Driven by Bitcoin’s record breaking rally, the crypto industry is getting off to a flying start into 2020. Amid the turmoil of this unprecedented moment in history, the digital asset space appears to have proven its resilience and to be a solid argument for being a safe haven in an increasingly growing world unsafe world to become.
Among other things, institutional and mass adoption was expanded further in the past year. Is this trend expected to continue into 2021, and what factors will affect the dynamics of crypto adoption across different sectors of the industry in the coming year?
The inflow of institutional money
It is now common to attribute at least some of Bitcoin’s (BTC) recent momentum to the effects of investment banks and hedge funds venturing into space en masse. However, this trend shows no signs of death.
From the great narratives that dominate the buzz-flowing circles to fateful changes in the political climate, there is ample evidence that Bitcoin will be increasingly optimistic in 2021. Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares, told Cointelegraph:
“The narrative shift around Bitcoin is so profound! Larry Fink on a conference call with Mark Carney about bitcoin as digital gold, saying he believes bitcoin is the future; Guggenheim [Partners’ chief investment officer Scott Minerd] Mention of a price target of USD 400,000. It used to be people in the industry who made these bold demands. Now it is the establishment and titans of the capital markets that are providing trillions in assets. “
The Demirors also predicted that the future democratic government will make it easier to generate even more money than was created during 2020. With “$ 5 trillion of dry powder on the verge to be deployed,” all of that money has to go somewhere and provide fuel for cryptocurrency markets.
Dave Hodgson, Chief Investment Officer of the NEM Group, also sees current US monetary policy as a main driver of the institutional money flowing into Bitcoin: “If the US continues to expand“ quantitative easing ”or undiminished inflation, it makes sense to do it itself conservative, fiscal decision to diversify and BTC would be one of those natural houses for liquidity seekers. “
The narrative that Bitcoin is gradually replacing gold as a hedge against inflation also remains strong. Eric Richmond, Chief Operating Officer of the cryptocurrency trading platform Coinsquare, told Cointelegraph: “Bitcoin will continue to emerge as a smart money alternative to gold as pension funds, family offices, hedge funds, macro investors and companies allocate part of their portfolios to Bitcoin in 2021. ”
In 2020, cryptocurrency will be more accessible to retail investors than ever, thanks in part to popular payment services like PayPal and Square, which are making digital assets available to their massive user base. The diversification of access points and the increasingly intuitive user interfaces will help add more everyday people to the ranks of crypto owners, traders and investors in the coming year.
Miles Paschini, founder and director of the Crypto Investment App B21, shared with Cointelegraph his belief that 2021 will likely be the year mass adoption will begin, adding, “Tools for investors and payment system users are becoming more user-friendly and banks, The previously avoided cryptocurrencies will gradually adapt and offer integrated services. “
In addition to the existing tools and platforms, new offerings will continue to emerge that will familiarize the mass audience with crypto assets. Facebook’s Diem is poised to become one of them, as Simon Peters, crypto market analyst at trading platform eToro, told Cointelegraph:
“Facebook has 2.7 billion users in its app suite. Facebook’s Diem is slated for release in January 2021 and could represent a significant ramp for crypto. If Diem is listed on crypto exchanges where it can be exchanged for bitcoin and other altcoins, it could encourage a whole new population to explore crypto. “
Peters added that Facebook’s payment service could be another factor driving mass adoption in 2021 if it turns out that buying crypto with Diem is cheaper and easier than with Fiat.
DeFi applications exploded like no other sector of the crypto industry in 2020, and many experts expect continued growth and public awareness of the area in the coming year. Erick Pinos, head of the American ecosystem at the blockchain platform Ontology, told Cointelegraph that crypto enables its users to make money: “With decentralized exchanges, loans, insurance, derivatives, mutual funds and a lot more, the possibilities are with DeFi making money endlessly. Overall, Pinos anticipates that the significant volume of transactions and product development efforts will continue to focus on DeFi over the next year.
At the same time, the regulatory pressures that will inevitably arise in bridging the areas of traditional and decentralized finance is a major obstacle to the growth of the DeFi sector. This could create significant tensions in the emerging field at first, but ultimately, regulatory compliance will pay off tremendously.
Reducing the barrier to access to DeFi protocols by making them easier to use will also help increase the number of those who use these investment vehicles. Will Liu, head of the SAGA decentralized protocol, predicted, “DeFi will be a more standardized and user-friendly form in 2021, and I believe it will be a good option for individual investors for a long time.”
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Liu also believes that other hot 2020 trends, particularly various use cases for non-fungible tokens, will continue to grow in importance in the following year. For example, NFTs of digital and physical works of art will attract the attention of some of the major auctions, while NFTs for personal data protection will benefit from the advancement of data law.
The DeFi activity was made possible by the underlying Ethereum infrastructure. As a result, the DeFi explosion in 2020 increased general use of the protocol. In the meantime, the Ethereum community has gone through some notable milestones in its journey to perfecting their network this year, and the process has not always gone smoothly.
Hodgson believed that the problems related to network upgrades resulted in some users experiencing some “project fatigue” due to uncertainties about Eth2 dates and scaling times. However, Hodgson argued that once these issues are resolved, Ethereum will see increased acceptance outside of DeFi-related spikes. Richmond added:
“Ethereum transacted over $ 1 trillion in value in 2020. With many new projects going into operation, this amount will increase in 2021. Ethereum supports all major crypto products such as stablecoins, De-Fi, crypto loans and NFT applications. Since this is vital to the development of these products, investors will certainly continue to use this asset to access these products. “
Used beyond finance
According to some industry participants, the coming year will also lead to critical gains in the introduction of crypto in contexts that are not directly related to monetary transactions. Health technology could be one of the most obvious beneficiaries as the crisis sparked by the pandemic has underscored the need for innovation in this area.
Chrissa McFarlane, CEO and founder of the healthcare technology startup Patientory Inc., told Cointelegraph, “One of the solutions that more mainstream viewers have become interested in throughout 2020 is tokens that encourage users to be healthy , while giving them access to their medical care records. “
These reports paint a picture of an industry poised to reach more people and organizations than ever before in 2021.