How Cryptocurrency Will Change in 2021

By Clark

2020 saw cryptocurrencies prove their resilience, which has driven huge levels of investor interest, particularly in the retail and banking sectors. It would have been easy to predict that cryptocurrencies like Bitcoin or Ethereum would have dwindled throughout 2020 since many people considered the crypto sector to have gone through its bubble of popularity. However, those still mining, saving, and spending their Bitcoins have seen a dramatic uptake in the latter half of 2020. As China, in particular, continues to focus on the blockchain and cryptocurrency at a national level, other trends in the sector look likely to dominate in this resilient sector.

Institutional Investors

No longer is crypto the sole preserve of the private investor. Institutions are adopting crypto and the blockchain at an incredibly rapid rate, largely because of the demand for more digitization of financial services. Retail brands have been slow to adopt crypto, but when there have been so many challenges for the retail sector in 2020, the shift to blockchain has been somewhat inevitable. However, it’s the financial sector that is proving to be the fastest adopter of blockchain. They may have been slower to make use of the digital currency trend, but 2020 has been a huge driver. In 2021, both retail and banking names will be adopting blockchain and cryptocurrency at a larger scale than ever before.

“If the cryptocurrency market overall or a digital asset is solving a problem, it’s going to drive some value.” Brad Garlinghouse

A Bitcoin ETF?

It’s unlikely, but not impossible, that 2021 will see the introduction of the world’s first Bitcoin ETF. Being able to track exchange-traded funds that follow cryptocurrencies would be a huge boon to crypto investors and spenders, but so far, the US Securities and Exchange Commission has either delayed or downright rejected any ETF applications that would focus on cryptocurrency. Despite this, the growth rate of Bitcoin and Etherum adoption in 2020 has only increased the likelihood of a Bitcoin ETF finally getting approval from the SEC, with VanEck’s fund being the most likely to get approval should the SEC take the next step.

“Bitcoin will do to banks what email did to the postal industry.” Rick Falkvinge

A Shift in Perception

One of the reasons why cryptocurrency has been slower than expected when it comes to mainstream adoption is because the general public has a limited understanding of it. That’s all set to change as charities, retail brands, and banks are increasing their use of both blockchain and Bitcoin. In particular, charities are set to adopt crypto donations because of the many advantages it has, specifically the fact that donors who pay in Bitcoin or Ethereum pay no capital gains tax. That means more money for the charity and more potential donors willing to use their digital currencies to do good.

One of the reasons why cryptocurrency use has been slower than expected when it comes to mainstream adoption is because the general public has a limited understanding of it. That’s all set to change as charities, retail brands, and banks are increasing their use of both blockchain and popular crypto coins such as Bitcoin and Ethereum.

In particular, charities are set to adopt crypto donations because of the many advantages it has, specifically the fact that donors who pay in cryptocurrency pay no capital gains tax. That means more money for the charity and more potential donors willing to use their digital currencies to do good. Another previous issue that affected the reputation of crypto is that many people have perceived cryptocurrency as this ludicrously expensive and risky endeavor which has put a lot of people off engaging with this developing and increasingly legitimate form of currency. This is set to change because cryptocurrency becomes more normalized into mainstream culture and there appeared a lot of different ways not only to buy Bitcoin and Ethereum but also to buy Ethereum with low fees  (besides much popular Bitcoin, of course), making crypto more accessible to the average person. It’s this collective realization that will allow cryptocurrency to take one step closer to becoming conventional in 2021 and beyond.

“Bitcoin is a technological tour de force.” Bill Gates

P2P Lending and Crypto

The growing popularity of peer-to-peer lending has been a surprise for many in the finance sector. Crowdfunding has become more popular than ever in 2020, and although the effect on cryptocurrency has been slight, it is an indication of things to come. Consumers are growing more empowered with P2P lending, particularly in developing countries. Those countries combine the growth of P2P lending with the security and accessibility of cryptocurrency and, by doing so, improve social mobility. The blockchain and crypto’s decentralized finance model means that there has already been a steady growth in asset trading and earning interest.

“I love seeing new services constantly starting to accept Bitcoin. Bitcoin is really becoming “the currency of the Internet.” I’m most concerned by possible government reactions to Bitcoin. They can’t destroy Bitcoin, but they could really slow things down by making exchange much more difficult.” Michael Marquardt

Is 2021 the year that cryptocurrency will explode into the mainstream? That remains to be seen. Yet, as the financial sector has proven, there is a demand for more mass digitization of services. The retail sector, combined with the national approach model adopted by China, are signs that mainstream adoption is increasingly likely. For Bitcoin, Ethereum, and the rest of the digital currency options, 2021 could quickly become the year that the general public starts to pay a lot more attention to their cryptocurrency options.

Clark

Head of the technology.

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