Cryptocurrencies are experiencing a beautiful moment with increasingly higher prices and new records. Bitcoin touched almost $60,000 a few days ago, while Ethereum broke the highs and then exceeded $2,000. These days we are witnessing a price correction, but the trend seems to remain positive. This is why 2021 will be a special year in which we will see several interesting trends. Let’s proceed with an overview!
1. Bitcoin and institutions
Like all underground phenomena capable of withstanding the axe of time, bitcoin is about to become even more mainstream. It is therefore not unlikely that 2021 will see a continuation of what we saw in 2020, with an increase in institutional investment in the cryptocurrency sector. One of them is the financial company Guggenheim Partners, which in recent days has announced its intention to inject $530 million in an investment trust linked to bitcoin. According to experts, the quantitative easing measures being introduced in economies that have been mortally wounded by the Covid-19 could, among other consequences, lead to further investments in cryptocurrencies by banks and investors who were once reluctant.
2. Little bitcoin grow
Last year, even Elon Musk gave his endorsement via Twitter to a minor cryptocurrency: Dogecoin. However, the sector of altcoins, the “alternative” cryptocurrencies, has been booming for a while: despite offering much lower prospects and earnings than bitcoin, cryptocurrencies such as Polkadot (DOT) and Cardano (Ada) are gaining in popularity. And in 2021 they could (the conditional is obligatory) get noticed. Spartan Black, a leading Asian crypto investment fund, believes Polkadot could even grow to the top-3 of the largest cryptocurrencies by market capitalization. Nicholas Merten, the creator of Datadash, one of the most popular YouTube channels among crypto-investors, also believes that at least some of the new investments in the sector will go to altcoins. Posterity will be the judge of that.
3. The social currency
According to the Financial Times, Facebook’s cryptocurrency Libra should finally see the light of day in January, but it will debut under a brand new name: Diem. The re-branding was necessary after all the controversy and backlash that marked its debut months ago. The digital currency will not compete with bitcoin, but rather it will be a stablecoin, i.e. one whose value remains pegged to a reference currency, in this case, the dollar. The idea is to offer a fully digital payment instrument that is independent of the banking system, especially in developing countries where there are more smartphones than current accounts. The creation of a financial ecosystem in Facebook could bring it a number of advantages, yet to be explored.
4. The search for stability
Even if Diem’s entry might disrupt certain balances, it is not necessarily the case that existing stablecoins are destined to succumb: Tether, for example, whose capitalization in August exceeded that of bitcoin, is now a certainty in the cryptocurrency markets. Investors and traders, instead of exchanging their virtual assets into dollars, euros, yuan, which they would have to deposit in the bank, convert them into Tether which gives them the stability of the dollar, plus the ability to store it in their virtual wallets, and then convert it back into cryptocurrencies at the appropriate time. It is difficult for Diem to offer the same guarantees, but Facebook’s firepower will in any case serve to convey the concept of stablecoin, which is still unknown to the masses. Assuming that no financial scandal crops up first, given that the sector is highly deregulated.
5. Cryptocurrency payments
The combination of PayPal’s clearance of bitcoin and the rise of altcoins and stablecoins in 2021 could convince more and more e-commerce companies to accept cryptocurrencies. Consider this: the payment method is one of the main reasons we choose an online shop. That is why, in order to beat the competition from Amazon, some online shops may open up to bitcoin and related products, which offer advantages such as low transaction fees. The fact that digital payment solutions such as Hype, Circle and Anyday have opened up to bitcoin in recent months, albeit in different ways, is a clear indication of the trend. And in 2021 others will follow.
6. Digital state currencies
For months now, China has been working on developing its own digital currency that could help the yuan conquer the world, bypassing the financial barriers that now keep it tied to the banking system: the baptism of fire should take place during the Beijing Olympics in 2022. So 2021 will be the watershed year when China’s digital currency will take shape.
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