So what are the latest cryptocurrency trends?
A lot of developments have transpired since the time cryptocurrencies were first introduced to the financial world. With many new coins, blockchain models, use cases, and innovative technologies, it is fascinating to look at how the landscape has evolved over the years.
The year 2020 has been a wild ride for Bitcoin and all other digital currencies. Before we close this year, let us take a step back and look at a snapshot of everything that happened in the crypto space this year, as well as what to expect this coming 2021.
Cryptocurrency Trends in Late 2020
Digitizing the Economy
The COVID-19 pandemic has been instrumental in the shift towards the digital economy. Because of the need for social distancing, we cannot completely rely on physical means of trade and exchange anymore. This gave rise to the demand for economies that capitalize on online and digital transactions.
These moves helped push the blockchain advocacy further, with many of the world’s payment systems now supported by its technology. With more institutions openly supporting and investing in this financial innovation, the outlook for the adoption of cryptocurrencies and blockchain appears promising.
Lowered Barrier to Entry
Contrary to what some proponents might say, one does not need to be an expert to take advantage of the benefits cryptocurrency brings. Most would even say that the consistent rise in market capitalization for Bitcoin and Ether has shown that it has disproven the claim that the crypto market is a bubble.
In fact, prominent asset managers are have already been putting up Bitcoin ETFs. This proves that institutional interest is already here.
Buying cryptocurrencies has never been this easy, as well. With just an application you can install on your own phone, you could open your digital wallet and store cryptocurrencies easily. If you wish to invest or actively trade, these applications will also cater to these types of services. The barrier to entry has significantly been lowered.
The Boom of the DeFi Space
One of the biggest questions that people had for cryptocurrencies way back is what their other use cases are. Decentralized finance, or DeFi, gave us the answer, which made it the biggest part of 2020’s cryptocurrency trends. Looking at the amount of assets that the community has poured in DeFi, now totaling $4 billion, it is definitely something to look forward to.
DeFi has not just created new profit-earning opportunities for our assets. It has also allowed us to explore different financial products and services with more autonomy and security. DeFi is powered by cryptocurrencies, blockchains, and smart contract technologies that automate each transaction and eliminate the unnecessary middlemen.
Introduction of Central Bank Digital Currencies
There are many projects all over the world aimed at coming up with new Central Bank Digital Currencies, or CBDCs. One of the most popular is China’s effort to create the “digital yuan,” a digitized version of their fiat currency. The digital yuan has just been recently launched and it is bound to drum up some interest in the months to come.
Usually, CBDCs work in as much the same way as stablecoins, with a value pegged only on their local currencies. And today, there are a lot of companies that have began developing and promoting their own stablecoins such as Stasis’ Eurs and USD Coin (USDC).
Cryptocurrency Market Trends in 2021
Shifting Views
Company shutdowns caused by the pandemic and its resulting economic distress all around the globe has led people to entertain alternative financial instruments. This is pointed to as one of the main reasons that drove people to use forms of payment and other financial services that are not fiat-based.
The traditional financial system has not been able to weather the impact of the pandemic on the market. And while this may not have been good news for the fiat currency, it has become a window of opportunity for cryptocurrencies and other digital assets to prove their economic value to the general public.
Rise of Cryptocurrency Adoption
There are many predictions for Bitcoin’s growth. Some of them estimate that Bitcoin might just be able to outperform earlier recorded all-time highs, probably going over $20,000 soon. They believe that this was influenced by the growth of institutional support, not only for Bitcoin, but the whole cryptocurrency space altogether.
There are many companies today, like Facebook and JP Morgan, that have invested in cryptocurrencies. Above that, we’ve seen a lot of stablecoins launched and new DeFi projects rolled out. With more of these developments in store, it won’t be difficult for cryptocurrencies to achieve greater adoption from the previously crypto-skeptic institutional and corporate worlds.
Growing Need for Peer-to-Peer Finance
Technologies that allow people to access financial opportunities from all over the world are powered by peer-to-peer innovations. Among the benefits brought to the people, especially those who live in developing countries, is the low-barrier access to lending, capital markets, and other asset exchange platforms. This has been brought to the world by DeFi.
Integration of Bitcoin in the Traditional Financial System
The development of Bitcoin and the continued interest of financial institutions on it has brought it to its new status: the world’s “most sought-after collateral.” And for good reason.
According to some experts, Bitcoin’s adoption has led to its inclusion to the traditional financial system as a corporate treasury tool. The US Office of the Comptroller of the Currency (OCC) even recently made an announcement giving its explicit permission for national banks and federal savings institutions to have custody of cryptocurrency assets.
Should this trend continue, it is likely that it will create a demand for financial institutions to lay down a security infrastructure for cryptocurrencies. This is expected to allow them to safely store and manage them in as much the same way that they do with fiat.
Support from Fintech Regulators
Most of the financial services regulators today, especially in the United States, have shown to be more supportive of new financial technologies like cryptocurrencies. There are efforts now aimed at streamlining the regulation on FinTech products and services, even inviting important industry stakeholders to come up with balanced regulations for everyone involved.
Closing Thoughts
Some of the key people from the finance industry might not have expected the sudden boom of cryptocurrencies and blockchain technology. Cryptocurrency is not just about Bitcoin anymore, but a whole industry in and of itself.
The introduction of new digital counterparts to the traditional financial products and services that weren’t always available to anyone has proved that the status quo needs changing. Digital assets have been touted as the solution.
The crypto and blockchain community is relatively young if you compare it with the goliaths in Wall Street. But so far, they have shown their capability in creating consumer-responsive products and innovations. If the trends we saw from 2020 continues, cryptocurrencies are onto an exciting 2021.
