Trend Analysis of Cryptocurrencies in 2020 and What to Expect in 2021

Cryptocurrency has erupted into a $775 billion industry, sparking a wave of global disruption.

At the heart of cryptocurrency is a rich history of innovation that extends back to the 1980s with advances in cryptography. Since then, a series of events have continued to shape the space, Bitcoin being the most paramount of all. Today, there are over 2,000 cryptocurrencies in circulation. This number is expected to grow in the coming years because the onset of COVID-19 has pushed the payment market towards rapid digitalization.

In tumultuous times like these, investors usually flee to safe-haven instruments that tend to be detached from the broader market, like cryptocurrencies. As the COVID-19 crisis changes investors' outlook, cryptocurrencies like Bitcoin and Ether have seen a four-fold rise since the beginning of the pandemic in March 2020.

Growing acceptance, both by consumers and institutions, provides a clear explanation of Bitcoin and other cryptos’ 2020 bull run. Let’s take a look at the recent events and trends that have boosted the adoption of cryptocurrencies.

• Increasing Institutional Adoption

Over the past few months, a range of Wall Street firms and institutions, including ARK Invest, Galaxy Digital, and Boston Private Wealth, disclosed to the SEC their new investment in Grayscale Bitcoin Trust.

Central banks have also appeared to warm up to Bitcoin. Goldman Sachs appointed a new head of digital assets in August 2020. JPMorgan launched the JPM coin last year and has recently begun allowing customer transfers in and out of two crypto exchanges.

Additionally, retail giants like PayPal and Square have also showered their love on cryptocurrencies. Two huge consumer-facing names showing their faith in crypto speaks volumes about the adoption of cryptocurrencies.

• Upgrades and Partnerships

The crypto market saw numerous improvements and upgrades in 2020 that helped digital currencies gain momentum. These include:

• Third BTC ‘Halving’

Bitcoin underwent its third ‘halving’ in May 2020, cutting the mining reward in half to slow the creation of new Bitcoin. Historically, the price of Bitcoin has increased drastically every time a ‘halving’ event occurred. In the 2020 halving, Bitcoin saw a marginal increase over a few weeks and then went on a massive ride in the next months. The ‘halving’ event might not be the primary cause of the Bitcoin bull run, but it has indeed reminded investors of Bitcoin’s scarcity.

• Ethereum 2.0

Ethereum 2.0 phase 0 (Beacon Chain) was launched on December 1st, 2020. In addition to the change from proof-of-work to proof-of-stake, Ethereum 2.0 will incorporate sharding, allowing the network to be divided into sub-networks, all running parallel. This upgrade will substantially increase the security and scalability of the Ethereum network. It has been fundamental in causing Ether (ETH) to grow by over 200% since the bear market of 2018.

• Cardano Shelley

Cardano, the third-generation blockchain, recently hard-forked from the centralized Byron network into the decentralized Shelley network. The market continues to react positively toward the Shelley upgrade; the upgrade will make notable improvements in the DeFi space. As a result, Cardano’s token, ADA, has carved out impressive gains over the past few months.

• China to use ChainLink for Blockchain Service Network

On 23rd July 2020, the Chinese government-backed Blockchain Service Network (BSN) announced that it would implement ChainLink’s oracle services into its ecosystem. ChainLink will provide real-world data to the BSN to verify the conditions of smart contracts. This year alone, ChainLink has also partnered with Bloom, Contentos, Provide, Tezos, and IrisNet. These partnerships have led LINK tokens to reach new heights.

• Stablecoins Taking the Lead

Tether (USDT) growth in 2020 has been spectacular. Its market valuation has grown by over 200% this year. Today, Tether clocks in as much trading volume as the next three most popular cryptocurrencies combined: Bitcoin, Ether, and XRP. The second-largest stablecoin, USDC, also joined Tether as the only stablecoin with a market capitalization greater than $1 billion. If these statistics tell us anything, in particular, it is that the decentralized finance (DeFi) space has exploded this year.

• Regulations Catching Up with Cryptos

Regulators worldwide have been slow to oversee cryptocurrencies, but the trend is changing now. Three recent regulatory examples suffice to show the development. First, in January 2020, the European Union implemented regulations over crypto exchanges and wallet custodians. Second, the UK government has now mandated cryptocurrency entities to register with the FCA and pay regulatory fees. Third, the Indian government is considering levying 18% GST on crypto trading. Canada has actively monitored the cryptocurrency space and is working towards improving how it regulates the cryptocurrency market without hindering innovation and crypto adoption.

• Development of CBDC

Banks all over the world are keen on the potential of digital currencies. For the past several months, more and more banks and countries have announced pilot programs, new studies, or reports on how a Central Bank Digital Currency (CBDC) might work. Recently, China launched several pilot schemes for its digital currency, Yuan, in the southern city of Shenzhen. The Bahamas has also launched “Sand Dollar'', a Central Bank-Backed Digital Currency. Canada, too, has been outspoken about its interest in a CBDC. In June, the Canadian Central Bank also outlined its views of the CBDC and how it wants the CBDC to function if they launch it in the future.

Speculation is at the heart of the cryptocurrency industry. Price speculation is present around all digital currencies. However, good projects have come out stronger than ever, mostly thanks to their promised potential and anticipated applications.

The year 2020 has calmed the crypto market, and 2021 looks even more promising in terms of adoption. Based on ongoing trends and thorough research, we have compiled a list of the most notable trends and developments that are likely to shape the crypto market through 2021. Let’s have a look.

• More Institutional Investors Get in the Game

While 2020 gave the crypto sector some exciting headlines, it will see an extension of this embrace of Bitcoin from large asset managers, insurance companies, pension funds, and sovereign wealth funds.

Industry giants have made it clear that the risk of not investing in Bitcoin is more significant than the risk of investing. This is likely to result in prominent companies announcing plans in 2021 to convert a  part of their portfolio to Bitcoin or other cryptocurrencies. Central banks may also start buying Bitcoin as a strategic store of value against depreciating fiat currencies.

• Ethereum 2.0 Bolstering the “DeFi Movement”

The full roll-out of Ethereum 2.0 will take place in three phases: 0, 1, and 2. Phase 0 was launched in December 2020, whereas Phase 1 and 2 are scheduled to launch in 2021. The long-planned upgrade aims to address concerns with the Ethereum network’s security and scalability. The eventual full-scale launch of Ethereum 2.0 will significantly impact the community as the network is used for most of the dApp (decentralized apps) DeFi use cases.

It will significantly impact how salable decentralized applications are and how wide an audience they can cater to without crashing. After the complete launch of Ethereum 2.0, we’ll probably never see a network crash similar to what happened due to the high demand for the famous NFT game, Crypto Kitties. It’s possible that 2021 will be the year that will make dApps finally ready to serve a huge demand without fail.

• The Government will Step in

Indubitably, government scrutiny is ultimately a large missing piece of the puzzle. The growing digitalization triggered by the COVID-19 pandemic is now narrowly monitored by regulators across the globe.

2020 revealed acceptance on the part of federal agencies that cryptocurrencies are the core element of society. With some countries getting in on cryptocurrencies, the world is more likely to see multiple national and local governments paying close attention to digital assets and blockchain technology.

Long time absent, governments worldwide are likely to start implementing several fintech regulations focused on supporting the growth of cryptocurrency adoption.

• CBDC Projects will Accelerate

As discussed above, many governments and banks are researching Central Bank Digital Currency (CBDC). This process will further intensify in 2021, driven by the economy’s digitalization, the diminishing use of cash, and the upcoming private digital currencies and rising demand. China is well in advance. They’ve already rolled out the digital Yuan. In addition to the Bahamas and China, nations like the US, Turkey, Lebanon, and Canada have also announced plans to develop digital currencies.

The year 2020 saw the resurgence of cryptocurrencies amid shifting tides in world markets. Ndax has moved from strength to strength this year, serving as a bridge between centralized and decentralized finance, between crypto and fiat, and between the past and the future. Here’s a quick recap of what Ndax has done to support its dream of increasing crypto adoption in Canada and across the globe:

1. Added ChainLink token, LINK, and Tether stablecoin, USDT on Ndax. Ndax users can now easily buy LINK and USDT with the Canadian dollar. Alternatively, they can deposit these tokens in their exchange wallet and start trading.
2. Added new functionalities to the exchange such as funds transfer and affiliate program so Ndax users can enjoy more benefits.
3. Added “withdrawal address whitelist” security feature to Ndax. We have also added MPC Hot Wallets for the resilient custody of users’ crypto assets.
4. As Canada’s leading crypto exchange on a mission to make crypto adoption easier for everyone, Ndax has always been adamant about being in full compliance with the legislation and regulations. In 2020, Ndax registered with the Autorité des marchés financiers (AMF), Canada’s major securities regulators.
    

In the coming year:

1. Ndax will add a “recurring buy” feature. Allowing both retail and institutional players to automate their purchases. We will also add innovative portfolio features to make it easier to track your holdings’ performance.
2. We are also finalizing the release of our mobile app. With the launch of the Ndax app, everyone will be able to buy and trade cryptocurrency from anywhere and at any time.

2020 was one of the most important years on record for cryptocurrencies as well as for Ndax. Despite the COVID-19 pandemic, the crypto industry received strong interest from institutions and everyday users, resulting in an influx of attention and capital to the market.

With crypto adoption picking up speed, the government is taking an interest in digital assets, DeFi, and stablecoins sparking new avenues for growth. The future of crypto is the rarest bright spot that gives us hope in 2021.

If you’ve been watching this year’s digital asset space from afar, and want to get started, now is your chance. Now more than ever, a huge community of investors and traders, both individuals and trusted institutions, are eagerly waiting to welcome more people into the world of cryptocurrencies. And at Ndax, we’re making it as simple as possible for everyone to buy, sell, and trade cryptocurrencies.

Onward and Upward