DeutschThe year 2020 was more than exciting for the crypto sector. And that in both positive and negative ways. In addition to the interesting developments at the end of the year, such as the price of Bitcoin and Ethereum, there were also some negative headlines – as in almost every year. For example, there were several reports of hacker attacks on exchanges and big names in the industry. One of the latest celebrities in the sector was Hugh Karp, the founder of the DeFi company Nexus Mutual. A hacker had stolen no less than 370,000 NXM tokens via malware and transferred them to his own wallet. There were also attacks on the Twitter accounts of many celebrities in the past year in order to obtain money from users in this way. The latest incidents have a good reason. The developments in the area of decentralized financing in particular led to noticeable jumps in the prices of several coins and tokens. 2020 was a more than eventful year. What does the 2021 outlook look like now?
Important information summarized in a compact form:
- 2021 is expected to bring regulatory steps in many countries
- good prospects for new Bitcoin records
- more states could follow China’s CBDC developments
- new US government could take a more relaxed approach to crypto
- DeFi systems will become more important
- not only Bitcoin is likely to continue to rise
- Growth in the area of stablecoins is emerging
2021 could Become a New Year of Success for the Crypto World
Against this background, it is correspondingly interesting to take a look at possible trends, forecasts and changes in general for the crypto world. And that is exactly what this analysis is about. Our experts deal with the question of in which points the new year already gives rise to hopes, but also possible crises and problems should be addressed. Many analyses have been indicating new record prices for Bitcoin and Co. for weeks. After the crypto flagship currency moved towards a new all-time high in the last weeks of 2020 at the latest, it was obvious that many connoisseurs of the industry would have their say with their own predictions.
One of them:
The CIO of Guggenheim Investments. In interviews, Scott Minerd indicated that the BTC price remained below its actually realistic level in 2020. Minerd spoke of a realistic current value of 400,000 US dollars and more.
The Ongoing Pandemic Situation Strengthens the Crypto Sector
Other insiders pointed out that such a course is more likely to be wishful thinking. Nevertheless, many analysts are not afraid to predict rosy times for Bitcoin. In mid-December, there were statements that at least a target price in the range of 120,000 to 140,000 US dollars was expected by the end of 2021. The Corona pandemic is only too readily cited as a possible trigger. Why? The massive financial injections by central banks worldwide fuel fears of rampant inflation. In many places, Bitcoin is already traded as the legitimate successor to the precious metal gold. Such allusions are not entirely far-fetched. On the one hand, there have long been indications that institutional investors in particular are increasingly shifting assets from gold to Bitcoin and other cryptocurrencies. On the other hand, the world’s first digital currency (and not only it) is characterized like gold by a natural limitation of available resources.
Bitcoin could Reach further All-Time Highs
The last weeks of 2020 also indicated that another Bitcoin rally could occur. In the period after the holidays, the BTC price climbed above the threshold of 29,000 US dollars for the first time. This had been announced for some time. At the moment of its provisional high, this corresponded to an increase of over 3,000 USD within just 48 hours. After that, however, there was a significant correction, at times even to clearly below 25,000 USD. Nevertheless, the development was an extremely important signal for crypto fans for the journey that Bitcoin could embark on in the new year – and with it many altcoins, which traditionally like to stay in the slipstream of the most important cryptocurrency.
Outlook 2021: DeFi Ecosystems Will Play a Greater Role
An important cornerstone for the coming crypto year will undoubtedly be how the decentralized financial industry (DeFi) sector develops. After impressive growth in many projects in the sector, there had recently been some setbacks here. Overall, however, many observers expect that once again the interest of institutional investors can and will trigger further expansions of the industry. And with it, the blockchain as the foundation of many DeFi projects will continue to gain in importance. Especially since: Even without the DeFi trend, the interest of many companies from banks to insurance companies to the IT sector in the blockchain is constantly increasing. In many forecasts for the crypto market, this is an important linchpin as a reason for probable positive movements.
More insights and knowledge: About DeFi – Decentralized Finance
We Look into the New Year 2021 – more Acceptance, Lower Volatility?
As in the past year, there was first a consolidation in digital currencies at the current turn of the year. The Bitcoin fell to below 25,000 USD on the second day of the year. However, consolidating also means that the beginning of a new upward phase is within reach when traders have left behind the profit-taking at the end of the rally. Many industry experts expect increasing correlations between Bitcoin and the stock markets from 2021. A successive approximation of the price developments has been emerging for some time. This could mean for “normal” investors that the Bitcoin becomes more predictable for them, so to speak. Risks could then be better calculated and investments easier to weigh up. However, analysts do not expect parallels to classic foreign exchange trading for the time being.
There will continue to be differences here. Cryptocurrencies will remain more volatile than traditional exchange rates for the time being. Good news for speculators. However, should more states create regulations as announced – especially the USA – this will be an important signal. The stronger entry of institutional investors, but also the stronger use of digital currencies in payment transactions will in turn ensure greater recognition. The entry of large companies such as PayPal, MasterCard and VISA should be mentioned in this context. Credit cards with crypto payment options have been rare so far, but should play a central role within the sector from 2021.
Ethereum Remains on Bitcoin’s Heels Due to System Changeover
An important new trend is emerging (see above the topic DeFi) with the “Bitcoin follower”. Through the multi-stage introduction of Ethereum 2.0, the system will become more and more efficient in the near future, according to the developers. Ether as the currency of the ETH universe could steer into a clear bullish movement in the course of this. The Ethereum blockchain will be further expanded and is primarily intended to enable faster transactions and guarantee better, more powerful processing in the network. In particular, Ethereum’s Smart Contracts could give the blockchain a new boost in connection with the technical innovations. At the heart of ETH’s new Beacon blockchain is not least the change of the consensus mechanism to Proof-of-Stake (PoS). The replacement of the previously used Proof-of-Work (PoW) is intended not least to reduce energy consumption and provide miners with fairer rewards. The change is not entirely undisputed in the community.
Elsewhere, we have already taken a closer look at ETH 2.0. Nevertheless, the new orientation deserves mention in the current outlook for 2021. The fact that smart contracts are basically cheap and quick to use for any type of contract stands out clearly on the list of advantages.
Outlook 2021: more Institutional Investors Will Use Cryptos
For a forecast, we inevitably have to return to the area of institutional investors. Many analysts give this group of investors good chances of taking a leading role in the crypto market from the new year. Had Grayscale and other large funds and companies initially discovered Bitcoin for themselves and invested massively, this will not be the end of the proverbial line. Billions of dollars had been poured into the Bitcoin market in 2020, which was a major factor in the rally. Hedge funds, asset managers and other investors with strong capital are increasingly landing with altcoins such as Ethereum. Headlines like “Bitcoin conquers Wall Street” were by no means far-fetched. Because that’s exactly where many of the new crypto investors sat and sit.
New Trading Models with Crypto Reference as Competition for Pure Crypto Exchanges
The bridges that have been built to traditional markets such as Wall Street or the London Stock Exchange will become more and more of a problem for classic crypto exchanges from 2021. The more derivative products such as futures or options on digital currencies are brought to the market, the stronger the competition. It is above all the aforementioned institutional investors and speculators who are more likely to operate on exchanges for futures and options derivatives such as the CME than on pure crypto exchanges. For large players such as Binance or Coinbase, it will become more and more of a challenge if investors prefer to trade derivatives on the Chicago Mercantile Exchange (CME) and other places than to buy and sell coins and tokens directly via exchanges. This development can lead to the fact that crypto investors as a whole have to deal with the new circumstances and other analysis tools.
At the same time, this trend can lead to a different perception on the part of many interested parties who have not yet dared to enter the crypto market. Analyses by renowned experts from the “Old Economy” still enjoy a better reputation among many undecided people than evaluations by crypto insiders.
Surveys of Crypto Users Fuel Hope for Good Developments
The changed perception will also lead to the fact that more and more companies from the old financial world recognize the benefits of tokens as part of supply chains or business models in general. Car manufacturers, banks and many other companies are now testing the possibilities for using the blockchain. The emergence of crypto funds and token-based securities will also ensure even more attention from 2021. Several surveys in the recent past have shown that previous investors are planning further spending in the Bitcoin sector in the new year. One of them was carried out by the experts from Blockpit. Almost 90 percent of the 500 crypto owners surveyed here stated that they expect continued positive developments in the crypto market. And more. More than 70 percent of the survey participants apparently want to expand their crypto shares in the portfolio and buy more bitcoins. According to the survey, crypto owners also want to trade other cryptocurrencies more strongly. More than 96 percent of the people surveyed want to invest in digital currencies again in the new year.
Slightly more than one in three is convinced that cryptos are the “future of finance”. The proportion of those who continue to see Bitcoin as the dominant currency of the crypto sector is similarly high. The results of several other surveys read similarly optimistically from the perspective of the crypto sector. Interesting: The survey mentioned showed that 56.6 percent of the participants want to hold bitcoins for more than 12 months and thus pursue a rather long-term investment strategy.
In Addition to Bitcoin, other Systems and Currencies Will also Win
The fact that the blockchain will gain in importance in 2021 is certain in view of the increasing interest in many economic sectors and the emergence of new developments. The question for our outlook is which coins, in addition to Bitcoin, have particularly great potential to play a leading role. Since the market emerged, more than 2,000 altcoins have been created. Many of them have disappeared over time, others have been able to establish themselves. In addition, there are now a number of offshoots of already known systems through so-called hard forks. With Bitcoin Cash or Bitcoin SV (BSV) and others, there are particularly many such spin-offs within the underlying blockchain for the crypto flagship currency Bitcoins. The result of such developments is more diversity for investors and choice for interested parties who are more concerned with technical peculiarities. Many experts expect particularly good opportunities alongside BTC currencies such as IOTA (MIOTA) or the scientifically oriented format Cardano (ADA).
Both systems have been part of practical tests by the aforementioned representatives from the banking or automotive sector in the past. TEZOS (XTZ) or Monero (XMR) will also continue to be very popular with many crypto fans. An important factor for the success of the systems will be the best possible scalability.
Young Trend – Non-fungible Tokens and Privacy Coins
So far, tokens of this type are mainly used in the area of online games. While many conservative skeptics have so far regarded non-fungible tokens (NFT) as a gimmick, the sector will in all likelihood become a more important approach of the crypto industry in the future. For example, in the form of digital trading cards – sports clubs, for example, could issue them as a new version of the well-known cards with photos and data on players. The possible uses are enormous. There could soon be significantly more marketplaces for the exchange of such cards. Fashion labels are also increasingly active in this environment. Digital art also contributes to the boom in the sector. In addition to NFTs, our experts are once again expecting good growth in the area of privacy coins – i.e. the currencies with particularly good framework conditions with regard to data protection. If these systems are criticized by politicians and authorities precisely because of the difficult traceability, Monero, as a privacy coin with the highest market capitalization to date, enjoyed increasing attention in 2020.
Compared to currencies such as Bitcoin, transactions are actually anonymized here. With many other currencies, transactions are more “pseudonymized” and can certainly be assigned to a specific user with the necessary technical knowledge. State investigation authorities have always been a thorn in the side of anonymity. The fact that only criminals prefer privacy coins is anything but correct despite the repeated accusations. For example, there were several analyses in the past year that cited Bitcoin as the cryptocurrency that hackers trusted most often. Monero and Co. could have a very good new year ahead. Because more and more people no longer feel well represented and treated by banks and regulatory authorities. Privacy coins could also find new followers when it comes to inflation protection.
Security Tokens: 2021 could Open New Doors
At the latest through the activities of the social media giant Facebook around its planned own cryptocurrency Diem, many mainstream media also reported on offers from the security token sector. As is well known, these variants allow the distribution of assets that are not divisible in the actual sense. A popular example in this context: real estate. But also companies that want to raise fresh capital and do not want to go the way of normal stock exchanges are increasingly recognizing the advantages of security tokens. Claims such as ownership rights, shares in assets or voting rights for token holders can be conveniently distributed and assigned via these tokens. Among other things, the systems are gradually conquering the middle class worldwide. Investors who cannot afford supposedly expensive shares are given the opportunity to become shareholders through the security tokens. Token issuers can easily increase their liquidity without having to accept high costs for stock market issues.
As early as 2019, the US bank JP Morgan made headlines with its plans for the JPM Coin, which is pegged 1:1 to the US dollar. With its in-house digital currency, the company not only wants to profit from the Bitcoin boom. At the same time, the global player is keen to clearly position itself against corporate stablecoins, other state digital currencies (CBDC) or Ripple’s cross-border payment system around the XRP Coin. Ripple, by the way, had to complain about massive slumps in its XRP at the end of the year due to a lawsuit by the US authority SEC.
Apropos CBDC – are State Digital Currencies on the Rise?
China was the first major country whose government not only announced huge investments in multi-year blockchain developments and tests. The People’s Republic also wants to be a leader when it comes to Central Bank Digital Currencies (CBDC), i.e. digital central bank money. From the outset, the country had its eye primarily on Facebook’s plans for the Libra currency, or Diem, as the format is now supposed to be called. Initial projects for the application of the state cryptocurrency are already underway. Many other countries are also working on their own blockchain concepts, at least according to unofficial reports. The chances are good that 2021 will have some exciting news in store. This is because the US and other countries are under pressure to act if China’s strategy is implemented across the board.
Outlook 2021: What Do New Regulations Mean for Bitcoin and Co.?
If you ask analysts and industry experts what they think of the regulatory efforts of many countries regarding the crypto market, the answer in many cases is: regulations are both a curse and a blessing. It is obvious that more states want to ensure clear conditions in 2021. Once again, it is the institutional interest in the crypto market that is calling authorities and governments into action. In some places, those responsible are threatening very strict rules to rein in cryptocurrencies, but also stablecoins. In the US, the change of power could lead to a rethink. The Biden government is said to have more crypto-friendly members than Trump’s cabinet. China is unlikely to deviate from its strict orientation. It seems clear that the “crux” of upcoming measures to regulate the market will be anonymity. Demands from the G7 countries, for example, speak volumes here. It probably won’t be long before Know-your-Customer rules (KYC) come into force across borders. There have already been initial implementations. A lot is sure to happen in 2021 in this regard. It should not be forgotten that regulations are a confidence-building development for normal investors who are afraid of data misuse and dubious providers. Consumer protection and more user-friendliness are just two important keywords. It seems certain that the number of market participants from the professional sector is just waiting to finally enter the market through clear jurisdiction.
Our Conclusion on the 2021 Outlook:
The extent to which future CBDC competition can be an enrichment for the crypto market as a whole remains to be seen in the new year. For the aspect of decentralization as a core aspect of digital currencies, state regulations are of course more of a curse than a blessing, to stay in the picture. DeFi systems will therefore benefit from the developments. Conflicts are pre-programmed. The year 2021 will be an exciting one. A lot speaks for further state gains in Bitcoin and thus also in Altcoins through more acceptance. The leading coins and tokens could grow rapidly. The next few months will show how far regulations should and can ultimately intervene in the market.
