Following a horrific 2020, the global economy is looking to rebound massively in 2021. However, there are still plenty of obstacles that could derail these recoveries. There could be a delay to the mass-rollout of the COVID-19 vaccine causing another economic lockdown.
However, perversely, this could be beneficial to the crypto market. As we have seen in 2020, cryptocurrencies have proven themselves to be safe-haven investments, which is a trend that could continue during 2021's turmoils.
The two top cryptocurrencies on our radar
2020 was an explosive year for cryptocurrencies as the total market cap rose from $191.50 billion on January 1 to $559.50 billion as of writing. As such, it should come as no surprise that the two cryptos on our hit list are the two OGs – Bitcoin and Ethereum. Let’s take a closer look.
#1 Bitcoin – The crypto market leader
Bitcoin will continue to be one of our most heavily recommended coins, come hell or high water. One can see every single principle that makes cryptocurrencies so great in spades in Bitcoin. Following a rocky start to 2020, the premier cryptocurrency is looking to give an early Christmas present to all by reaching all-time high levels. As of writing, the premier cryptocurrency has already risen by a staggering 170%.
Finixio's Adam Grunwerg believes that despite expected volatility, the price is likely going to break past $50,000 in 2021. Plan B's S2F model takes things a little bit further and suggests that the price could actually reach $100,000 by August 2021!
So, are these just empty numbers, or are they backed up solid data? Well, we have two words for you – institutional investors.
2020 has seen a steady inflow of institutional investors entering the market. Fidelity surveyed almost 800 institutional investors in Q2 2020 and found that 36% owned crypto assets. However, it looks like the number of investors has grown significantly recently.
CoinShares reported that investors had bought around $429 million worth of BTC and other crypto assets within a week. Of this, the always-bullish Grayscale had bought in a whopping $336 million out of the $429 million. This brings their total AUM to a little once $12 billion.
However, according to James Butterfill, investment strategist at the digital asset manager, this could just be just the beginning. Butterfill said:
“On an anecdotal level, based on our client conversations over the course of 2020, we have seen a decisive shift from inquiries of speculative nature to those that begin with comments such as, ‘bitcoin is here to stay, please help us understand it.’”
Plus, let’s not forget MicroStrategy’s recent announcement that they had raised $650 million to buy more Bitcoin, bringing their total exposure to $1.1 billion.
Overall, all this is hugely positive for Bitcoin. With a steady flow of institutional investors coming in, Bitcoin is fast becoming one of the world's most resilient assets. As such, it looks very poised to have a strong 2021.
#2 Ethereum – Ethereum 2.0 and DeFi
Ethereum’s growth over 2020 has put Bitcoin’s to shame, having exploded by 350% starting the year at ~$125. We can expect a repeat, or even a better performance by the smart contract platform in 2021, due to two significant reasons – Ethereum 2.0 upgrade and DeFi.
The Ethereum 2.0 upgrade sees several new features entering the protocol, the chief among them being proof-of-stake (PoS). Ethereum has often been lambasted for lacking high-performance functionalities. All this is going to change with Ethereum 2.0, which will make it exponentially more developer-friendly.
Speaking of which, we believe that Ethereum will continue to validate its position as the premier DeFi platform in 2021. The ever-growing DeFi sector is going to be monumental in determining ETH’s price action next year. A little less than $15 billion is presently locked up in DeFi contracts. Note that this number was less than $700 million at the beginning of 2020. This shows us that the DeFi sector is exploding at a rate faster than the crypto market cap. This is a major point, which is going to be instrumental in determining Ethereum’s price action.
As such, it could be extremely beneficial to read up on how staking works in Ethereum and gathering enough coins to participate in the protocol’s proof-of-stake algorithm.
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Virtual currencies are highly volatile. Your capital is at risk.