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An Outlook on Cryptocurrency Adoption in 2020 — Will the Institutional Money and Corporate Treasury Demand Grow in 2021?

13 Min Read
Last Updated March 26th 2021

The world saw the rise of cryptocurrencies soar in 2020. Bitcoin, for instance, known as the world’s preeminent blockchain and a consistent predictor of the broader crypto market, shot up in value towards the end of 2020 to hit its all-time peak and in addition, is still maintaining its spot today. 

Following this year of prominent success, the global audience is exuberant about the potential for 2021 and are eager to see when the time is right to join the bandwagon. No longer are we wondering whether governments will get in on the hype, but rather how deep in the next bull run will crypto get.

Let’s take a look at where cryptocurrencies like Bitcoin lie ahead for 2021, who are the driving forces for crypto adoption and why more people are investing.

 

2020 At a Glance

Cryptocurrencies are gaining momentum. At the beginning of 2021, we saw Bitcoin stand at roughly $42,000 per coin. Although the Bitcoin surge in 2017 had mostly been powered by the buying hysteria, the rally in 2020 was strongly influenced by institutional investors. Not only has the escalating pace of major institutional investors speaking openly about and investing in Bitcoin as a portfolio asset confirmed the position of Bitcoin and other coins in the portfolio, but it has also grabbed the interest of other stakeholders.

With that said, it must be noted that Bitcoin reached notable adoptions by the end of 2020 from corporate treasuries such as MicroStrategy and MassMutual, having bought large amounts of Bitcoin in asset reserves according to Forbes. MassMutual spent $100 million in Bitcoin on December 10th, which Wall Street Journal labels its the ‘latest sign of mass adoption.’ Additionally, MassMutual purchased a $5 million minority ownership interest in NYDIG, previously known as New York Digital Investment Group, also showing signs of mainstream approval of cryptocurrency adoption.

PayPal, the leading virtual payments company, has supported crypto acceptance in October 2020 when it announced the addition to its network of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. This now allows for the company’s 361 million users to buy, sell, and hold one of these coins through the PayPal app. Crypto will access PayPal’s Venmo peer-to-peer payments app later this year, and PayPal announced its plans to make crypto accessible to its 28 million retailers worldwide as a means of financing for transactions this year.

Additionally, in 2020, we saw innovative advancements in crypto-taxation when the US Internal Revenue Service sent each American a set of questionnaires about crypto holdings, while special reports upon this subject were released by the Organization for Economic Co-operation and Development.

Cryptocurrency buying has never been easier. There are not only several highly regulated and controlled crypto exchanges in the world, but the number of accounts within those online exchanges has increased drastically, from just 5 million in 2016 to more than 100 million in 2020.

A Wave Of Institutional Adoption

Even non-crypto enthusiasts can tell that the relationship between cryptocurrencies and governments isn’t much of the best. Until 2020, there’s been merely a foundational basis for cooperation between big cryptocurrencies and financial institutions. However, the success of cryptos unfolding in ways we haven’t seen before may force governments to think twice about what they’re missing out on.

Growing institutional interest is among many of the key factors predicted to stir cryptocurrency prices in the coming years. Institutional investors have until now kept a close tie with gold for decades, and now the value of gold is currently at its highest. However, the revival of crypto has earned a debilitating blow to the overall position of gold in finance, a punch that will ripple over time, analysts at JP Morgan have stated. There have already been signs of cash withdrawals from gold funds as digital finance has been taking over many of the same investors.

Bloomberg has also confirmed that Bitcoin has been consumed as easily as practicable by a vast majority of investment firms, and the list of billionaires and other influential tech executives to support the crypto asset has lately grown longer and longer. Owner of the London investment firm Blu Family Office, Christian Armbruester, has grown his faith into digital assets, noting that their spot within a diverse portfolio has been earned.

Michael Hayner, CEO digital payment platform Metal Pay, says that “Bitcoin has reached all-time highs over the past couple of months, and with this meteoric rise, institutions, hedge funds, and major corporations have begun to add digital assets to their balance sheet.” He points out that the cryptocurrencies, referring to Bitcoin, in particular, are being used as a safe haven against inflation of fiat currencies, as they are entering their fourth wave of adoption. He defines the first three waves as exuberance, speculation, utility, and acceptance in a conversation with Forbes writer Benjamin Pirus. 

Read Also: Top 10 Cryptocurrencies to Invest in 2021

 

Drivers Of Cryptocurrency Adoption In 2020

It’s obvious how large of a role governments and institutions play in the transformation toward digital currency. CEO of Ternio, Daniel Gouldman believes that it won’t be the simple common usage of Bitcoin that will drive crypto adoption, but rather the increased spotlight on CBDCs, central bank digital currencies that will move the way forward.

CoinDesk states that large government institutions and banks such as the ECB and Federal Reserve might face an unlucky fate if they don’t take the opportunity now to get a hold of cryptocurrencies before they dive into the world of electronic commerce.

Besides sole American institutions, many other parts of the world have driven cryptocurrency adoption in 2020, including Eastern Europe, China, and Venezuela.

According to a report released to Fortune on crypto performance in 2020, Ukraine and Russia rank first for highest levels of crypto adoption such as Bitcoin. Crypto adoption includes retrieved, traded, and stored cryptocurrencies in terms of measurements. In addition to this, Eastern Europe accounted for 12% of global digital currency activity in 2020. Roman Sahnikov, a cybersecurity specialist, notes that Eastern Europeans are generally very technically efficient people, which may explain the high levels of crypto use in the region. 

For a lot of Eastern European countries, namely Russia and Ukraine, the COVID-19 pandemic became a driver for adoption as the pandemic struck both economies quite harshly. Having to stay at home in isolation, forced individuals to think ahead about their finances, and thus pushing them to consider investing in crypto.

The People’s Bank of China has been working toward creating a fully-funded digital fiat currency since 2014 and is projected to become the world’s first national central bank to issue an official digital currency. Reports have stated that in 2020, China revealed a cryptocurrency capital outflow of more than $17.5 billion. The sum suggests a rise of more than 50 percent from the average for 2019, which stood at $11.4 billion. Although the government’s approach toward Bitcoin remains antagonistic, as it aims to lead the global blockchain scene, China has welcomed digital currency and blockchain adoption and even encouraged its acceptance. Although it is predicted that China may launch their digital yuen by the end of this year, the Fed and ECB are unlikely to catch up until at least next year.

The rise in crypto adoption in Venezuela has accounted for the common practice of using it for savings and peer-to-peer trading. The Head of Research at ChainAnalysis, Kim Grauer notes in an article by CoinDesk that “People in Venezuela don’t necessarily want to go to cryptocurrencies because it’s interesting or a cool thing to do, but because they are looking for a stable source of value” 

 

What Can We Expect From Blockchain In 2021

After we saw a monster year with high-flying crypto prices taking hold of the spotlight, let’s get a glimpse of what awaits for digital coins in 2021.

Bitcoin, the world’s largest cryptocurrency right now, saw prices surge, doubling its previous peak in 2017. BTC values have stabilized in 2020 from a multi-year slump ever since, reaching its new all-time high of $40,000, boosting its fame and resilience. This raises hopes for the coin, thinking about not just what lies ahead this coming year, but also what potential might kickstart for the crypto market as a whole.

This new wave of adoption is allowing for the breaking of barriers all across the globe, from individuals to institutions alike. Cambodia and the Bahamas have already implemented blockchain-based technologies for federal use, among the high levels of crypto use by other countries mentioned above.

Nasdaq notes that in order to make crazy proclamations about the future of crypto, numerous players are now chomping at the bit, forecasting that Bitcoin could go up in value by 25 times within the next few years.

Read Also: 10 Bold Bitcoin Price Predictions For 2021

The World Economic Forum forecasts that institutional adoption may rise in 2021, in either forms of direct investments or hands-on deployment, referring to the investments made by MassMutual and Square. Additionally, they point out that the effects of COVID-19 have proven our need for a digital transformation in international and national finance.

In general, Bitcoin and the majority of altcoins do not align with demand shocks triggered by health and economic crises. Thus, while the main sector and other future investments are disadvantaged by the state of the economy, businesses can also prosper from cryptocurrencies’ portfolio diversification advantage, potential outperformance, and liquidity feature.

Another topic on the rise is whether Ethereum could pass Bitcoin in 2021. Although there are very slight chances of it happening, the possibility still exists. And who knows what’s in store for 2021.

In the last few days of December, Bitcoin’s powerful surge culminated what is already a good year and generated a yearly success of 300 percent, well outside of other macro wealth, although still behind the remarkable 470 percent of ETH. On February 5th, Ethereum, the second-largest digital coin globally in terms of market value, climbed to a price of $1,756 reaching a new all-time high, as per Coinmarketcap. With that duly noted anything can happen this upcoming 2021.

Read More: What Is The Future Of Cryptocurrencies - Should You Invest In Cryptocurrencies?

 

Conclusion

Things such as rising institutional acceptance, expansion in the developing world economy and flourishing developer engagement all mean that the emergence of digital currencies is having a significant effect on the coming years in terms of digital asset growth. With that said, it’s only fair to predict that 2021 could represent above and beyond additional gains for the crypto world, regardless of whether it’s financial, technological or anything else to come.

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Key Points

  • Bitcoin surge in 2017 had mostly been powered by the buying hysteria, the rally in 2020 was strongly influenced by institutional investors.
  • Bitcoin reached notable adoptions by the end of 2020 from corporate treasuries such as MicroStrategy and MassMutual.
  • PayPal, the leading virtual payments company, has supported crypto acceptance in October 2020 when it announced the addition to its network of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
  • The revival of crypto has earned a debilitating blow to the overall position of gold in finance, according to JP Morgan.
  • Cryptocurrencies, like Bitcoin and Ethereum, , are being used as a safe haven against inflation of fiat currencies.
  • Ukraine, Russia, China, and Venezuela are among the top four countries headed closest toward adoption at the end of 2020.
  • The World Economic Forum forecasts that institutional adoption could rise in 2021, in either forms of direct investments or hands-on deployment.
  • Effects of COVID-19 have proven our need for a digital transformation in international and national finance.
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