This is a million-dollar question. We are not sure, but this could be the year of cryptocurrencies. Bitcoin is once again under the spotlight. The fact that Bitcoin continues its growth is a confirmation of it being increasingly legitimized.
During the same time, many countries started a complex process of regulation and institutional investors began considering Bitcoin as a very interesting alternative to traditional assets. Since its inception, Bitcoin went — and IS going — through continuous developments to improve the network.
Despite that tremendous bitcoin price fluctuation — in a generally upward direction — 2020 was also a year of relative maturity for a currency that, after all, has only been trading for a decade.
Here are some of the Bitcoin trends in 2021:
Bitcoin’s use in everyday life has always had a 🐔 – 🥚 problem: Very few use or accept it because… for one thing, very few use or accept it.
But 2020 saw a striking evolution in bitcoin adaptation. Big fintech companies, from Square’s investment of $50 million in bitcoin to PayPal allowing its users to buy and sell bitcoin, gave it a stamp of approval, and this is a very important step.
In 2021, we will likely see an extension of this mainstream trend. Look for at least one major U.S. or European bank to announce some kind of system where they either enable bitcoin purchases or agree to hold digital assets for their clients.
Because of its fast evolution, Bitcoin has forced a lot of big, global entities to think about offering an international digital currency.
Every company involved in the payment space understands not only that there is a market for digital payments still up for grabs, but that payments involving different currency markets have the most potential. That’s because currently, such transactions can take days to resolve and often involve high fees.
Bitcoin has demonstrated that a global digital currency can dramatically streamline that process. This year, both Facebook and Google — companies with a massive global reach that bitcoin can only dream of — moved forward with big digital currency plans.
Tech offerings like Facebook’s Diem aren’t exactly the same as bitcoin, but if they start to catch on in 2021, they may eat a little into bitcoin’s growth.
This year, the Bank for International Settlements issued a report and survey indicating that 80% of the world’s central banks are working on some form of digital currency. This is an important announcement for all the crypto enthusiasts, something big is about to happen.
China has taken the digital currency experimentation much further than any other nation. Recently, in the eastern Chinese city Suzhou, just west of Shanghai, a lottery was held in which 100,000 residents each received 200 renminbi (about $30) via a digital wallet. They were encouraged to link their digital cash to their bank accounts, and if they didn’t spend their digital cash within a few weeks, it disappeared — both great techniques to advance the experiment.
As China moves toward nationwide adaptation of the digital yuan, it is likely to undercut demand for bitcoin and other independent cryptocurrencies. Next year may see similar experiments in other countries.
President-elect Joe Biden’s administration will have higher priorities in its first 90 days than regulating cryptocurrency, and of course, Congress’s mood and expertise on the subject are hard to read.
The natural assumption is that a Democratic administration will regulate more stringently than a Republican administration, yet some have asserted that Biden will be “good for cryptocurrency.”
Maybe, but bitcoin enthusiasts tend to overlook issues like anonymity and its potential use for fraud; for regulators, those are very serious concerns.
Biden’s team might well come up with a more comprehensive and rational way of regulating cryptocurrency, but I would not bet on any favoritism toward bitcoin in particular.
Because the value of bitcoin is not directly tied to any obvious real-world phenomenon (such as fiscal or monetary policy), it can appreciate or depreciate in ways that are hard to predict or even explain.
As an investment, this makes it hard to recommend for anyone hoping to avoid big losses. Some say bitcoin could reach as high as $50,000 next year, and although that seems extreme, it is not out of the question if investors move money from other assets into bitcoin.
Of course, it is just as possible that the price will head in the opposite direction in 2021. The one thing that seems certain is that the wild ride of 2020 will be repeated — so buckle up.