2020 has been nothing but tumultuous, and most analytical fintech pundits got their predictions on crypto markets wrong. The Coronavirus caused an unprecedented, global effect that altered trends, intensifying some and creating others from scratch.
Just around March 2020, when global lockdowns became a trend, bitcoins cost about $4,000. Government-imposed economic shutdowns caused widespread volatility as the use of digital currency surged. By December, bitcoins had appreciated to $23,000, with some other crypto assets appreciating even more.
Closely analyzing 2020’s volatility reveals some method to the pandemic madness. 2021 may be easier to predict, owing to the spillover effects of the global pandemic.
Speculating the crypto asset markets in 2021 can be profitable for those paying attention to the regulatory developments. Widespread cryptocurrency adoption and financial regulation will dominate the majority of crypto market trends for 2021. Let’s have a look at some of our crypto predictions for this new year.
De-Fi Market Growth Will Continue
Ripple Labs was causing significant ripples in the banking sector, integrating blockchain technologies in over 100 banks via its dApp menu. The DeFi market was growing rapidly because of the speed, low-cost, and decentralized nature of transactions.
It hit a major blockade when the SEC sued it for running an unregistered security exchange. However, Ripple Labs has a powerful, legal reply, asserting the XRP as a commodity and not a security.
It’s not the character of governments to halt constructive technologies, and blockchain will be indispensable in overcoming the challenges of the Coronavirus pandemic. Therefore, the DeFi markets will prevail in legal onslaughts against them by finding a middle ground.
Since Covid19 struck DeFi, markets grew from a market cap of $193 billion in January 2020 to $668 billion in December and are projected to hit 39.7 billion in 2025. The phenomenal growth came as investors injected funds into digital currencies. They were escaping the volatility of the global economic shutdown.
Markets that offered crucial value but lacked liquidity suddenly got flooded with money. For cryptocurrency markets and DeFi, such liquidity can only cause irreversible, compounding growth.
More corporations will pay to use blockchain technologies for global, digital transactions. More banks will integrate dApps and Smart Contracts, and DeFi markets will achieve even more liquidity.
Increased Understanding and Integration of Blockchain Technology
Cryptocurrencies are novel fintech, widely misunderstood seven years after bitcoins became a store and transfer of value. People grew aware of it gradually, but the Covid-19 outbreak accelerated the pace. Shrinking markets and economic lockdowns motivated the corporate class to find working solutions in digital payment networks.
As DeFi markets gained unprecedented liquidity, cryptocurrencies are increasingly becoming viable payment options for daily consumption. More businesses are embracing blockchain networks, and people now appreciate the vast potential of blockchain technology.
Blockchain is also applicable in other industries, such as supply-chain management, asset management, developing risk protocols, and running democratic elections. 2021 may see industries adopting blockchain aspects such as:
- Tokenization.
- Smart Contracts.
- Decentralized Consensus.
More research and development of blockchain technologies will decentralize processes such as electioneering, global commerce, inheritance, and dividend allocation. For example, universities are developing blockchain technologies for running auctions for parking spaces.
Digital Transformation Will Become a Corporate Necessity
Let’s face it; the global pandemic could reign with fear for another whole year. Some private firms supposedly came up with Covid-19 vaccines, but Americans are largely distrustful of them.
The vaccine manufacturers aren’t liable when anything goes wrong with the vaccine, and people want someone they can sue in case of severe damages. As the conflict lingers, daily operations for many businesses will remain frozen.
Digital currencies offer decentralization, bypassing the need for currently frozen/slow financial services. Bankers and regulatory exchanges facilitating global commerce are in partial or total atrophy. Therefore, digital transformation is becoming a survival strategy for corporations.
If Ripple Labs resolves its deadlock with the SEC earlier, it could dominate the crypto markets with its dApp technology. ETH is also likely to maintain its growth trajectory if it continues engaging the corporate scene.
But work-at-home trends are likely to consolidate the 2020 gains of crypto markets in 2021. Cryptocurrencies are swapping from Proof of Working mining protocols to decentralized, peer-to-peer Proof of Stake consensus-building mechanisms.
Folks are ganging up to do business and have fun online, and they found ways of getting social during the imposed quarantine. With time, they will drive bulky blockchain transactions where cryptocurrencies will be major payment options, and Smart Contracts will replace traditional handshakes.
China Will Lead in Cryptocurrency Adoption
China led in the use, development, and innovation of blockchain technology in 2020, and it will dominate the markets in 2021. China is embracing blockchain applications on a national level.
China funds infrastructural growth and integration through digital currencies. It even instituted a state-backed Blockchain-Based Service Network to encourage the adoption of digital currencies. The communist giant also plans to provide its digital infrastructure to other nations.
The nation is so committed to encouraging Crypto Yuan adoption that it offers free, temporary tokens to entire villages and towns. Recipients are allowed to use them before an expiration date when unused free tokens disappear.
China’s aggressive adoption of blockchain technology will dissuade the EU and the United States from harassing their digital markets. Regulatory bodies will adopt friendlier, problem-solving approaches firms.
Central Banks Will Get in on the Action
Central Bank Digital Currencies are looming and could revolutionize crypto markets. The BIS reported that 80% of sovereign central banks are considering designing or developing their digital currencies for national use and international exchanges.
Central banks have enough data to appreciate the diminishing use of cash, and they want a piece of the digital payments action. The widespread growth of private cryptocurrencies also threatens them.
Central banks are also under competitive pressure from Chinese authorities who are accelerating blockchain technologies.
CBDCs will help to curb the growing influence of scammers and blockchain hackers. The rise of stablecoins will probably lay fertile grounds for the development of CBDCs, and digital currencies will become more secure than 2020.
Tightened Fintech Regulation
Fintech regulators had plenty of time to study and investigate crypto assets. If 2020 was anything to go by, legislative and oversight bodies will be more informed and hands-on. They will do a better job monitoring crypto markets.
Tax laws and consumer protection will take center stage, and digital currency firms will engage in heated negotiations with financial regulators. Both sides of the government and private digital firms will make concessions to accommodate widespread adoption.
Regulatory tightening will be great for investors and governments. These developments will make digital payments more convenient and secure, benefiting end-users the most.
Final Word
The crypto-asset markets were the most profitable in 2020, and they are likely to be even more profitable in 2021. The gains of digital payments from 2020 are irreversible, and you are well-advised investing in crypto markets.
This year saw the development of cross-chain money markets and a legal onslaught on cryptocurrencies that didn’t grind them to a halt. Therefore, the phenomenal growth will endure, and 2021 might see widespread adoption of crypto payments.
Share your predictions with us in the comments section if you have some extra insights. Let’s discuss ideas that will yield maximum productivity in 2021.
