It’s true to say that 2020 was a year packed with a whole range of unforeseen and unprecedented global events that no one could have predicted when 2019 was drawing to a close. But perhaps the most pleasantly surprising of these was the sudden resurgence in the cryptocurrency markets.
After tumbling far from its previous record-breaking highs all the way back in 2017, bitcoin and the cryptocurrency markets more generally seemed set to have another year of lackluster performance in 2020. Although the first quarter of 2020 saw some positive growth trends, there was as much downward momentum as there was upwards in the early months.
But as is very much on trend for how 2020 has played out, the markets had another plan in mind. Towards the beginning of Autumn, there seemed to be a palpable shift in market sentiment as the prices started showing some positive signs of upward momentum.
By the close of 2020, the markets were locked into a full-on bull run, with the prices of the major cryptocurrencies such as bitcoin and ethereum easily hitting new all-time highs on a weekly basis. Much like the previous bull-run in 2017 that saw bitcoin hitting its previous all-time highs — which were close to a 100% less than the new highs it was hitting in 2020 — word of this trend had spilt out into the mainstream media. This only served to drive the bull-run forward even more, with unprecedented trading volumes being hit across all major cryptocurrencies on a daily basis as 2020 drew to a close.
But with some of this new-found enthusiasm dying down somewhat as the markets look to consolidate, what does 2021 have in store for cryptocurrencies? Will the bull-run finally turn bearish as mainstream media loses interest in cryptocurrencies? Or has the industry hit a tipping point in terms of institutional interest and investment?
Expect more regulation
While, in the past, news of ‘more regulation’ might have been enough to scare early cryptocurrency adopters away from the likes of bitcoin — which were initially embraced as a way of getting around ‘regulation’ — times have definitely changed. Now, news of regulation by international financial institutions and authorities across the world is a strike of confidence in those looking to see widespread adoption of cryptocurrencies. In fact, progressive approaches to the regulation of cryptocurrencies by central governments and financial authorities is a sign that these powers are ready to embrace cryptocurrencies. For this reason, we can expect to hear a lot more from the likes of the Financial Consumer Agency of Canada (FCAC) and the US Securities and Exchange Commission (SEC) as they attempt to come to grips with the likes of bitcoin and ethereum.
Expect more companies to acquire bitcoin
One of the things large multinational companies do as a way of hedging themselves against the potential for losing money through currency price fluctuations is to pre-emptively acquire volumes of currencies. This allows large companies who operate globally to give a little bit of certainty to their proposed cash flow in both the long and short term. This logic is much the same when it comes to cryptocurrencies. As bitcoin and ethereum surge in price, we can expect large multinational companies to make announcements that they are adding cryptocurrencies to their assets as a way of future-proofing their cash flow.
Now almost two months into 2021, we have already begun to see this trend gain some momentum. In this regard, the announcement by Tesla that it is looking to acquire a staggering US $1.5bn in bitcoin as part of its plan to start accepting cryptocurrencies as a payment method is a huge sign that bigger things are to come in the crypto world.
For this reason, if you are looking for market trends to watch out for, start paying attention to a wide range of businesses beginning to ramp up their use of cryptocurrencies as payment methods, such as online casinos and even groceries stores. Online casinos, in particular, are well placed to take advantage of this trend, given they were one of the earliest adopters of cryptocurrency.
Look out for cryptocurrency ETFs
Perhaps one of the most hotly anticipated developments in the cryptocurrency world are cryptocurrency ETFs. Also known as ‘Exchange Traded Funds’, ETFs are an increasingly popular investment vehicle for individuals and institutions looking to invest in a broad cross-section of the market. They function as a way of spreading out the risk typically associated with trading and investing. ETFs can be traded like regular stocks and can track a wide array of asset classes. They have become increasingly popular for individual and institutional investors alike in recent years, as they manage to consistently out-perform the majority of actively managed investment funds.
For this reason, the first cryptocurrency ETFs are hotly anticipated by those looking to invest in cryptocurrencies while also spreading out their risk exposure across a variety of currencies and cryptocurrency instruments. Crypto market watchers are paying particularly close attention to the first American-domiciled cryptocurrency ETF, which will be taken as a much broader commitment of the American market to cryptocurrencies in the future. While American financial market regulators have yet to grant full approval to a consumer-ready crypto-based ETF, a number are already in the pipeline waiting to be deployed when regulators give the go-ahead.
With Canadian financial regulators such as the Ontario Securities Commission recently approving the launch of the Purpose Bitcoin ETF, it doesn’t look like we will have to wait much longer until their closest neighbours follow suit. When an American-domiciled ETF does get the green light, we can expect the cryptocurrency markets to respond very enthusiastically, given how long the industry has been waiting for this development. Just how much longer we will have to wait, however, remains to be seen.