How will the Bitcoin stocks perform in 2021?

This year is one for the history books for all sorts of reasons, not all of them bad. For cryptocurrencies, 2020 shaped up to be a banner year.

And as we start the clock in 2021, a number of people, places, and trends bear watching because, after all, it’s not as if everything stops on Dec. 31.

First things first, as they say. The wild price swings in this space are only part of the story, but they do indeed form a large part of the narrative we’ll see moving forward. As of this writing, the marquee name in cryptocurrencies, bitcoin, is changing hands at more than $28,100. That recent trading action far eclipses previous highs set just a few years ago when the peak was just under $20,000, with a market cap of more than $500 billion, per CoinMarketCap.

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Along the way, institutional investments in bitcoin have gotten a boost. To give just a few examples, tech firm MicroStrategy bought roughly $50 million in bitcoin earlier in the year and then raised debt to buy roughly $650 million more with a total of more than $1.5 billion on its books tied to the crypto, per Yahoo Finance. Square, PYMNTS reported, has held tens of millions of dollars of bitcoin on its balance sheet.

The stage has been set for broader adoption of bitcoin and other digital currencies to be held within the financial services realm, which in turn may bode well for institutional adoption. As reported earlier this month, new U.S. regulations for bitcoin and other cryptocurrencies are being developed and will debut early in the new year.

Bloomberg reported that amid the crypto rallies, regulators will be tightening their gaze on cryptos, especially with the incoming administration of President-elect Joe Biden. The scrutiny may focus on fundamental, existential questions, such as whether particular crypto is a currency or an asset (as has been raised in a recent lawsuit against Ripple by the Securities and Exchange Commission over XRP).

Watch The Use Cases

One wonders how bitcoin and others might fare if the stock market is volatile in 2021, and investors shy away from speculation.

That’s because pricing stability would come with broader use of crypto within a commerce setting. We’ve seen broader embrace come bit by bit. And 2021 may prove a watershed year for cryptos’ use in retail. PayPal, after all, will be bringing bitcoin and other coins to 350 million users to deposit into their accounts and spend at 26 million merchants in 2021. Elsewhere, Ternio signed on with Visa’s Fast Track as a cryptocurrency-focused enablement partner.

Watch The Competition

But the key to cryptos’ mainstream efforts will be the availability of alternatives. PYMNTS is mindful here of the emergence of central bank digital currencies (CBDCs). It’s possible that digital fiat catches the imagination of the public at large, country by country, with dollars and yuan and other currencies rendered in bits and bytes.

PYMNTS has already noted how, in the Bahamas, the Sand Dollar has been making headway as a unit of exchange. Elsewhere, there are reports that Turkey is planning on piloting its own CBDC in the second half of 2021. In November, Reuters reported that more than 2 billion yuan (about $307 million) has been spent using China’s new digital currency.

The U.S. is still exploring how digital dollars might fit into the framework of the central banking system at large. Plan on 2021, then, being a year of headlines tied to digital fiat. It will remain to be seen whether those digital currencies displace other cryptos or co-exist with them.