Are you thinking of which coins will rise or fall in price as regards to bitcoins and cryptocurrencies in 2021? And what could be the available changes in the crypto world come 2021? Here you are, let’s dive in and see…read on!
It is always exciting to predict the crypto industry’s trajectory, because it is developing simultaneously thanks to, and as opposed to, the traditional financial system. On the one hand, the introduction of requirements for the identification of crypto users, the growing interest in government digital currencies, the crypto service from PayPal and the upcoming launch of the stablecoin, Diem (ex-Libra), from Facebook, and many other events confirm that digital assets are becoming more understandable and more mainstream at long last.
Which coins will rise in price and which ones will fall?
On the other hand, the speed of cryptocurrency distribution directly depends on how quickly operations with their various brands and flavors become available and accepted in each traditional bank or payment system. The mass use of digital assets is both what the world is striving for, and what it fears. It is the attempt to maintain a balance between profit and risk in the use of cryptocurrencies that will determine the trends of 2021.
Trend One: Crypto will see tax regulation
The main topic for the near future is the tax regulation of cryptocurrencies. Today, crypto taxation is still an obscure thing — an ideal picture far from reality. Crypto taxes are not yet widespread, and while they are unwelcome to some, they have begun appearing in some countries as those markets mature and governments see their revenue raising potential outweighing previous crypto uncertainties.
However, the introduction of mandatory user identification through know your customer (KYC) procedures, the development of protocols that allow tracking transactions, and the adoption of legislation on digital assets, clearly indicates that things are changing, and doing so faster than some might expect.
We also see monitoring tools being actively developed, along with governments exchanging information on the owners of cryptocurrencies, and the transactions they are making. Therefore, in 2021, the world is likely to face the first bitcoin tax evasion lawsuits.
Trend two: “Silent crypto harbours” are on the way
Since there is an anti-trend for every trend, the introduction of crypto taxes will increase the attractiveness of jurisdictions that will resist this practice and allow users to legally minimise the costs of owning digital assets. To put it simply, the so-called “offshore crypto havens” will develop more actively. This role will most likely be played by countries where IT and the financial market are both well developed, such as in Singapore, Korea, Japan and, of course, Switzerland.
Trend three: The first crypto crisis is coming
The maturing crypto world is not only becoming more transparent, regulated, and secure, but it is also beginning to be subjected to a range of economic challenges and tests. We are already seeing the harbingers of the first crisis that has nothing to do with cybercrime or fraud.
In December, the cost of Bitcoin (BTC) set a new record, breaking the $34,000 mark. However, the reason was not only the growing demand for BTC, but also an oversupply in the market of stablecoins Tether (USDT), which are used to conduct 70% of the trading on crypto exchanges.
In order to increase the capitalisation of its coins, Tether, which is registered in the British Virgin Islands, is constantly increasing their emission. At the same time, market players have serious doubts that USDT stablecoins are really backed by fiat assets, i.e., US dollars. In addition, Tether is owned by the company iFinex, against which investors filed a class action lawsuit for $1.4 trillion on charges of market manipulation in 2017–2018.
As a result, what we see on crypto exchanges today is roughly what happens when governments start up the printing presses in the traditional economy: an excess of fiat money supply in the market leads to an inflation of dollars and thus their devaluation. We see the depreciation of money, which in the world of crypto is currently USDT, which leads to a rise in the cost of goods, which, in the crypto world, is BTC. Therefore, current trends may lead to further depreciation of altcoins and an increase in the price of bitcoin, the emission of which is well known to be limited.