- Bull runs and bear cycles of crypto markets are usually directly linked with events
- There will be more country-backed cryptocurrencies in 2021
- Crypto regulation has been a long-standing issue affecting the growth of the industry
- The European Union has proposed a unitary legal and regulatory framework for cryptocurrencies
Once again, the crypto industry has been brought into the limelight thanks to Bitcoin’s stellar price run which began in November 2020. As it has been with the industry, bull runs or bear cycles are usually directly linked to events that affect the industry.
For instance, the most recent price run that saw the crypto market peak at above $1 trillion for the first time, was linked to the influx of institutional investors and Wall Street firms in Q3 and Q4 of 2021. Reminiscing on the events of 2020, these are the major events that are likely to spark a bull run or a bear cycle in 2021?
Financial Regulation of the Crypto Space
For a long time, digital assets have operated in a largely unregulated environment. However, the narrative has already begun to change. Countries around the globe have come up with different regulatory guidelines to control the use of digital assets within their borders.
The problem with this approach is that there is no unitary or standard for which digital assets, derivatives, and exchanges are regulated. Financial regulatory guidelines can either stifle or encourage the growth of the young crypto industry.
For example, France has moved to strip cryptos of their anonymity in transactions, the United Kingdom has banned the use of crypto derivatives, while Switzerland’s “Crypto Valley” gets deeper with blockchain projects thanks to the country’s crypto-friendly regulations.
In Europe, things may change as the European Union has started the process of drawing up a unified, legal, and clear regulatory regime in areas pertaining to blockchain-based applications.
With more countries taking a cue from leading crypto countries, there is bound to be more crypto regulations in 2021. The direction of the crypto industry worldwide is largely dependent on the nature of regulations that will be proposed to check the industry.
President Biden’s Administration
In the United States, which is the biggest crypto country, the regulatory framework has been largely erratic. Different regulators have come up with multiple guidelines that are sometimes conflicting.
President Joe Biden’s administration has been backed by crypto analysts to put an end to the regulatory woes of the United States. Already, President Biden has been hinted to pick blockchain expert, Gary Gensler, to Head the Security and Exchange Commission.
This would mark a shift from the prosecution styled leadership of current SEC chairman, Jay Clayton to a more expert, future-driven style of the blockchain professor, Gary Gensler.
The President’s economic driven cabinet may churn out crypto-friendly guidelines which could spark a bull run in 2021. However, if the opposite holds true, a bear cycle could be up next.
When Bitcoin launched with blockchain technology in 2009, its first challenge was the banking industry. The advantages blockchain give to digital assets makes it the better option. Digital assets are touted to be the future of money, and now, the traditional banking industry is trying to catch up.
A number of countries including China, Ecuador, Senegal, Singapore, Japan, Palestine, Russia, Sweden, and the European Union have either launched or are looking to launch a digital form of their currency soon.
The European authorities have earmarked the middle of 2021 to begin work on developing a digital currency for the Eurozone.
In 2021, more countries are billed to launch their digital currencies than in the years preceding it. How the growth in the number of country-backed digital currencies will affect the entire crypto industry remains unseen.
On the Flipside
- While some countries are looking for ways of moving the crypto industry forward, others are attempting to curb its growth
- The Bank of America has referred to Bitcoin as “the mother of all bubbles,” reflecting on the 2017 price crash of the asset
- A U.K. financial adviser to the government has called for a ban on crypto transactions
Greater Institutional Interest
Although the crypto industry enjoyed its largest spell of institutional investors in 2020, it is far from maxing out that potential. There are 2,800 companies on Wall Street, however, less than 10 percent have been directly involved with the crypto industry.
2021 starts on a good note, with signs from Goldman Sachs on the possibility of entering the crypto industry. If mega banking firms like Goldman Sachs enter the scene, we could witness another major bull run in 2021.
The biggest aspiration of the crypto industry is to achieve mainstream adoption. The number of people who have been exposed to cryptocurrencies is estimated at 100 million. However, the number of active users is much lower than that.
Although cryptocurrencies have proven to be better than the traditional banking sector, it is yet to turn the tables in this industry. The innovation is likely to get to the hands of more people across the globe in 2021.
Due to the Covid-19 restrictions, people turned to digital payment apps like PayPal, which saw its stocks climb by over 110 percent in 2020. Later in the year, PayPal in collaboration with Venmo, launched its cryptocurrency services.
PayPal currently has over 325 million active users, and analysts believe that the digital payments platform will be a key player in the mainstream adoption of cryptocurrencies.
The Facebook-backed Libra cryptocurrency is billed to launch in 2021. The proposed currency and wallet were scheduled to launch in the Summer of 2020, however, the launch never happened.
Facebook recorded over 2.7 billion monthly active users in the second quarter of 2020, making it the largest social media platform. Although not a Facebook project, there are high expectations to see how Libra would affect the crypto industry.
The longest bull run of crypto markets rests on their ability to get mainstream adoption. Could 2021 be the year for that?