2021
In 2020, there were many events that changed the traditional financial system and the global economy as a whole. In December 2020, the rules of the game changed and the market capitalization of bitcoin, which exceeded 1 trillion, made it too important to ignore the first cryptocurrency. Many payment systems decide not to fight the new trend, but to cooperate with it. This led to an increase in confidence on the part of the market and a serious institutional accumulation began. Commercial and great organizations still continue to accumulate crypto assets at record levels. And it is difficult to underestimate their market power: as long as they continue to enter the market and work with cryptocurrency, this gives great support to bitcoin, which certainly affects altcoins.
Cryptocurrencies are a product of the natural evolution of modern technologies. Financial technology is not going anywhere. And blockchain has revolutionized finance, increasing the speed and efficiency of transactions. And even if the "parabolic rally", which began in March 2020, ends, cryptocurrencies will still continue to gain popularity given the policies of central banks and governments. One of the side effects of the pandemic has been the influx of liquidity in the market, which leads to a rapid increase in the money supply. (in parallel with the national debt of the United States and other countries). The measures taken by the authorities to combat the pandemic promote the development of independent means of exchange, since cryptocurrencies built on the idea of free networks reject interference from states. And despite the fact that vaccination will sooner or later help to defeat the coronavirus, the economic consequences will remain with us for years.
The reason for the growth of cryptocurrencies is the ultra-soft monetary policy of the two main world central banks – the US Federal Reserve System and the European Central Bank. It can be assumed that if the stimulation of large economic systems continues for a long time, then the support from the state will begin to curtail this year. And the first news has already appeared, indicating the future normalization of monetary policy – in the US, rates on "long" bonds have begun to rise, and this is likely to return investors ' interest in classic instruments, which will entail an outflow from cryptocurrencies. And in general, no central bank in the world will ever give up the exclusive right to print money. Most likely, they will take for themselves something useful from the very idea of cryptocurrencies. For example, the introduction of a digital national currency.
It is possible that the new regulatory measures may trigger a significant correction of digital currencies, but it likely will be temporary. But the movement for the "freedom" of money markets has already gained momentum, and it is almost impossible to reverse the trend. Any significant sell-off of cryptocurrencies is likely to expand the trading range, moving both the lows and highs, as the token supply is limited. It is also necessary to take into account that in May 2020, a halving occurred in the bitcoin network, which halves the reward for bitcoin miners every four years, and this event each time makes bitcoin even rarer and increases its price in the long run.
Ethereum – The King of DeFi
The second largest cryptocurrency by capitalization after Bitcoin is ETH. In April 2021, Ethereum has a market capitalization of about $ 450 billion. Ethereum started the year at around $ 700 and is currently trading at $ 3,900 per coin.
So why Ethereum is so successful?
The Ethereum open source blockchain network has always served as the preferred network for decentralized applications (dApps). In addition to its own cryptocurrency, Ether (ETH), the platform supports other crypto platforms. For example, Uniswap (UNI), Maker (MKR) and Aave (AAVE), which are active in the decentralized finance (DeFi) sector. DeFi is considered one of the fastest-growing trends in cryptocurrency, which can transform insurance, credit and savings programs, making them independent of banks and other centralized financial institutions.
Many experts attribute the growth of ETH to the release of the update of the largest altocin – Ethereum 2.0. Ethereum 2.0 is a solution that allows you to scale the original blockchain and make it more convenient for users. The main feature of the update is the transition of the network to the Proof of Stake (PoS) consensus, which will replace the Proof of Work (PoW) consensus, which currently runs the blockchain. The main difference between PoS and PoW is that to maintain the network operation, you no longer need miners who generate computing power. The efficiency of the blockchain is provided by the holders of digital coins and they receive a reward for this. In March, the founder of ETH, Vitalik Buterin, proposed to speed up the transition to the Proof of Stake consensus amid the dissatisfaction of miners with the upcoming updates. But despite the desire of developers to move to Ethereum 2.0 as soon as possible, the exact date of the transition of the blockchain to PoS is still unknown.
By 2021, the world's fastest-growing crypto sector, DeFi, has reached new heights. The total number of assets locked in the DeFi ecosystem in April 2021 exceeded $ 13 billion (in 2020, this number was less than $ 14 billion). The explosive influx of market participants and capital into DeFi contributed to Ethereum's strong position as a leading altcoin, as it dominated a sector that accounts for 96% of total transactions.
The growth in the value of Ethereum is not so much due to changes in the network, but to the fact that the network is finally scaling, experts say. They claim that the improvements that have occurred with the blockchain recently allow projects built on Ethereum to develop. The hype around the DeFi sector has shown that Ethereum can withstand any load, and this attracts more and more user money and becomes a trigger for the growth of the coin. And the transition to consensus PoS will add a supply constraint factor and push the cryptocurrency rate up.
According to experts, this year Ethereum can rise in price to $10 thousand due to the growth of network performance, which will be a record even against the background of the rapid growth of the price of bitcoin last year.
Ripple
Ripple was created as an alternative financial payment system with the goal of transforming and facilitating cross-border payments, making them 100% secure, almost free and instant.
Back in the early days of Ripple in 2013, the platform attracted the attention of many financial organizations. Over the years, it was adopted by more than 100 financial institutions. In the first quarter of 2021, Ripple's revenue from XRP token sales exceeded $150 million. And the Ripple blockchain has expanded to more than 300 providers in 40 countries, including:
– Banco Santander (SAN);
– American Express (AXP);
– JP Morgan (JPM);
– HSBC Holdings (HSBA).
However, in December 2020, the Securities and Exchange Commission (SEC) accused Ripple and its executives of raising over $1.3 billion by selling unregistered securities under the guise of XRP tokens. As a result, some exchanges, including the American Coinbase, delisted the coin. And while the entire crypto market was updating its highs, XRP remained at local lows, while losing its place in the top 3 cryptocurrencies by capitalization.
But in March, a representative of the SEC stressed that in addition to Ripple and its employees, no investors, exchanges or trading platforms violate the law by selling XRP tokens, which pushed the value of the token to grow and in just a week, XRP grew almost 2 times. In the future, experts predict that the growth potential of the coin may exceed 300% from current levels. And very important is the fact that investors who invested their capital in XRP at its peak in January 2018 are now trying to "pull prices up" in order to exit the asset with minimal losses.
According to a report by OMFIF (the Official Forum for Currency and Financial Institutions), Ripple, with its distributed ledger technology (DLT), can "position itself as an alternative to SWIFT" by addressing five major issues: security, speed, traceability, cost, transparency, and risk management. Ripple's prospects seem brighter than ever before, thanks to growing support from the European Commission and plans to create a new legal framework that allows the use of DLT technology and crypto assets in the financial sector.
On the investment issue, the main risk factor is the confrontation between Ripple's management and the Securities and Exchange Commission, but the prospects are not completely clear here. At the moment, the chances of winning look equally likely for both Ripple and the US regulator.
Litecoin: fast and affordable
Most recently, you could see the Litecoin logo on the wrestling mat during the UFC tournament. Litecoin (LTC) is a digital peer-to-peer currency integrated into open source software that was created in 2011 by former Google employee Charlie Lee. The cryptocurrency was created on the basis of the Bitcoin protocol, but differs in the hashing algorithm used. Lee's goal was to create a lightweight version of Bitcoin. In particular, the difference lies in the priority of the transaction confirmation rate, which is approximately 2.5 minutes per block. But unfortunately, the reality is that Litecoin users will have to wait about 30 minutes for the transaction to be processed due to network congestion.
As with Bitcoin, there is also a built-in scarcity. There are only 84 million LTC. Litecoin is highly undervalued compared to other cryptocurrencies. For example, as mentioned earlier, Bitcoin is much slower and more expensive to use.
The market capitalization of LTC is almost $ 24 billion. Litecoin boasts that compared to other coins, it can be mined faster and at the same time offers a high reward for miners – 25 LTC per block.
LTC is a classic altcoin with more than 6 years of market experience. You can easily add new technologies and software updates to Litecoin. Another advantage in favor of litecoin is the fact that people who live in third world countries and do not have bank accounts can quickly and inexpensively purchase this coin. LTC is an excellent alternative to paper money compared to Ethereum. Ethereum was not developed as money, but it can be used as such, and it should rather be considered as a fuel for cryptocurrencies. In addition, the concept of Ethereum is much more difficult to understand than the concept of Litecoin. LTC is just digital p2p money with built-in scarcity, which actually works faster as a means of transaction. As the popularity and price of Bitcoin increases, and therefore transaction costs, users will look for cheaper and faster alternatives, one of which is Litecoin.
Litecoin has been used to launch the first decentralized fantasy role – playing game, LiteBringer, where each player's turn is a transaction. After the launch of the game, the number of Litecoin transactions exceeded 130,000, which undoubtedly benefited the entire block chain. The improved performance could serve as a positive price driver, with CoinSwitch analysts predicting a $ 600 price target for Litecoin in 2021. Experts also believe that the price of Litecoin will undoubtedly rise in the coming years after the halving.
Experts expect that in 2021 Litecoin will have a bright future thanks to integration and partnership. In addition, the Litecoin community is actively developing projects. Litecoin has a clear potential for further growth and is certainly a serious competitor for other cryptocurrencies. Although Litecoin is not the best performing cryptocurrency of the year, it has never left the top 10 most popular crypto assets, and 2021 is unlikely to be an exception.
Traditionally, the market goes through a growth cycle like: bitcoin, the main altcoins, and finally the rest of the tokens. It is obvious that now the crypto market is on the border of the transition from the second to the third stage of growth, as evidenced by the falling bitcoin dominance index against the background of the growth of the total capitalization. The rise in the price of alternative coins is quite an expected period when bitcoin has already demonstrated a powerful jump in price and it is not necessary to expect a new round of multiple growth from it. Investors take profits by selling some of the bitcoins, and transfer assets to altcoins, where there is a chance to see growth of tens of percent again. And if the crypto market overcomes the capitalization of $2.5 trillion, then a serious correction can begin, which will last 3-5 months, experts say. The altcoin season is unlikely to last more than six months, and by the fall, bitcoin will enter a new phase of growth, and it is better to concentrate more than half of the portfolio in the main cryptocurrency, which will begin to set new records.
Blockchain technology is increasingly affecting the world of people. It may soon be on the level of the discoveries that have changed the world – the Internet, machine learning and electricity. Large companies and investment funds will increasingly use cryptocurrencies in their business. The question is when, not if.
What should we expect from the crypto industry in 2021?
– Since the widespread adoption of cryptocurrencies and crypto payments is a matter of time, 2021 promises to be a great period for the entire cryptocurrency market.
– The lists of the best cryptocurrencies may differ, but they can all provide good trading opportunities.
– Only time will tell us which forecast was correct. Nevertheless, experts seem to be unanimous in predicting a bright outlook for the cryptocurrency market for the next 12 months.
And in conclusion: investing (and cryptocurrencies are no exception) should be approached with a cool head, be able to distinguish artificially inflated hype from promising projects and startups that will be able to develop into something more in the future. Despite the fact that cryptocurrency remains a high-risk asset, with certain knowledge, investing can bring profit quite rapidly. A number of investors explain their investments in cryptocurrencies by the fact that they are an alternative to gold. And yes, there is some similarity here: bitcoin, like gold, does not bring interest income to holders and has a limited supply. Investing in cryptocurrency for a long time will also give an excellent result – experts predict that bitcoin will reach the $100 thousand mark this year.
The best advice for working in this market: invest only what you can afford to lose and avoid loans and borrowings. Parabolic markets often reach unstable price levels, a correction from which will be scarier than any analyst can imagine. When the entire market is trying to throw off an asset, the bottom of the market actually does not exist. Expect increased volatility, and you won't be disappointed. It is not surprising if in the coming months bitcoin will be twice as high as the recent high or 75% below the peak of April, 14. Be extremely careful and protect your hard-earned capital. It is important to remember that no matter how reliable the forecasts and comments of the most intelligent experts may seem, the decision is made by you, and, as a result, only you are responsible for everything that happens to your investments.