The world of crypto is incredibly volatile, and can be an unpredictable rollercoaster of law suits, vertical candles and FUD attacks (Fear, Uncertainty, Doubt) at the best of times. Predictions by anybody, no matter how well-versed they are in the new financial economy, should always be taken with a pinch of salt.
But, seeing as it’s January, it is quite tempting to dream about what 2021 might bring to crypto investors everywhere. Here are our top 5 predictions for the year ahead:
1. Bitcoin to surpass 100,000 dollars
Seems like a no-brainer, right? A 100,000 dollar Bitcoin requires less than a 3x increase from where we are at the time of writing. But the bigger the market capitalization of Bitcoin gets (the amount of coins available multiplied by the price of the asset) the more incoming money it takes to significantly shift the price.
Still, if we were to use ‘moon math’ by taking the 2017 bull run as a model, Bitcoin sat at around 1000 dollars on Jan 1 of that year, and after a bullish 12 months, fetched a price of 13,000 dollars by Dec 31.
If a similar 13x increase were to happen this year, we’d be looking at a price of 377,702 per Bitcoin… matching some of the more rose-tinted predictions made by Bitcoin bulls such as venture capitalist Tim Draper and Vinny Lingham, co-founder of the Civic digital identity platform.
2. Polkadot blockchain to eat into some of Ethereum’s market share
Currently, over 80% of dapps (decentralised applications) are built on Ethereum. The original smart contract platform has by far the greatest number of active developers, users and blockchain activity. But all of this activity has lead to congestion (slow confirmation times) and expensive transaction fees.
Polkadot, a project that aims to build bridges between different blockchains, was founded by former Ethereum Chief Technology Officer Gavin Wood, and, after a slow start due to a number of setbacks, currently has hundreds of new projects building on their many parachains – small, interlinked blockchains that combine together in order to speed up transactions and increase the collective security of the network.
Projects that build on Polkadot need to buy a large amount of DOT tokens as a kind of ‘rent’ for their space on the parachains, so 2021 could be a big year for their native token also.
3. Stablecoins to enter the financial mainstream
China’s state-owned DCEP (Digital Currency Electronic Payment) is a cryptocurrency that is ‘pegged’ to stay at the same price as the Chinese Yuan. It has been tested through 2020 and is ready to be rolled out nationwide in 2021. It will face no official competition: all other cryptocurrencies have been banned by the state. Reportedly, China’s ambition is to develop the first centralised state cryptocurrency and therefore be at the centre of the new digital economy in the same way that the US dollar is at the centre of traditional finance.
The United States’ response appears to be more pragmatic: just a few days ago on Jan 4, an opinion letter was published by US bank regulator OCC which finally gives permission for financial institutions to use existing blockchain infrastructure and hold / offer stablecoins. The US economy will perhaps then leapfrog the necessity of creating their own national cryptocurrency, and instead offer escrow in a mix of bank-issued cryptocurrencies (created by the same bank CEO’s who have been saying for years that crypto is worthless) and pre-existing stablecoins. USDC, issued by the Circle tech and investment company, could be likely benefactors, considering that their product is designed to stay within the confines of US financial regulation.
4. XRP won’t be the only digital asset to fall from grace
Ripple Labs had already raised eyebrows by distancing themselves from their XRP token, selling it off to fund their business activities, and leaving investors with very few incentives for holding the coin. But now, what was the 3rd biggest coin in terms of market capitalisation is being delisted from major exchanges after the US Securities and Exchange Commission launched legal action against the company for the sale of an unregistered security.
Regulators may now be scrutinising other crypto assets and startups, meaning that centralised ‘blockchain’ projects that are based in a specific jurisdiction could be at risk of retrospective action. New investors should consult knowledgable advisors to ensure the projects that interest them are not vulnerable to being shut down, which can lead to a huge price decrease within minutes. Other large-cap projects that face potential legal issues this year are Bitcoin SV (a controversial ‘forked’ imitation of Bitcoin) and the Tether USDT stablecoin, which still has to answer some serious questions about its relationship with the crypto exchange Bitfinex.
5. ‘IDO’ to become a 2021 buzzword
A large amount of traders are moving away from centralised crypto exchanges, which remain vulnerable to regulators and hackers. Decentralised exchanges such as Uniswap and Kyber Network are doing a roaring trade, and new ‘DEXs’ being built on Polkadot (such as Polkastarter) should be equally attractive to traders.
The 2017 crypto boom was characterised by the popularity of the Initial Coin Offering (ICO), where hungry investors threw large amounts of Bitcoin and Ethereum at new projects, some without even a minimal viable product, in search of huge gains on their investment once the coin finally came to market. Some of these projects are still going strong today, but most of them fell by the wayside, leaving investors holding large bags of useless currencies.
A rising trend in 2021 is the IDO, or Initial DEX Offering. The token is simply listed on a decentralised exchange at a certain fixed price for a limited time, with the aim of ensuring fairness for all early investors. This is a great way for new projects to be crowdfunded in a cheap and permissionless manner, but considering that anyone can launch a token on these democratic platforms, still represents a significant risk for new investors, who, in a euphoric crypto bull cycle, will likely be drawn into a glut of IDO’s that vary wildly in quality.
Those who seek to invest in crypto in 2021 should, as always, practice due diligence, and ask trusted advisors such as those at Blocksafe Crypto,if in doubt.