The past year was overwhelming on various fronts, but against that background, the value of Bitcoin continued soaring. In the Bitcoin market, a trend that was notable in the year 2020 is that different companies and governments gave the digital currency some exclusive attention. Whether the attention was in the form of new regulations or adaptation by some companies, Bitcoin has occupied a unique financial sector position. Suppose you’re already a BTC investor or intend to try your luck in the industry. In that case, you may be curious to understand how 2021 will look. Therefore, we have taken an in-depth evaluation using past trends and data to give you an educated view of how the year 2021 will look like in the digital currency space. Please stay tuned for juicy and accurate predictions.
Competition May come from the Central Bank.
Research by the Bank for International Settlement indicates that 80% of central banks experiment with some cryptocurrency. China is the frontrunner in this experimentation. And in the year 2021, you should expect many central banks in the world to start adopting digital currencies. New challenges like COVID 19 have made the Central Bank Digital Currency (CBDC) project urgent due to the minimal use of cash. However, at the implementation stage, institutions will have to grapple with various challenges, including those touching security and privacy.
If many governments adopt digital currencies and other innovations, transactions will happen faster across borders with minimal transaction costs. Furthermore, through this experimentation, many low individuals in the rural and urban areas will access the financial systems.
Renewed need for tax enforcement:
The Internal Revenue Service (IRS) has shown several indications to start taxing crypto. Perhaps, this year authorities in various jurisdictions may want to explore the potential of cryptocurrency as a revenue generation stream.
If you possess BTC, you need to organize your tax matters-especially if you’re a resident of the US and UK. The IRS and Her Majesty’s Revenue and Customers are likely to be tough on those who don’t reveal their digital currency holdings.
Blockchain will go beyond financial solutions.
Individuals and organizations that operate blockchain do so for financial services. However, a trend is emerging where some fields can also gain from technology. Therefore, in the year 2021, blockchain will expand to net in more sectors, like transportation, logistics, and Healthcare. Although forecasting the future is a tricky affair, past trends indicate that blockchain technology is likely to gain acceptance in multiple sectors.
More mainstream acceptance
In the past few years, bitcoin didn’t gain acceptance, and many avoided it. Surprisingly, in 2020 there was a remarkable trend in BTC adaptation. For example, famous companies like PayPal are allowing their users to purchase and sell bitcoin. We’re likely to see these acceptance trends from multiple companies in 2021. And anticipate a major announcement from an American or European bank that may accept bitcoin assets this year.
Some companies, such as MicroStrategy, have pumped massive sums of dollars worth of BTC into their balance sheet. Fuelled by the COVID-19 pandemic, many companies and individuals are expressing interest in investing in alternative markets.
Expansion of Related Technologies
In terms of investment, bitcoin is a highly unpredictable currency. Investors may want to use technologies like Bitcoin profit trading robot to assist them in doing business. While multiple trading software exists in the market, in 2021, you should anticipate more players on this front.
Competition from Technology Giants
Bitcoin has jolted big companies to start thinking about providing an international virtual currency. Companies in the payment field know that the digital currency market is ripe for grabs and standard payment methods are sometimes expensive. Furthermore, mainstream payments can take time to complete. Many companies realize that a worldwide virtual currency can dramatically streamline international payments. For example, world communication giants, like Facebook and Google, are at advanced stages of implementing Bitcoin. Although technology offerings like FB’s Diem are different from Bitcoin, they might want to take a share of Bitcoin’s expansion in 2021.
New Regulations
Specific individuals may hide behind bitcoin’s anonymity and privacy clauses to commit fraud. Because these are issues of grave concern, Presidential-elect Joe Biden may isolate the digital currency sector for agent regulation. One can assume that a democratic administration may create sweeping regulations on virtual currency than what the Republicans did.
Besides political parties’ politics, various regulators have shown indications to start controlling the digital currency market. You can expect the continuation of this trend from financial regulators of various countries this year. We anticipate tighter control from major regulators like the US Securities and Exchange Commission (SEC) and the UK’s Financial Conduct Authority (FCA). The latter entity has already started cracking the whip on unauthorized digital currency businesses.
Because the digital assets and distributed ledger technology (DLT) field is growing, one can anticipate that regulators will find time to evaluate the field to create friendlier regulations keenly. So we anticipate guidelines and protocols that can create a favorable environment for the emerging financial sector.
On a positive note, the Office of the Comptroller of the Currency (OCC) recently indicated that it views the decentralized DLT networks just like SWIFT or other standard systems when transacting across the border. This development means that away from the standard systems that take many days to complete, OCC appreciates the speed at which BTC transactions are completed.
In a nutshell, we anticipate that many countries may try to create rules that control BTC transactions this year. Because many regimes appreciate the significance of BTC, they may create rules that are friendlier to the growth of the sector than punitive one’s statutes.
More volatility
Because BTC operates in a market that’s not tied to specific phenomena, like fiscal policies, it’s prone to greater appreciation and depreciation. Even experienced analysts may fail to predict with certainty what can happen soon in terms of appreciation or depreciation. In 2021, this trend will continue. Smart investors may want to diversify their investment portfolios to distribute risks in various currencies evenly.
Bitcoin poised as Store of value (SoV)
Digital currencies like Bitcoin Cash and Bitcoin SV are not reliable assets to be used for extended periods as Sov. Only Bitcoin, with its safest network, can be a trustworthy SoV. The digital asset can even appreciate after a long time. Experts observe that Bitcoin can deliver 10× or massive within a period of a few years. In 2021, more people will invest in this currency to make huge profits on their investments.
In 2020, there was an exciting debate centered on whether BTC can offer a viable alternative to gold as an SoV. Some market watchers indicate that millennials prefer digital currencies as a haven asset.
More security Breaches
As individuals and businesses develop multiple ways of borrowing from the decentralized finance (Defi) networks, you can expect more scams and hacks in 2021. The Defi space is at its nascent stage of development, and its technology hasn’t undergone thorough testing. These are open source systems that demand a high level of responsibility from their users. With a slight mistake, like exposing your password, you can quickly lose your investments. Remember, there isn’t any centralized entity you can rely on in case of any lost assets.
Bitcoin will hedge against inflation.
According to JP Morgan’s report, some institutional investors consider BTC a virtual option to gold, a well-known hedge asset. Whereas Grayscale Bitcoin Trust (GBTC) has expanded massively, gold EFT hasn’t shifted.
BTC will maintain the Bull Run
There are high hopes that the virtual currency will retain its bullish trend in 2021. A survey by Finder.com indicates that 58% of participants contemplate that Bitcoin will continue to enjoy an upward trajectory this year.
Big Financial Institutions
After many years of doubt, Wall Street is beginning to embrace BTC. Late in 2021, leaked Citibank documents indicated that BTC could soar to hit $318,315.72 by late 2021.
Key Takeaways
The digital currency field continues to attract attention from across different fields. While investing in this industry, it’s critical to understand the past to enable you to predict its future outlook. Suppose you want to reap some share from the perks of the BTC industry. In that case, you should evaluate the past performances to predict whether your investment can attract handsome returns. This guideline has delved into the likely trends of the year 2021. Some of the key lessons include:
- Because of its bright future, many central banks of different countries are mulling about the possibility of having some form of digital currency. So we expect some competition from these institutions in 2021.
- Tax enforcement: countries like the US and UK may start taxing people holding BTC tokens. If you’re an investor in this area, it’s critical to organize your tax information to avoid conflicts with the regulators.
- Store of Value (SoV): Many institutional investors are entertaining the idea of choosing BTC as their SoV. And this value many entities attach to this coin. So investing in it is a plus.
- Regulations: currently, the industry is mostly unregulated. This year many countries may come up with various rules and protocols to regulate the industry.
