Cryptocurrencies have had a shaky growth in the past, but all seems to be working just fine.
For example, bitcoin saw a steady rise in December 2020. It went past the $20,000 mark, which was not the case in the past. For context, at the beginning of 2018, bitcoin was at $13,500 from 19,783 in December 2017.
It went to drop to $3,400 which was losing three-quarters of its value. Other cryptos were not doing well either. For example, Ethereum (ETH) dropped to $91 from $1300 in December 2018, but it has been growing and reached about $450 by December of 2020. According to a discussion on cryptocurrency by SoFi, 2021 might see continuous growth. Here are some predictions on the performance of cryptocurrency in 2021.
• People lost trust in fiat currency.
When the effects of the pandemic started being felt around the world, people started looking for ways to invest their money better. The value of gold, cryptocurrency, and other assets shot down at first. For crypto assets like bitcoin, the value started increasing steadily. In 2021 the value is expected to increase as more people lose trust in fiat currency and start trusting crypto.
• Cryptocurrency will become an international payment currency.
With big companies like PayPal incorporating bitcoin in their wallets, it will see a major adoption by people. PayPal has over 300 million active users and 2.6 million merchants. With crypto being used to pay for products on PayPal, many people will start buying them. Other corporations will also feel the pressure eventually.
• The covid-19 vaccine will not impact cryptocurrency.
People are hoping the vaccine will get the world back to the pre-crisis moments. The impact will be positive on the stock market. However, cryptocurrency will still be seen as a safety net for uncertain times. The value will still increase as more people regain liquidity. They will see a reason to invest in cryptocurrency for a rainy day.
• Cryptocurrency might replace gold as a hedge against inflation.
The traditional hedge asset has always been gold. Bitcoin has been seen as the digital alternative hedge asset. While fiat currency continues to feel the effects of the pandemic, there has been a lot of inflow to bitcoins from the gold industry. This is mostly because cryptocurrency is a far much-advanced product than gold.
• Ethereum 2.0
Ethereum 2.0 is a great way to introduce the masses to cryptocurrency. The new crypto has addressed some issues that kept many people away. The issues of security and scalability are well addressed and that will ensure that more people trade in crypto. The new ETH will work like a bank deposit where you can leave the tokens and they will build up slowly with time.
• Central bank tokens.
Central banks are on a quest to start issuing their crypto tokens. There have been discussions about regulations around cryptocurrencies and what would be a better way to do it than central banks having their tokens. That will drive more people to adopt cryptocurrencies.
Some governments are keen to regulate decentralized currency. Some people see that the authenticity of the cryptocurrency is secure without government regulations. With that in mind, if the regulations start, there are going to be people who will not comply and they will trade and transact on the dark web.
There is a chance that the growth of cryptocurrencies will be steady in the long run.