From the coronavirus pandemic to the global financial market meltdown, there’s been no shortage of risks keeping traders up at night in the earlier parts of this year. Shockwaves aside, 2020 will forever be remembered as the year cryptocurrencies — namely, Bitcoin — catapulted into the global spotlight. After a banner 2020, with gains of nearly 500% since the liquidity crunch in March, 2021 could shape up to be just as strong for the flagship cryptocurrency.
Here are the top narratives we believe will dominate crypto markets next year.
1. Bullish on Bitcoin
BTC claims top spot as the best performing macro asset in 2020, exceeding 270% returns year-to-date. Will this stellar performance continue into 2021? The chorus of bullish 2021 predictions say yes — with expected price targets ranging anywhere from $36,000 to beyond $300,000.
|Kraken Survey||$ 36,602|
|Plan B||$ 288,000|
2. Crypto’s Black Hole
Grayscale made significant headway this year, sucking up almost 3% of the total BTC supply. With premiums to spot at elevated levels, will we see the corresponding compression of premiums once private placement lock-ups hit the secondary market? Let’s not forget the possibility of an ETF approval on the horizon.
3. Saylor Moon
With Saylor’s MicroStrategy leading the charge, 2020 saw increasing company treasury allocations to Bitcoin. Will 2021 be the year where Bitcoin as a treasury reserve asset goes mainstream?
4. Exploring Options
Options are maturing as an asset class, with Bitcoin options hitting their first $1 billion trading day in 2020. Watch CME and Bakkt’s option offerings in 2021, as these will indicate major TradFi institutional involvement.
5. You Get What You Pay For
2020 saw an explosion in user adoption of DeFi protocols, hitting more than $10 billion in Total Value Locked. Will 2021 experience another major pump-and-dump, reminiscent of 2017’s ICOs, or will it harken a new age in global finance? Outperformance of DeFi “blue chips” seem to be indicating the latter.
6. Stepping Up Oversight
Regulators were markedly more active in 2020, cracking down on high-profile names in “gray area” segments of the crypto industry. 2021 could see heightened bulldozing in preparation for TradFi institutional involvement.
|Jul-20||Plustoken||Fraud charges, with crypto confiscated||China|
|Sep-20||Arbistar||Operator charged with fraud and money laundering||Spain|
|Oct-20||BitMEX||3 founders charged||USA|
|Oct-20||McAfee||Tax evasion charges||USA|
|Oct-20||PGUC||Founder facing 24 years in prison||India|
|Dec-20||Ripple||XRP charged with being “unregistered security”||USA|
7. The Return of the King
Bitcoin dominance approaches multi-year highs, likely a function of TradFi allocation being concentrated in BTC. This needs to trade weaker before we can see any significant upside in altcoins.
8. What’s Old Is New Again
Security Token Offerings (STOs), ICOs’ rebranded cousins, are set for growth with legacy institutions like Singapore’s DBS Bank which is rapidly rolling out offerings. NFTs and their respective marketplaces are also set to be back in a big way in 2021.
9. “Wall Street”-ing Crypto
The key difference in the crypto industry today versus 2017 is the massive infrastructural improvements within the ecosystem, from institutional custody solutions, to borrowing, lending and OTC markets. Could 2020’s precipitous decline in exchange reserves be signifying diminished exchange dominance going forward?
10. Meteoric Rise of Stablecoins
Keep an eye on the meteoric rise of stablecoins, with Nic Carter of Castle Island Ventures predicting total supply to exceed $50 billion by 2021. Also on our watchlist is renewed interest in algorithmic stablecoins, with Ampleforth/Basis/Empty Set Dollar leading the charge.
11. Size Matters
The elephant in the room is the scalability of DApps, an issue highlighted by skyrocketing ETH gas fees during 2020’s “DeFi summer”. Watch for more Layer 2 and sidechain solutions coming online in 2021.