If you search “cryptocurrency trends” on your browser, you will be amazed by the number of search results that will show up.
As you read through them, one of the overarching questions that will run through your mind is: why are so many people writing about crypto trends today? Well, the crypto world is growing at an alarming rate.
At the time of writing this piece, the total market cap of all cryptocurrencies is over $1.6 trillion. It is estimated that there are over 100 million cryptocurrency users across the globe. This means that cryptocurrencies are now gaining the mass adoption they deserve, and this is why most crypto enthusiasts find it exciting to predict the industry’s trajectory.
2020 was a bad year for many industries. Thanks to the COVID-19 pandemic, most businesses closed shop, and the traditional finance market was adversely affected. This cannot be said for the crypto space that saw massive adoption, and most cryptos reached their all-time high. You can read here our last year’s article about the Top 5 Cryptocurrency Trends in 2020.
There is evidence that despite the pandemic continued effect on almost all industries, 2021 will be more deciding on the future development in the crypto space. To put things into perspective, here are some of the crypto trends to look forward to before the year ends.
Crypto Tax Regulation
One of the biggest crypto trends to expect in 2021 is crypto tax regulation. As Benjamin Franklin once said, “The only two certainties in life are death and taxes.” It shouldn’t, therefore come as a surprise to see tax authorities across the globe carving out their share of profits from cryptocurrencies’ explosive growth.
According to recent report, the Internal Revenue Service (IRS), the United States Taxman seeks to collect as much as $40 billion in revenue from cryptocurrency. This is enough to make up for 5% of the revenue lost due to the COVID-19 pandemic – assuming a 50% compliance rate at a market capitalization of $830 billion. Today, the market cap has doubled, which means that with full compliance, the taxman could collect as much as $160 billion in taxes.
While tax regulations are unwelcoming to some, it is evident that they have started appearing in some countries such as the United States, and as governments see their revenues increase exponentially as a result, stricter measures will doubtlessly be enforced.
Anti-money Laundering (AML) regulation and intense monitoring of Know Your Customer (KYC) by global regulatory authorities is another trend that will gain prominence in 2021.
Even though the crypto space is new to such regulations, the uptick in the global blockchain market, growing digitization, and crypto-related crimes has, and will prompt regulators across the globe to issue compliance standards for digital banking, cryptocurrency, and blockchain technology.
Tokenization of Everything
Today, there are way over $256 trillion real-world assets. Most, if not all these assets are signified by paper and are illiquid. With the advent of blockchain, ownership of these assets will shift from analogue to digital and we will see their release of these illiquid assets to liquid marketplaces.
Tokenization can be compared to securitization where financiers slice, dice, and sell fractional ownership of their assets. We mentioned tokenization briefly in our article about crypto-friendly banks.
Thanks to the structural design of the blockchain network that minimizes transaction costs via an immutable record of ownership, security tokens will be a significant innovation that will transform the global trade as we know it.
Tokens will eliminate middlemen and embed both legality and execution within the smart contract code; hence augmenting the ease of divisibility and lower the cost of global transfers of ownership. Therefore, our ability to trade real-world assets that are illiquid will increase by an order of magnitude.
In 2021 and beyond, tokenization will ensure that any asset can be placed on the spectrum of liquidity and made tradable.
As a result of tokenization of everything, we will see the emergence of new markets for illiquid and under-utilized assets that were previously inaccessible such as carbon offsets and diamond mines. Cross border trade will also be boosted by greater margins.
Central Bank Digital Currency
One of the major cryptocurrency trends in 2021 is that Central Bank Digital Currencies (CBDCs) might become the next big financial disruptors. Led by countries as big as China and as small as the Bahamas, digital currency is drawing stronger interest as the future of a cashless society.
Central Bank Digital Currency will resemble cryptocurrencies such as Ethereum or Bitcoin in limited aspects but will differ in essential ways. Rather than being a tradable asset with limited use and wildly fluctuating prices, CBDCs will function more like fiat currency and will have a widespread acceptance. It will be fully regulated and will be under a central authority, unlike major cryptos that are decentralized in nature.
Efforts to introduce CBDCs are gaining momentum across the globe, and over 86% of central banks are exploring digital currencies. A 2020 survey released by the Bank for International Settlements showed that nearly all central banks in the world at least did something on digital currencies.
It revealed that 60% were working on a “proof of concept” at the time, while 14% had already launched a pilot program or were in development of CBDCs.
Financial experts have hailed the introduction of CBDCs, citing that they provide benefits of boosting monetary transactions without the adverse side effects that come with cryptocurrencies. The adoption of these digital currencies will provide an opportunity for innovation, but the scope of disruption to the financial system that will come with it is something that remains to be seen.
DeFi was undoubtedly one of the topics that created heated debates in 2020. By February 2020, the TVL (Total Value Locked) of DeFi crossed the $1 billion dollar mark – a milestone that prompted celebrations from the Ethereum community.
Today, the figures have increased exponentially, and the current TVL of DeFi is $14.32 billion. With the increase demand in DeFi tokens coupled with the fact that more investors are venturing into yield farming, it is expected that major crypto exchanges will expand their support for DeFi tokens in 2021.
This industry is expected to grow and evolve over the next few months, with governments set to enforce tighter regulations. To understand more about DeFi is important to figure out how cryptocurrency earns value, so we recommend you read more here.
Another trendy crypto topic that will change the cryptocurrency space in 2021 is the 5G technology. This technology will be in the nearest future determine how mining is built, what new services will appear in the market, and which DeFi applications will be in development. Its implementation will mean that transaction management capabilities will no longer be limited to network speeds.
This technology offers ultra-low latency that will significantly alter the high-frequency trading segments by ensuring investment decisions are made by computers.
If you are a cryptocurrency trader, you can attest to the fact that the length of the wire affects how quickly you can place or withdraw an order. This is why most traders struggle to place their server as close to crypto exchanges as they can. With 5G, all systems will have a level-playing field for transactions regardless of how far you are from a crypto exchange.
What Does The Future Hold For Cryptocurrencies?
Cryptocurrencies have garnered massive popularity over the past few years as a form of digital currency that can be used for daily online transactions.
This has led to an astonishing increase in their prices. Nonetheless, cryptocurrency prices hit a bump on May 19, 2021 after Tesla CEO Ellen Musk said the company would no longer accept BTC as a form of payment due to the increased use of fossil fuels for Bitcoin mining.
Additionally, the Chinese government banned all financial institutions in the country from providing cryptocurrency services.
However, on May 24, Bitcoin prices rose by 4% after Musk announced he had talked to miners in North America over the sustainability of Bitcoin.
To be honest, cryptocurrencies enjoyed a stellar run in 2020. Major Cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and Cardano were way up over 100% by May this year despite the effects of the COVID-19 pandemic, and experts project that they will continue to grow in value by the end of 2021 and beyond.
Recent reports show that the future of cryptocurrencies is bright, with some financial experts asserting that the crypto market will reach way over $2 billion dollars by 2026 from $1.6 billion that is estimated in 2021.
Going forward, cryptocurrencies might render billing and paper money obsolete; thus, it will play a major role in building a paperless society. Even though Bitcoin might still rule the roost by 2025, this crypto giant might be looking over its shoulder as Stablecoins begin to make their presence felt.
To learn more about the future of cryptocurrency and Bitcoin click here.
Look – stablecoins tie their values to the tangible real-world assets such as gold and the US dollar – which means they are almost guaranteed to be free from market volatility that surrounds BTC and ETH. Upcoming secure stablecoins will make transactions around the world seamless, since there will be no need for currency conversions, and there will be no transaction costs tied to them.
We can be certain that beyond 2021, there will be abundance of cutting-edge technology that will allow various cryptocurrencies to thrive.
From reimagining of payment portals for services online to intricate blockchain networks with the ability to leverage instant transactions, there are plenty of reasons to be excited about how the cryptocurrency market will look like in 2021 and beyond.
To be prepared for this reality, make sure to download Tezro app where you can store and trade your crypto assets, in a fully encrypted text messaging app.