This past year will forever be marked as the global pandemic took hold of everything from our health and safety to financial security. It was a year of mass economic devastation, of ineptitude at the highest level and agitation for change growing from the bottom up.
It was also a year that crypto came into its own – perhaps because it is the people’s money, unfettered by dysfunction at the top. Despite a minor scare in mid-March – when bitcoin collapsed 55% in one day, bottoming at $3,782 – it quickly bounced back, and even (perhaps ironically) gained recognition as a safe haven asset. Hedge funds, billionaires and publicly traded corporations have allocated treasuries to bitcoin, to say nothing of the little guys.
This year, the on-ramps got bigger and easier to use, and more people than ever have begun holding and trading cryptocurrencies. And, as online wallets and apps continue to improve, we will likely see more people enter the fold in the coming years.
Nearing the end of 2020, several headlines rocked the cryptocurrency world. The biggest, perhaps, was news that PayPal partnered with Paxos to bring crypto functionality to its 300 million plus users. While the service was limited to a few large-cap coins – bitcoin, ether, litecoin and bitcoin cash – it drove a new bitcoin rally and reignited a conversation over the mass adoption of digital assets. This renewed confidence will only continue to gain momentum as we cross the threshold into 2021.
Then there were the institutional high fliers who changed their outlook on bitcoin. Legendary hedge fund manager Paul Tudor Jones committed to storing a percentage of his net worth in bitcoin, while a leaked internal document from Citibank revealed that a senior analyst predicts bitcoin could reach $318,000 by December 2021.
As participation from the largest names in traditional finance continues to expand, 2021 will see limitless possibilities and further news of high-net worth individuals betting on bitcoin. And while bitcoin trading has not reached a volume where it is stable enough to be considered a true safe asset like gold, it has and will continue to show more and more inflation-resistant characteristics.
It’s likely that bitcoin and other cryptocurrencies will start decoupling from traditional assets, which may drive more institutions to add BTC to their treasuries. While additional fiscal stimulus was paused by a divided U.S. government, this only resulted in pressure on the Federal Reserve to expand its balance sheet and pump trillions of dollars into the global economy.
It’s for all these reasons and more, bitcoin has a chance to continue to take market share from gold. With a current market cap of $300 billion, and gold’s at $10 trillion, it will only require a fraction of these assets to shift in order to change the dynamic of “inflation hedges.”
Stablecoins find a stable home
Though bitcoin is the undisputed king of cryptocurrencies and has proven its ability to empower people through its decentralized, uncensorable monetary system, stablecoins have emerged as a necessary tool to further these economic and social aims.
In the emerging world, stablecoins have proved to be a hedge against volatility and inflation. This was seen by growing use in Nigeria, South Africa and Turkey, as the naira, rand and lira faltered.
Stablecoins pegged against stronger currencies like the U.S. dollar or euro will continue to help preserve the wealth of everyday people who do not want to expose themselves to the volatility of purer cryptocurrencies like Bitcoin or Ether. It’s a trend I expect to continue to unfold.
The explosive growth of stablecoin volumes will remain an agitator for central banks across the world to continue the research and development of creating central bank digital currencies (CBDC).
Location, location, location
Nigeria, China, India, the U.S. and Vietnam have become the main markets for peer-to-peer finance and have the potential to be leaders across the ecosystem.
These countries have managed to implement their own use cases for remittances, a major market in which bitcoin is unrivaled. For instance, Paxful’s global volume increased by nearly 31% this year. As more and more people adopt digital remittances, traditional remittance methods will be forced to take a backseat to bitcoin’s ease of use, lower fees and global availability.
The rise of price across cryptocurrencies is the result of growing societal and governmental dysfunction. The mainstream is awakening to a future of digital assets. And even if the bull market peters out, in the aftermath of the COVID-19 crisis and conjoined economic meltdown has already brought crypto into the well-deserved spotlight.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.