The Year of Blockchain: 7 Bitcoin, Ethereum, and Altcoin Predictions for 2021
Let's just clear the air real quick: 2020 was an insane year for not only Bitcoin but life in general. We don't need to get into details on this point as you, along with the rest of Earth's 7.8 billion people, have surely felt some of the repercussions.
But, we digress. Bitcoin was affected too, most notably in the way of incredible amounts of market volatility.
How volatile are we talking? During the March crash, BTC dipped into the $4K region. Now, at the year's end, Bitcoin is sitting well above $30,000. Ditto, Ethereum, which experienced a March low of $112 but is now cruising over $1,000.
However, price action is only the speculative facet of the cryptocurrency industry. Hop the fence, and you enter the far more enchanting space of blockchain development wherein real value is being created.
In 2020, developers — not speculators — who created real value as the world around them appeared to crumble.
The clearest sign of this was the remarkable rise of DeFi (decentralized finance). Like a phoenix rising from the ashes of a multi-year bear market, DeFi illuminated the cryptocurrency industry unlike ever before.
Suddenly, cryptocurrency + blockchain had a real raison d'etre that everyone could rally around. Ironically enough, as decentralized money, Bitcoin has always been about DeFi — but now, we have a very catchy name for that application.
If 2020 was the year of Bitcoin and DeFi, what does next year hold? Here, dear reader, are 7 Bitcoin, Ethereum, and altcoin predictions for 2021.
Warning: These predictions are not investment advice and should not be taken as investment advice. They are solely the opinion of the author. Cryptocurrency is volatile and risky, there is no guarantee the market will continue to perform well in 2021. Take these opinions with a grain of salt.
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1. Bitcoin could see the next big bull run
In March 2020, some Bitcoin naysayers were preparing eulogies during what they presumed was Bitcoin's plunge to zero. Instead, BTC bounced back from the brink to become a darling of the financial institution world.
Maybe it all started with legendary investor Paul Tudor Jones declaring there was massive upside to BTC, or that he called it a better inflation hedge than gold.
No, wait, maybe it was the other legendary investors like Stanley Druckenmiller and Larry Fink, who all praised Bitcoin. Or perhaps it was Microstrategy, Mass Mutual, Ruffer Investment, and Square combining to buy several billions of dollars worth of BTC.
Whatever — and whoever — is responsible for it, financial institutions have finally accepted Bitcoin as an asset worth holding from here on out. The Bitcoin is digital gold tagline has not only stuck, but it's well and truly come to easily define BTC for a new generation of believers.
As such, with untold swaths of wealth waiting in the wings, 2021 will be the year financial institutions finally FOMO into the market. Make sure to have some popcorn on hand because the land-grab will likely be epic.
As no-coiners realize the errors of their ways, they'll try to amend them as quickly as possible, taking BTC price to dizzying heights leading into 2022.
2. Ethereum could start outpacing Bitcoin
It's common knowledge that in 2017, after Bitcoin rampaged its way to $20K, Ethereum set off on a run of its own that culminated in $1,400 ETH.
After Bitcoin's stellar year and run to $30K, Ethereum is primed to step out of BTC's shadows as traders look elsewhere for chasing all-time highs.
Bitcoin may be digital gold, but Ethereum is digital oil.
Large financial institutions may not understand the significance of that yet, but they will — oh, will they ever. Looking for a reason to believe? On February 18, 2021, the CME Group is launching Ethereum futures.
In 2017, the CME also developed Bitcoin futures that were widely credited as the rocket fuel powering BTC's launch. Will history repeat itself? We have all of January 2021 to find out.
3. DeFi total locked value could exceed $30 billion and significantly disrupt traditional finance
In 2020, the DeFi TLV (total locked value) skyrocketed from $650M in February to $14.5B by year's end. Such a gargantuan rise was made possible by incredible DeFi platforms and products like Uniswap, Compound, Yearn Finance, Aave, Maker, Synthetix, SushiSwap, Curve, and Balancer.
A second-tier round of DeFi darlings led by C.R.E.A.M. & Harvest Finance brought value. Still, their allure was blunted by the ongoing security exploits and losses suffered by projects like Cover Finance.
2021 will see DeFi take the lessons learned from such exploits to build and strengthen their offerings into the future. As security improves and the DeFi industry goes mainstream (emboldened by crypto adoption from PayPal and Visa), expect TLV to skyrocket. Simultaneously, centralized blockchain finance (Celsius, Nexo, BlockFi) leads the way for retail.
People will soon realize that true financial freedom doesn't require a banker's consent — all it takes is a self-hosted wallet and a willingness to accept the future of money.
Decentralized finance is something crypto insiders have passionately harped on about for years without really explaining the concept.
4. A crypto boom in Latin America will broaden blockchain's horizons
Fiat currency volatility is real. While Americans often complain of inflation weakening the dollar's strength over multi-year stretches, nothing compares with the currency crises seen in Venezuela, Argentina, and Colombia.
Latin American and African markets have dipped their toes in the water using Bitcoin and Ethereum in places of their volatile fiat currencies. But, there are better decentralized finance solutions on the way for 2021.
Reserve, a decentralized stablecoin pegged to a pool of other stablecoin assets, is readying the Reserve App’s launch. It's a Square Cash-like mobile app for sending and receiving digital USD that is focused squarely on the Latin American market as a whole.
Bitso, a crypto exchanged based in Mexico City but active across Latin America, is already processing upwards of $1B in remittances across the region. With Ripple's SEC troubles knocking it out of contention in many markets, a significant opportunity has opened up for other players to come calling.
5. Stiff competition between layer 1 blockchains like ETH, DOT, and ATOM
Ethereum made quite a bit of noise in 2020 as it reincarnated from proof of work-based ETH 1.0 to proof of stake ETH 2.0.
The upgrade wasn't lost on developers, speculators, and observers. Few, if any, transitions have been as significant as Ethereum's evolutionary move toward a fully-sharded and future-ready blockchain.
At the time of writing, over $1B worth of ETH has been staked in ETH 2.0 staking pools. The sheer volume of deposited value is the crypto equivalent of a standing ovation and a clear signal that people expect Ethereum to continue dominating the layer 1 protocol landscape.
However, the days of assuming ETH has no competition are over. Polkadot, an interoperable, fully-sharded blockchain created by the same person who co-created Ethereum, is quickly aggregating hopes and value.
Over 63% of the available DOT are currently staked for just around $5B — nearly 5x the value of staked ETH. Additionally, over 100 projects are coming to fruition in the Polkadot universe, with more sure to follow as the project begins IPO slot auctions (the Polkadot ICO equivalent).
Cosmos has been tending to its IBC (inter-blockchain communication) protocol for blockchain interoperability for several years. In 2021, Cosmos hopes developers will favor sovereign blockchains built on its protocol rather than the relay chain-connected parachains available via Polkadot.
Notable projects like Band Protocol and Terra have already transitioned to Cosmos. With the arrival of Dfinity expected some time in Q1 2021, its market share might be eroded somewhat along with Ethereum’s. In any case, the layer 1 blockchain space is heating up as competitors seek to outpace Ethereum 2.0's phase 1+ developments.
Let's face it — everyone wants rewards. That might also be the biggest takeaway from this year's DeFi craze.
6. Facebook's Diem launch will spark a rush on stablecoins & CBDCs
Facebook has renamed its stablecoin crypto asset to Diem following tons of regulatory pushback on its previous version as Libra. With several billion Facebook users worldwide, the platform is primed to capture a massive audience the moment Diem launches.
While one can't expect users to equivocate Diem with lesser-known stablecoins like DAI, USDC, and RSR, it will likely give them a voluminous boost. Stablecoin assets like Diem become, perhaps, the next-best known face of crypto after Bitcoin.
Expect Stellar ($XLM) to make big moves as XRP steps aside due to an SEC lawsuit. The Ukrainian Government announced it had entered into an MOU agreement with Stellar to develop central bank digital currency solutions.
Additional propulsion will froth to the top as central bank digital currencies like China's digital yuan finally appear.
7. Regulators will try to clamp down on crypto, but decentralization will win the day
The tail of 2020 saw regulators trying to mark the cryptocurrency space — and not in a good way. New rules on self-hosted wallets came to the fore, as did SEC lawsuits against Ripple and BitMex.
Fortunately, neither is decentralized, signaling low regulator tolerance for centralized organizations masquerading as otherwise. However, the uncertainty created by the SEC's recent interest in crypto, along with mainstays like Coinbase going the IPO route, means that centralized crypto institutions will face some uncertainty in terms of how to operate.
New token listings will be scrutinized unlike ever before, and some of today's current selections are likely to be culled from the order books at Coinbase, Kraken, and Bitfinex. As such, decentralized exchanges, liquidity protocols, and AMMs will find themselves perfectly positioned to trade in the vacuum.
Back in September, Uniswap surpassed Coinbase's volume for the first time. 2021 will see more flippening events wherein we find, once again, that decentralization is the correct solution.
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