more managers in there analyzing which are the most appropriate ones to buy," Elward said.
He added that crypto is a natural extension of the so-called alternative investment world, a group of assets beyond stocks and bonds that typically includes gold and other precious metals.
Along those lines, some experts think that ether and the world's third most valuable cryptocurrency, binance coin, could continue to gain market share versus bitcoin.
"You have to look at the utility of cryptos. Ether could eventually be bigger than bitcoin. It's the rails for NFT transactions," said Alex Lemberg, CEO of the Nimbus Platform, a decentralized finance lending firm.
Wu, of Ava Labs, also thinks that investors will move beyond bitcoin.
"We expect more dispersion in the crypto world. Prices will move more based on adoption," he said. "Cryptos won't be trading in tandem as much."