Boosted by record breaking rally of Bitcoins throughout 2020, the entire crypto industry has signed off the year with flying colours. Despite the unprecedented times due to the pandemic, the digital asset area has proven its resilience thereby making a water tight case for being considered a safe haven in an uncertain world. The continued expansion of institutional investors and mass adoption has set the tone for 2021 which could be a defining year for the entire cryptocurrency market.
Institutional Money Influx
One of the largest contributors to the golden year of cryptocurrency has been the effects of Investment banks and hedge funds considering investments in the market causing the extended upward trend. The churn of big money coupled with the Democratic administration taking charge in 2021 is anticipated to further enhance the gains in the crypto market. Experts believe a price target of $400k should not be considered impossible with trillions of dollars in assets getting allocated.
If the U.S. continues expansion of ‘quantitative easing’ or inflation, unabated then Bitcoins would be the natural homes for liquidity seeking shelter. The possible theory of Bitcoins replacing gold as a hedge against inflation continues to gain traction. This aspect will take a long time to gain confidence amongst the investors but it definitely is emerging as an alternative to pension funds, hedge funds, family offices, macro investors and various corporations allocating section of their portfolios in this area for 2021.
Wider Base of Acceptance
The opening of doors by popular payment services like PayPal and Square have enhanced access to retail investors making digital assets available to massive user base. Technological improvements indicates investor tools and payment system users would become more user friendly and institutions which earlier denied cryptocurrencies may now offer integrated services.
Additionally, new offerings introducing the mass audience to crypto assets shall continue to emerge. Facebook’s Diem is poised to become one of those trading platforms which can take advantage of it existing use base. If Diem gets listed on the crypto exchanges for bitcoins and other alt coins, an entire new dimension and demographics for exploring crypto will gain attention.
Subsequently, if purchasing crypto with Diem is easier and cheaper then Facebook’s payment services can also lead to a mass acceptance for 2021.
De-fi applications have witnessed a rampant growth in 2020 and multiple experts anticipate continued growth trajectory and increased public awareness in the upcoming year. The opening up of decentralized exchanges, insurance, lending, mutual funds, derivatives and other such alternatives for making money in De-Fi tremendously expands its scope for the forthcoming year.
The constant regulatory pressure in this area could pose a constraint but if this aspect can be settled, the compliance clearance would be astonishing. Simultaneously, improving the access to DeFi protocols and making them user friendly would be a welcoming change for individual investors in the long run.
It is worth noting that the scope for improvement and expansion is immense and 2020 should be used as a stepping stone for launching its performance in the next year. There are multiple hurdles which could apply brakes on the process but the gains can go a long way in establishing a niche for the entire market and perhaps pose a challenge to the existing options.
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