Powered by Bitcoin’s record-breaking rally, the crypto industry is watching 2020 with flying colors. Amid all the turmoil of this unprecedented moment in history, the digital asset space seems to have proven its resilience and is making a solid case for becoming a safe haven in an increasingly uncertain world.
Among other claims, the year out saw the continuous expansion of institutional and mass adoption. So, is this trend expected to continue in 2021, and what factors will determine the dynamics of crypto adoption across different sectors of the industry in the coming year?
The influx of institutional money
It has become somewhat common to use at least some of Bitcoin’s (BTC) recent boost to the securities of investment banks and hedge funds moving into space en masse, but this trend shows no signs of waning.
From the big stories that dominate the circles where a lot of money is flowing to fateful shifts in the political climate, there is ample evidence to suggest that by 2021, major weapons of traditional finance will be increasingly optimistic about Bitcoin. Meltem Demirors, chief strategy officer of CoinShares, a digital asset investment company, told Cointelegraph:
“The storyline around Bitcoin is so profound! Larry Fink in conference call with Mark Carney who talked about Bitcoin as digital gold and said he believes Bitcoin is the future; Guggenheim [Partners’ chief investment officer Scott Minerd] with a price target of $ 400,000. It used to be people in the industry who made these bold calls, now it’s the establishment and titans of capital markets allocating trillions of dollars in assets. “
Demirors further predicted that the upcoming Democratic government will facilitate the generation of even more money than was created in 2020. With “$ 5 trillion in dry powder waiting to be deployed on the sidelines,” all this money will have to go somewhere, providing fuel for cryptocurrency markets.
Dave Hodgson, NEM Group’s chief investment officer, also sees current US monetary policy as a major driver behind institutional money flowing into Bitcoin: “If the US continues to expand” quantitative easing, “or inflation, it seems. a wise, even conservative, fiscal choice to diversify and BTC would be one of those natural homes for liquidity seeking shelter. ”
The story that Bitcoin is gradually replacing gold as a hedge against inflation also remains strong. Eric Richmond, chief operating officer of cryptocurrency trading platform Coinsquare, commented to Cointelegraph, “ Bitcoin will continue to emerge as the smart money alternative to gold with pension funds, family offices, hedge funds, macro investors and companies allocating part of their portfolio. . to Bitcoin in 2021. “
In 2020, cryptocurrency has become more accessible to retail investors than ever before, thanks in part to popular payment services such as PayPal and Square that make digital assets available to their huge user base. Diversification of entry points and increasingly intuitive interfaces will help larger groups of everyday users join crypto holders, traders and investors in the coming year.
Miles Paschini, founder and director of crypto investment app B21, shared with Cointelegraph his belief that 2021 will likely be the year when mass adoption will begin, adding, “ Tools for investors and payment system users will become more user-friendly and banks that previously avoided cryptocurrencies will adapt and offer integrated services. “
In addition to existing tools and platforms, new offerings will continue to appear introducing the general public to 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 suite of apps. Facebook’s Diem launches in January 2021 and could be a significant start-up for crypto. If Diem is featured on crypto exchanges, where it can be exchanged for bitcoin and other alt coins, it could encourage a whole new demographic to explore crypto. “
Peters added that if it turns out to be cheaper and easier to buy crypto with Diem than with fiat, Facebook’s payment service could become another factor driving mass adoption in 2021.
DeFi applications exploded in 2020 like no other sector of the crypto industry, and many experts envision continued growth and growing public awareness of this space in the coming year. Erick Pinos, the US ecosystem leader at blockchain platform Ontology, told Cointelegraph that crypto allows its users to make money: “With decentralized exchanges, loans, insurance, derivatives, mutual funds and more, the opportunities to make money in DeFi endlessly. Overall, Pinos expects significant transaction volumes and product development efforts to continue to revolve around DeFi in the coming year.
At the same time, a major impediment to the growth of the DeFi sector is the regulatory burden that will inevitably arise in bridging the realms of traditional and decentralized finance. At first this could create significant tensions in the emerging field, but in the end the result of compliance will be huge.
Lowering the barrier to entry to DeFi protocols by making them easy to use will also help increase the number of users of these investment tools. Will Liu, head of the decentralized protocol SAGA, predicted, “DeFi will be a more standardized and easy-to-use form by 2021 and I think it will be a great option for individual investors for a long time to come.”
Liu also thinks other popular trends of 2020, notably different use cases for non-replaceable tokens, will continue to grow the following year. For example, NFTs of digital and physical artworks will attract the attention of some of the major auctions, while NFTs for the protection of personal data will benefit from the continuous evolution of data law.
DeFi activity has been made possible by the underlying Ethereum infrastructure, as a result, the DeFi explosion in 2020 has ramped up the overall use of the protocol. Meanwhile, the Ethereum community has gone through some remarkable milestones in its quest to perfect its network this year, and the process hasn’t always been smooth.
Hodgson believed that the network upgrade issues have caused some users to experience some degree of “project fatigue” due to uncertainty about Eth2 dates and scalable timescales. However, Hodgson argued that once these issues are resolved, Ethereum will see increased adoption beyond the DeFi-related peaks. Richmond added:
“Ethereum traded more than $ 1 trillion in value by 2020 and, as many new projects go live, this amount will grow in 2021. Ethereum supports all major crypto products such as stablecoins, de-fi, cryptolending and NFT applications. Because it is crucial to the development of these products, investors will certainly continue to use this asset to access these products. “
Used outside of finance
According to some industry participants, the coming year will also yield critical gains in cryptocurrency adoption in contexts not directly related to monetary transactions. Healthcare technology could be one of the most obvious beneficiaries as the pandemic-induced crisis has highlighted the need for innovation in this area.
Chrissa McFarlane, CEO and founder of Patientory Inc., healthcare technology startup, said to Cointelegraph, “One of the solutions that will have attracted more mainstream audiences in 2020 is tokens that encourage users to be healthy while giving them access to their medical records. “
These accounts paint a picture of an industry poised to reach more people and organizations than ever before in 2021.