2021 Crypto Preview: Here's What's Coming Next

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Over the last few years, crypto has seen its share of ups and downs. Pundits are everywhere when it comes to guessing the next all-time-high, or trying to pinpoint what level they think Ethereum, Bitcoin, or any other of a host of cryptocurrencies is going to be in the future. When it comes to the exact future of crypto prices, no one has a crystal ball.

However, what investors can focus on are real-world adoption and usage of crypto. Here’s a list of top events that can drive widespread adoption for crypto in 2021.

Central banks Are Racing To Create Digital Currencies 

Nearly 80% of central banks around the world are engaging in research, experimentation, or development of CBDCs. Citigroup’s Chief Executive Michael Corbat said his company is going to help countries around the world create their own digital currencies. Corbat specifically stated that CBDCs are “inevitable” and will be the future of money.

The People’s Republic of China has made the most progress and is already testing its new currency, the digital Yuan, across several Chinese cities. It will be their first legal digital currency, and it is one of the most advanced and forward-thinking financial projects of all time as it introduces crypto to millions, and later, billions of people. It’s a bit different from what you’d expect with standard crypto because it is controlled, monitored, and issued by the People’s Bank of China. To get the ball rolling, the bank is giving $29.75 worth of digital yuan to 50,000 randomly chosen residents so China can test the network and study how consumers utilize the new currency. 

Recently, Chinese eCommerce company JD.com announced it will be the first company to accept digital yuan as a form of payment. The new cryptocurrency is picking up steam with support from companies. As more people become familiar with cryptocurrencies like digital yuan, other cryptocurrencies like Bitcoin may become more understood, and purchased and increase in price as well. Not only that, but other countries have been noticing China’s CBDC and may copy them.

Big Banks Embrace Crypto

Big bank adoption of crypto is also accelerating. Last month, German private bank Hauck & Aufhäuser announced their very first cryptocurrency fund. The HAIC Digital Asset Fund I is a joint effort with Kapilendo and will aim at being attractive to investors interested in investing in cryptocurrencies like Bitcoin, Ethereum, and Stellar. This fund will cover 85% of cryptocurrencies and will passively allocate cryptocurrencies based on factors like market capitalization. This is a strong sign that as time goes on, private banks and other entities will create new ways for people to invest in cryptocurrencies.

Germany’s bank is not the only bank around the world getting involved in crypto. Singapore’s largest bank, DBS, Spain’s second-largest bank, BBVA are also getting into crypto as well. DBS is creating three new crypto offerings, including trading and custody, as well as a platform for security token offerings. And BBVA is no stranger to crypto as they combined public and private blockchain back in 2018. They are said to be launching a cryptocurrency initiative across Europe.

Growing Institutional Investment

Bitcoin has grown from an internet concept into the world’s sixth-largest currency. It has functioned reliably for now over a decade, and Bitcoin as a borderless form of money has steadily grown in popularity around the world. 

Boosting its reputation, several billion-dollar companies have recently announced that they plan to hold significant amounts of their reserves in the cryptocurrency. MicroStrategy is a great example of such, as they’ve been buying millions of dollars of Bitcoin. Dozens of companies are also making it easier for individuals to invest in cryptocurrencies such as PayPal, Stripe, Square, Coinshares, Robinhood, Bitwise, Visa, JP Morgan, and Mastercard. And as the year ends, the pace of famous investors announcing Bitcoin investments and speaking optimistically about crypto as an investment is also on the rise.

Other investors, meanwhile, are pointing to the fact that Bitcoin’s fixed supply makes it attractive in times of unprecedented spending and inflation. As more dollars are printed over the coming months and years, Bitcoin’s supply of 21 million will never increase - making it an effective hedge against inflation as demand for it continues to increase. 

Facebook’s finally launches its cryptocurrency

Facebook has been working on its digital cryptocurrency for years. Recently, they changed its name from Libra to Diem, which means “by the day”. It’s a smart new name for the cryptocurrency as Facebook wants Diem to be the daily transactional currency for the world. Some of its benefits include mobile-accessible, stable to reduce volatility (backed by cash or cash-equivalents like short-term government bonds), fast with transaction speeds, scalable, and secure due to its use of blockchain technology.

Diem has not been officially launched yet, but it is projected to release in 2021. Unlike Bitcoin, Diem will start as a centralized currency and gradually become decentralized over time with its ownership handed off from Facebook to a conglomerate of companies including eBay, Stripe, Shopify, and others.

Ethereum: faster, better, stronger

Ethereum’s upgrade to 2.0 has been a long time in the making. Building the future of the internet isn’t easy - and Ethereum 2.0’s steady progress has taken its long-term potential into consideration. The current version of Ethereum is a revolutionary system that allows software to run all kinds of programs, contracts, and other applications quickly, effectively and without the need for humans to manage them. However, Ethereum, as it is now, is also expensive, slow, and difficult to use at times of high network traffic. Ethereum 2.0’s future updates aim to solve these issues and bring about other massive improvements. 

Developed to handle high network usage with speed and cost-efficiency, the first phase of Ethereum 2.0 launched in late 2020 as a proof-of-work (PoW) protocol. This enables savvy investors to “stake” their Ethereum on the network and help validate the transactions. As a result, they can earn substantial rewards of up to 18.10% APY, like a crypto interest rate.

As of December 8th, over 1.3 million ETH has been staked onto their new network from 40,000 unique validators creating a highly decentralized and successful launch, enabling thousands of individuals to earn consistent rewards.

Crypto Companies Are Going Public

Coinbase, one of the largest crypto exchanges in the world, is in the process of going public and becoming publicly tradable on the stock market. They have over 13 million users and have partnered with a dozen different companies including Overstock, Dell, Expedia, PayPal, and Stripe. 

Robinhood, another leading exchange for crypto trading, also recently announced they are working on their IPO and The Bitwise 10 Crypto Index Fund OTCM, is now available to trade in the OTC market.

As demand increases for crypto, 2021 could create a flood of crypto companies looking to expand into the public markets. 

Digital Collectibles Finally Gain Traction 

Digital collectibles, known as non-fungible tokens (NFTs), are unique art, sports cards, gaming characters, and more that are digitally created and recorded on a blockchain.

NFTs are not new, as they’ve been around since 2012, but they have been gaining more attention recently. This technology has many uses, including games and characters are owned by the user and can be bought and sold outside the gaming environment or used in other online games. CryptoKitties was one of the first popular blockchain-enabled games and new games like Axie Infinity are expanding on this concept.

Original digital art NFTs can be created and sold on online marketplaces like Rarible. 

Similar to digital baseball cards, NFTs may be an investment opportunity as they are unique and may increase in price over time due to their uniqueness limited supply.

Rising Demand For Crypto Inside IRAs 

Adding crypto to an IRA appears to be increasing in demand as the price of Bitcoin goes up. Bitcoin has been around for more than 10 years and confidence may be growing that it will be a permanent asset in our future. 

Since large traditional exchanges like Fidelity and Vanguard are yet to allow their users to purchase crypto for their retirement accounts, some companies like Bitcoin IRA have stepped in to help fill the demand. These companies provide similar services to traditional exchanges where consumers can rollover an IRA to their custodian and buy and sell crypto directly inside their IRA or 401(k). This also provides some tax benefits relative to buying through a typical cash exchange like Coinbase. 

With these upcoming projects launching and the price near all-time highs, 2021 is shaping up to be a banner year for crypto.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

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