Where Is the Cryptocurrency Industry Headed in 2021?

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Where Is the Cryptocurrency Industry Headed in 2021?

Bitcoin has witnessed a steady increase to new all-time highs, pushing beyond $20,000 per BTC as of December 2020, but it was not always that steady.

Look no farther than 2018 to see how troubled the market has become. Bitcoin was trading around $13,500 in early 2018, after hitting an all-time high of $19,783.06 in December of 2017. It later fell below $3,400, a loss of about three-quarters of its value—and other digital currencies weren’t faring any better at the time. For example, Ethereum (ETH) plummeted from an early-year high of $1,300 to barely $91 by December 2018, then rising back to over $450 by the end of 2020. 1

Cryptocurrencies such as Bitcoin and Ethereum have shown to be robust. Retail and institutional investor interest in digital currencies has surged considerably in recent months. Many early investors who were anxious to profit from the “cryptocurrency frenzy” have now moved on to other endeavors, leaving behind a smaller core of persistent HODL-ers. However, there are grounds to assume that the cryptocurrency business still has some fight left in it.

Investors are once again wondering how far digital currency can go. And, as of December 2020, Bitcoin had returned to all-time highs, hitting over $23,625 and Ethereum had over $700.2 Looking forward to the end of 2020 and the beginning of 2021, the greater question may be how this sector will evolve in order to survive.

Key Takeaways

  • Over the last decade, Bitcoin and other cryptocurrencies have developed as a new asset class with remarkable gains.
  • After hitting over $20,000 in early 2018, Bitcoin has now dropped to roughly $3,000 as the rest of the crypto market has also dropped.
  • 2019 and 2020 have been years of recovery, with Bitcoin rising beyond $15,000, but can the bull market last?
  • Several recent events, including as rising institutional interest, imminent ETF clearance, and the popularity of stablecoins, indicate that the trend is likely to continue.
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Institutional Investors Get in the Game

Although trading numbers for private investors are down in many situations, institutions are now getting on board in a big manner. Institutional investors permit substantially higher trading volumes than most individual investors, implying that even if fewer trading partners trade in the digital currency area, the business may still thrive.

Several prospective changes in 2020 and 2021 are expected to have a substantial influence on institutional engagement in the digital currency market. If crypto gets listed on the Nasdaq or another equivalent exchange, it will quickly gain reputation—and presumably value.

The Elusive Bitcoin ETF

For years, crypto aficionados have wished for a digital currency ETF that would be accessible to mainstream investors in the United States. The Securities and Exchange Commission (SEC) of the United States has frequently rejected or postponed Bitcoin ETF applications to be evaluated at a later date. One of VanEck’s most talked-about funds has had its final approval decision put back many times.

Some experts feel that the adoption of a mainstream Bitcoin ETF might give the digital currency sector a substantial boost, allowing investors to join without some of the dangers involved with purchasing and selling coins directly. However, the destiny of VanEck’s fund is unknown for the time being.

Stablecoins Take the Lead

Stablecoins are digital tokens tied to a fiat currency that serve as hedging measures against the probable collapse of underlying cryptocurrency collateral prices—and they might be the industry’s greatest chance heading into 2021.

Stablecoins may gain in value next year for two reasons: one, the long-term instability of non-centralized tokens; and two, the present stablecoin market leader, tether, is about to be dethroned.

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Tether (USDT), being one of the first stablecoins to enter the mainstream, has gone through a series of publicly publicized growing pains as the sub-industry matured. Other stablecoins have already joined the field, attempting to dethrone it.

What Do We Know for Sure?

While it’s tough to predict which digital currencies will enjoy significant price increases in 2021, we can state with certainty that cryptocurrency is not going away anytime soon. Blockchain technology, which underpins several cryptocurrencies, has gone well beyond the digital currency business and is expected to find new uses this year. Governments and regulators will continue to struggle with the appropriate way to enable and manage digital tokens.

The peak of cryptocurrencies may have passed, but the crypto market may still have a lot more upside to offer. One thing is certain: cryptocurrencies were once poised to destabilize the whole financial system. That type of commotion doesn’t go away quickly, so expect to hear from cryptocurrency—or at least its biggest supporters—for at least another year.

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