Cryptocurrency Trends for 2021 — Aus Merchant
In 2020, Bitcoin saw high gains in its price and saw the highest upward trend since 2017. With the macroeconomic conditions continuing to favour digital assets and the highly anticipated launch of Facebook’s own cryptocurrency this year, 2021 trends show no sign of slowing down.
There is a momentum surrounding cryptocurrencies like Bitcoin and Ethereum, more and more individuals and institutions are buying in and racing to purchase and trade cryptocurrency. This momentum is creating the need for regulations on trading and buying.
The market is heating up, and now is the perfect time to take a look at the trends for the new year.
Top 10 Cryptocurrency Trends for 2021
Trend #1. Central Bank Digital Currencies (CBDC) and China
CBDC had a banner year in 2020. Many central banks are going to be focusing on retail CBDC’s. In contrast to wholesale CBDC’s, retail allows the public to have a fully digital form of central bank money.
Emerging from this growth and new opportunities for investing, China is blazing the trail for future money. Their digital renminbi is in its final phase, with more than two billion digital renminbi traded via 40 million transactions. The only question left is how quickly China is going to move forward on this project.
The Australian Reserve bank has also shown interest in a CBDC project for wholesale settlements kicking off last year.
Trend #2. Stablecoin Popularity
Digital tokens called stablecoins may see some growth over the next few years. Stablecoins are a fiat currency that acts as a hedging mechanism to protect against the potential decline in cryptocurrency collateral prices.
There are two main reasons that stablecoins will see growth in 2021 and beyond, resulting from the instability of non-centralized tokens over the long term. Tether experienced several growing pains while the industry developed, making it vulnerable to other stablecoin providers — and it’s on track to be dethroned.
Trend #3. Traditional Banks Using Bitcoin
Institutional players in the cryptocurrency market entered the market in 2020 and show no sign of slowing down in 2021-financial institutions like Wells Fargo, JP Morgan, and Citibank.
As this trend accelerates through 2021, as banks begin to make their crypto plans more public, further catalyzing the entry of traditional buy-side firms that are comfortable with trading regulatory intermediaries.
In addition to investment banks entering the market, private banks are starting to look at cryptocurrency. Private banks are looking to adapt to cryptocurrency as a differentiator to engage and drive new revenue.
Trend #4. Tax Clarity for Cryptocurrency
An increasing number of tax authorities around the world are imposing and providing crypto tax guidance. While there is no guidance for crypto borrowing or lending, tax authorities focus on capital gains taxation on crypto and mining income.
Tax clarity is crucial for giving stability to institutional investors. With retail and professional traders seeing gains in the market, tax authorities are looking to collect the taxes due, even in the current challenging economy.
Trend #5. Crypto Mergers & Acquisitions (Crypto M&A) Become Crypto Octopuses
Crypto M&A had an impressive year in 2020. Despite the struggling economy, the total value increased from $19.2 million to $45.9 million. This growth has created a shift from crypto unicorns to becoming crypto octopuses by increasing spending in bull market gains and investing in firms offering ancillary services.
The growth of Crypto M&A is shifting from the United States and becoming more popular in the Asia-Pacific, Middle East, and European markets. As the crypto unicorns become crypto octopuses, we see nothing but growth in these markets and others worldwide.
Trend #6. Easy Purchase of Cryptocurrency
It’s never been easier to purchase cryptocurrency. There are now regulated exchanges in most countries. These exchanges have grown to over 100 million in 2020. Players like PayPal and Square provide easy ways to purchase bitcoin and other crypto assets. 2021 will be no different as these institutions take their platforms to international customers.
Trend #7. Hedge Fund Investments
Hedge funds like Guggenheim and Renaissance Technologies began to look into crypto investing in 2020 seriously. As numerous regulated and institutionally focused exchanges now happy to service crypto funds, hedge funds want in on the action.
Trend #8. Decentralized Finance (DeFi) Regulations
Decentralized Finance (DeFi) exploded in 2020 to $50 billion from the $1 billion at the beginning of the year. In some months, DeFi saw larger trade volumes than some traditional exchanges.
One of the main factors for the growth of DeFi is their composability, a design principle allowing different components to meet any specific use case requirement. DeFi creates the ability to reimagine financial services, giving way to a first-principles approach.
Trend #9. Bitcoin ETF Regulation
Crypto enthusiasts have wanted a digital currency ETF for mainstream investors for years. ETF regulation has repeatedly pushed back, and applications from firms like VanEck are still being delayed. However, analysts believe that mainstream Bitcoin ETF’s approval will give a jolt to the digital currency world.
Once approved, the industry will be open to investors looking to participate without the current market risks associated with purchasing and selling coins directly. These funds’ future is unknown, but the Bitcoin ETF regulation is on our 2021 radar.
Trend #10. Using a Cryptocurrency Broker
When you are trading digital assets, it’s important to maintain a disciplined and secure methodology. There are three primary reasons why you should consider using a broker instead of a cryptocurrency exchange.
1. A Larger Liquidity Pool
When there are more people buying and selling, the exchange is considered to be more liquid. When a new exchange is opened, it is populated with trading pairs of buyers and sellers in order to distribute trading liquidity from existing exchanges. Brokers can avoid liquidity problems by carefully monitoring the market and then acting on instructions from the trader to sell or buy based on the quoted price or estimate.
2. Slippage Fees and Reduced Spread
Low liquidity in cryptocurrency exchanges causes a high spread and the slippage fees eat into your funds. Brokers can distribute their selling and buying across the most liquid exchanges — giving you the best market rate, minimal slippage, and lowest spread. This means you’ll enjoy increased profitability in the long run.
3. An Increase in Cryptocurrency Pairs to and Investment Opportunities
If your exchange offers 100 or 200+ tradable assets, you can be stuck in an altcoin trade without being able to get a fill. Brokers give you the ability to offer assets without losing liquidity. This means reduced spread and slippage fees in addition to being able to use a single broker to manage their portfolio from one location.
As a digital currency merchant, Aus Merchant specialises in connecting a network of liquidity providers and high volume exchanges with a sophisticated wallet security system. Trade and access investment opportunities directly from your secure wallet. Contact us today and speak with one of our brokers to customise a trading system just for you.
Originally published at https://ausmerchant.io.
