Crypto Investing
11 Mar 2021

Cryptocurrency Market Trends to Watch in 2021

Nisha Ramesh

2020 has been a big year for many events, and cryptocurrency is definitely one of them. In the past year, crypto has been on the news often for more positive than negative reasons. 

In India, the Supreme court lifted the two-year-long ban imposed by RBI on crypto transactions. After the ban was lifted, more investors started accepting it as a long term asset class for investment. 

On the global platform:

Institutional investors such as Microstrategy Inc, Square etc., converted their cash reserves into Bitcoin as a hedge against fiat money’s falling value. And after the Bitcoin Halving event this year, the currency witnessed a never before seen bull run where its value rose from ~₹5,00,000 to ~₹35,00,000. 

When the global economies were melting due to the pandemic, the cryptocurrency market rose steadily, providing investors with a cushion from market risks. 

The evolution of the technology underlying cryptocurrencies has not ceased to take us by astonishment, and I believe that 2021 will be nothing less. There are so many trends in the crypto market that could change the way we see things drastically. 

Here’s what we are seeing:

1. Stablecoins are Stabilizing

A stablecoin is a cryptocurrency whose value is attached to an outside asset such as the US dollar or gold for stabilizing its price. 

Stablecoins have cemented themselves as one of the most-used payment networks in the world’ in 2020. According to statistics, there was a 500% increase in the number of stablecoins in circulation last year. 

In addition to growth in supply, stablecoins also grew across multiple blockchains. For instance, Tether extended support for OmiseGo and Solana protocols, USDC, the second-largest stable coin, added support to the Algorand network. 

Looking ahead:

Experts believe that the market capitalization of the dollar-backed stablecoins such as Tether and USDC could cross the value of $150 Billion in 2021. 

Though it is not possible to predict the growth of stablecoins, given its performance in the past year, there are high hopes for its utility to expand. 

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2. Growth of DeFi

DeFi or Decentralized Finance is a collective term for various finance applications based on cryptocurrency or blockchain technology. It mainly aims to cut intermediaries and delays caused by centralized financial institutions. 

2020 was quite a questionable year for governance tokens. However, there were strong total values locked in Decentralized Finance (DeFi) protocols. 

The number of DeFi apps users has been increasing, which can be expected to continue in 2021.

Innovations will continue to hit the market with new products. Experts believe that DeFi could solve some of the challenges that hold back the financial sector, such as inaccurate price data.

3. Introduction of Polka Dots

Polka dot is a new technology generation that aims to connect multiple specialized blockchains into a unified network. Currently, blockchain in isolation can process only a certain number of transactions in a given time. 

Polka dot could tackle that challenge with its ability to process several transactions over several chains simultaneously. 

Over a hundred projects are underway for the Polkadot ecosystem. It ranges from core technical infrastructure to applications for DeFi, privacy-oriented data and digital identity systems (often called self-sovereign identity), IoT, social networking,  robotics, gaming and supply chain logistics. 

4. NFT’s Mark is Made

NFT stands for Non-fungible Tokens. In simple terms, they are digital assets like memes, GIF, images etc. People can buy and sell and own these tokens in digital form. 

NFT witnessed a triumphant year in 2020 – this year saw rare assets representing games and artwork. Big brands, including top football teams and cinema makers, are already issuing NFT’s to avid gamers. This trend could be set to continue or even grow in the year 2021.

5. India’s Own Digital Currency

Recently:

The Indian government expressed its interest in introducing an official digital currency of its own in a new Cryptocurrency Bill. Countries such as China, Singapore etc., have already issued their own digital currency. Other countries such as Japan, Sweden and Russia are looking to launch their cryptocurrency. 

If India moves forward with its plan to introduce its own Central Bank Digital Currency (CBDC) in 2021, it could be a big leap forward in our country’s technology. 

6. Regulation and Rules

It is quite likely that 2021 could take shape to be a bittersweet year in the crypto community. With the crypto market capital growing exponentially, the much anticipated governmental regulations may fall in place. 

This could be a welcome reprise. It gives more clarity to the investors regarding the status of cryptocurrency in the country. It could also be unwelcome by many due to more restrictions on transactions. 

Bottom Line

Wrapping up with a note of caution. We could expect many things from the crypto market in 2021, but the chances for it all to be true are quite slim. Honestly, the crypto space is ever-changing. So, it is impossible to make an accurate assumption of what could happen in the future.

It is most likely that some of the things that could dominate the industry this year have not even come to notice yet. 

But one thing is for sure; cryptocurrency is here to stay. 

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Nisha Ramesh

Content Writer

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