Cryptocurrencies rally on in 2020, and 2021 could be even bigger

As crypto is gaining momentum, Marie Tatibouet, CMO at Gate.io, a global digital asset exchange, shares with The Paypers crypto 2020 trends and what’s next in 2021

From being an intriguing research topic widely scrutinised by everyone and understood only by a handful to technology with revolutionary potential, cryptocurrencies have come a long way. The digital asset industry is in a virtuous cycle of self-reinforcing feedback loops, where various impactful events start to feed on each other, witnessing world-changing trends; most promising ones around investor enthusiasm fuelling capital flow into top-tier crypto assets, world-class companies ramping up crypto-related tech investment, retail access expanding access to crypto payment, and more. 

Wondering how to comprehend what is happening in the crypto asset space as the trend starts gaining power and speed? Here are some significant events that occurred in 2020 and will go down in history.

Crypto outperformed equities

2020 has been a strong year for Bitcoin as it continues to outperform financial stocks due to the increasing demand for BTC among institutional investors.

Impactful Bitcoin Halving

Bitcoin halving took place on May 12, 2020, slashing the reward from 12.5 Bitcoin to 6.5. The price of Bitcoin reaching its ATH shows the success of the event.

Bitcoin soaring to new heights

Yet another remarkable moment in Bitcoin's history; at the time of writing, Bitcoin crosses USD 22 K, marking the year-to-date return of 185%. Crypto Twitter calls it a ‘turning point’ and predicts USD 25 K as the next stop.

Governments warming up to cryptocurrencies

2020 saw ground-breaking developments in crypto taxation. The US Internal Revenue Service sent a questionnaire to every American, asking about crypto holding, while the Organisation for Economic Co-operation and Development published special reports on the topic.

Institutional investments pouring in

We saw fintech acceleration, retail adoption, favourable macro factors, and corporate acceptance, all supporting crypto simultaneously. Not to forget that some big names entered the market - on December 10, MassMutual invested USD 100 million in Bitcoin, and WSJ calls it the ‘latest sign of mass adoption’. In November, PayPal announced that its users would be able to buy, sell, and hold four cryptocurrencies—Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. MicroStrategy raised USD 650 million, and it's investing it all in Bitcoin. JP Morgan predicted Bitcoin's market value, saying it can reach USD 600 billion, which is quite a change from 2017 when they called it a fraud. Fidelity launched a Bitcoin-only fund for investors, and the business turned out to be successful as per the CEO. Square invested USD 50 million in Bitcoin to underscore the firm's purpose of economic development.

China successfully piloted the CBDC

The pilot witnessed 3.1 million digital yuan smooth transactions between April and August, making it the most widely used central bank digital currency (CBDC) ever. China's eastern city of Suzhou is next to roll out the second digital yuan pilot in December.

What could this mean for 2021?

Factors like growth in emerging global markets, increasing institutional adoption, and booming developer activities suggest that the crypto community is looking forward to a slew of developments soon. It appears safe to say that 2021 will mark additional gains — financial, technical, or otherwise — for the cryptocurrency space.

Banks and financial institutions jumping on the bandwagon

We should expect institutional investments in cryptocurrencies to accelerate in the coming year as many institutions begin to make their crypto plans public, further catalysing the entry of traditional buy-side firms that are not only more comfortable trading with such regulated intermediaries but, in many cases, are obliged by their own regulatory or investor restrictions.

We should also keep an eye on the private banks. Some banks may disregard Bitcoin as not a serious asset. We will see some of the forward-looking private banks to adapt and see cryptocurrencies as a differentiator offering to engage and drive new revenue.

More clarity on crypto taxes

The ‘PWC Global Crypto Report’ revealed that an increasing number of tax authorities worldwide provide explicit crypto tax guidance on areas like capital gains on crypto or mining income. Expect the level of tax clarity to improve in 2021.

On a practical level, many professional and retail traders made gains with the bull market in recent months, representing tax authorities' opportunity to take what they believe is due.

Crypto will become more accessible to retail investors

Buying cryptocurrencies has never been easier. Not only are there numerous regulated crypto exchanges in the world, but the number of accounts at such exchanges grew from a mere 5 million in 2016 to over 100 million in 2020. This year saw a record number of Bitcoin wallets, so we should not be surprised to see this trend continue in 2021.

Of course, the elephant in the room will be big players like Square and PayPal that continue to make it easy for people to buy Bitcoin and other crypto assets. These firms alone are purchasing the equivalent of 100% of newly minted Bitcoin to cover US customers' demand. Think of what will happen when they open to international customers next year? The impact will be interesting to measure.

DeFi space exhibit extraordinary growth

Many times in 2020, trading volumes locked in DeFi surpassed USD 10 B in November 2020. In 2021, DeFi is likely to grow further. We saw a big boom over the summer, and although we've fallen, we continue to see an increase in interest and money invested.

Diem

Facebook’s stablecoin, Diem (rebranded from Libra), is slated to launch in 2021. Once launched, Diem will be backed by the US dollar and may eventually add other fiat currencies. The project was announced in 2019 and has been subjected to regulatory hurdles since then. It will be interesting to see Diem’s actual dynamics, usage, and preparedness to strengthen its position against the likes of PayPal. Even though PayPal’s crypto services are different from Diem, the payment giant, along with Visa, Mastercard, and others, left the Diem ecosystem earlier.

Crypto derivatives exchanges will grow up

The crypto derivatives sector will be an area to watch in 2021. The current size of the derivatives market is still multiple times that of the crypto market. However, the changes in the space as open interest on Bitcoin futures on the CME have recently been at record highs. This will be a good barometer of investor appetite as we advance.

The crypto derivative space still offers many opportunities for organisations that understand the institutional-grade requirements, from high-speed connectivity and counterparty risk mitigation to being regulated. This will provide a great opportunity to existing players and traditional institutions, and new entrants.

This year was exciting for the crypto community, and 2021 shaping up to be even more exciting. In the coming year, it'll be interesting to see if this trend continues. Do you agree with the above predictions? Do share your opinion or critique ours!

 About Marie Tatibouet

Marie is the CMO at Gate.io. She has lived and worked in America, Europe & Asia. Before joining Gate.io, she was the CEO at a Digital Marketing Agency in Hong Kong, working with clients in the blockchain technology sector. As a blockchain influencer, Marie is known for spreading the importance of blockchain technology to the masses, simplifying its technicalities for the everyday user, and indexing on the security and transparency aspects of Blockchain and Crypto evolution.

About Gate.io

Gate.io is a global, blockchain assets exchange platform. Established in 2013 and developed entirely in-house, Gate.io enables blockchain enthusiasts to trade and store assets in over 470 of the leading cryptocurrencies for over 3 million users from over 130 countries. Gate.io is a one-stop-shop for Spot, Margin trading, Futures, Perpetual contracts, Staking, C2C Loan, and Options Trading. Gate.io’s newly launched public blockchain, GateChain, is a next-generation public blockchain, focused on onchain asset safety and decentralised trading. Gate.io sets itself apart by prioritising security and user experience, providing quick, easy, and safe access to digital assets.