What are the perspectives for cryptocurrency in 2021?
Cryptocurrency is an industry that has experienced massive growth over the past few years. While the market goes in positive and negative cycles, we can observe rapid growth in awareness, wallet addresses, and active users, when observed on an industry-wide level.
But there are many perspectives when it comes to the cryptocurrency markets. Those that purchase Bitcoin believe it to be the “escape” of our rigged financial system. For more traditional and experienced investors, however, it is a futile zero-sum game. According to them, cryptocurrencies are too volatile, non-proven, and pose no chance of being regulatory compliant in the future.
So who is right? In this article, we try to get an objective viewpoint of both sides of the coin. We explore both the perspective of the industry’s survival and growth, as well as the scenarios in which the whole market is doomed to fail. Ready to get started? Let’s dig in!
The positive perspective – Industry growth
Many investors claim that 2021 is a year that has many positive outcomes stored for the crypto industry. For one we have the Bitcoin halving, which did not only lead to a decrease in the recurring supply of Bitcoin but also a massive amount of demand from those who discover how it works.
Next, we have an accelerated need for safe-haven assets due to the COVID19-related issues. More specifically, the economic instabilities lead to massive bailout packages on a global scale, as a final resort to deal with the imposed lockdowns. These government payments decrease the strength of the US dollar and, as a ripple effect, all the FIAT currencies pegged to it. The dreaded result is a double-digit inflation rate that is projected to continue for at least 3 years in the future. And for many institutional investors, Bitcoin and precious metals are the only way to escape this.
Another positive element that could further accelerate market participation is the ease of participation. During the latest bear market, market leaders spent significant amounts of money and time to create apps that are easier to interact with, even for those that are less tech-savvy. Nowadays buying and interacting with crypto is a lot easier than your typical internet banking app.
The growth has, in fact, already started accelerating.
Not only do we see more people discuss and buy cryptocurrencies, but we are also seeing governments building mining farms, and creating favorable regulatory frameworks to allow more people to enter the space.
The negative perspective – Governments crush crypto
Make no mistake – the current money printing practices and massive inflation rates are not done randomly. Governments know and understand the long term implications that come with it. Many claim that everything we are seeing is nothing more than a power game that will eventually lead to the rich getting richer and the poor getting poorer.
Since Bitcoin offers a safe haven against this happening, there is a real threat for those who want to benefit from the situation. There is also the fact that people are afraid of what they don’t understand, and Bitcoin is exactly that.
The only offensive move that regulators can make at the moment is that Bitcoin is used for illicit and criminal activities (USD is used for that as well but let’s willingly ignore this). Just a few days ago we saw Head of European Central Banks Christine Lagarde mention it in one of her live streams:
This instills fear for potential regulations that will strongly limit the usage of Bitcoin as a future currency and means of transaction.
But will governments actually try to “ban” crypto? It seems highly unlikely when looking at the global stance against the popular cryptocurrency. Several large cities and states are already open to converting part of their cash reserves into Bitcoin, while one public company after the other buy it up in bulk as well.
And make no mistake – these public companies buy hundreds of millions worth. This means that in the background that are top-level financial advisors that track these steps and find that a move into Bitcoin is in the best interest of everyone.
So what about cryptocurrencies and their future?
Cryptocurrency prices are rather volatile to make any predictions of their future value. Even with historical data to back up our claims, we have seen that every coin has a different price action depending on many factors.
Therefore, we could make the assumption that certain coins will survive and potentially thrive in the future (Bitcoin, Ethereum, exchange-based tokens, etc.) while others may or may not survive in the future. The latest ones are, however, those that can bring the most upside to investors, as they can end up multiplying in value a lot faster.