While 2020 might have been a year filled with ups and downs, cryptocurrencies ended the year with a bang. The crypto king and flagship digital currency bitcoin, started the year at $7000 and rose to almost $30,000 just as the curtains closed in 2020. A whooping 400% growth in 2020 alone.
With such impressive performance echoed through the crypto space in 2020, it is natural to envisage great things for crypto in 2021. Some of the biggest trends of the previous year could continue in 2021 on a more grander scale.
How crypto will play out in 2021 cannot be accurately predicted, crypto after all is full of surprises but there are trends and and events that will leave a mark on crypto this year.
Influx of Big players
The influx of institutional investors in bitcoin in 2020 made the crypto community go wild. Companies like MicroStrategy, Square and Mass Mutual, moved a massive chunk of their cash reserves into bitcoin. The spikes in bitcoin prices can be attributed to the bold moves by institutional investors.
This trend of big players entering the bitcoin scene is expected to continue in 2021 which could invariably lead to even more ATH (all time highs).
The $425 million investment by MicroStrategy already doubled in value. More big players will want to get a piece of the crypto action. There are more massive companies that might get in on crypto. A lot of traditional financial institutions will likely turn to crypto in 2021.
More institutions turning to crypto will mean a massive surge in use cases. Utility has been a major challenge for crypto when it comes to mainstream adoption. More people using cryptocurrencies for daily transactions and not just acquiring it for profit maximization will increase chances of mainstream crypto adoption. Companies like PayPal, Square already facilitate crypto use cases. More institutions going into crypto will increase use cases.
Will governments join the trend?
Will governments invest in bitcoin in 2021? If they did, it would be huge for crypto. While it might seem unlikely, it is happening indirectly of sorts. The Norwegian government owns about 600 bitcoins. This is so because it owns a 1.51% stake in MicroStrategy.
Government interest in crypto will increase once crypto becomes big enough. An open investment by a world power for example will spark a very wild waze of frenzy. FOMO levels will go through the roof, the effects of crypto will be unprecedented.
Role of Facebook’s Diem in crypto adoption.
Facebook backed digital currency, diem, formally known as Libra will play a massive role in crypto adoption in 2021. The currency is due to launch this month.
Facebook has about 2.7 billion users across all the platforms it owns. A currency backed by facebook could introduce crypto to a huge number of people. If the currency is easily available and accepted as a form of payment on facebook’s platforms, not only will crypto use cases go through the roof but the value of the currency will increase rapidly.
Will Elon Musk make a major bitcoin move?
Elon Musk’s fraternization with bitcoin has left some unsure of what he truly feels about the currency. Elon Musk is no stranger to crypto but hasn’t made a major public move in the space yet.
Recently the SpaceX CEO caused quite a stir in the crypto community on Twitter after he responded to Michael Saylor, CEO Microstrategy’s reply.
Michael Saylor’s reply read “If you want to do your shareholders a $100 billion favor, convert the Tesla balance sheet from dollars to bitcoin, other firms on the S&P 500 would follow your lead and in time it would grow to become a $1 trillion favor.”
Micheal implied Elon joined the institutional investors to convert Tesla balance sheets to bitcoin. Elon Musk’s reply of “are such large transactions even possible?” Sparked thousands of comments. The excitement that Elon would even consider it made the crypto community go wild.
Such a move by Elon would have an impact on crypto that never been before. TSLA stocks which have grown by an impressive 738% in 2020 alone will call for a lot of companies to follow Elon’s footsteps.
It is however not sure that Elon would make such a move. His take on crypto could be said to be positive but no one can say for sure if Elon will take Michael’s advice.
How will the Biden administration affect crypto?
The current president of the United States Donald Trump has made it clear he does not have a soft spot for crypto but now that new president Joe Biden will be coming on board in a few weeks, will there be changes?
While there’s general optimism that the new administration will help crypto thrive, it is also possible that things could play out differently.
Janet Hellen who is the president elect’s nominee to head the Treasury department isn’t a fan of bitcoin. According to her many of the the transactions done with bitcoin are illegal and ilicit. Given that a lot has changed since she made the comment in 2018 and renouned institutions are investing in bitcoin, Hellen might have a change of heart about the digital currency.
A crypto friendly United States will lead to a crypto friendly world.
Decentralized Finance (DeFi)
DeFi was a big part of crypto in 2020 and it is definitely a trend that will not oy continue in 2021 but grow also. DeFi growth in 2020 was phenomenal, starting the year with $683 million in total value locked (TVL) and spiking to 14billion at the close of the year. That is a mouth watering 2000% growth in only one year.
DeFi is extending financial services into the decentralized sphere. Services that could only be provided by traditional financial institutions are now being offered on a decentralized platform with crypto. Insurance, mutual funds and lending are now available to the ubanked. These financial services are now available only digitally.
There’s more coming to DeFi in 2021. While it is still a relatively new phenomenon, it will receive significant attention in 2021.
A significant about of DeFi protocols were built on the ethetreum blockchain. Ethereum will be continuing with another phase of its upgrade in 2021. There will be a lot going on for ethetreum in 2021.
Ethereum saw over a trillion dollars in transaction in 2020 and the number is expected to increase this year.
What is known for sure.
Cryptocurrencies are here to stay and are not going anywhere for a long time. There could be setbacks even this year but crypto will die out as a result. Mainstream adoption might not come in 2021 or subsequent years but it is very imminent.