Which coins are going to rise in cost, and which ones will fall? What else in the regulatory and legal framework will regulators come up with? How will 5G create a level playing field for traders anywhere globally, and what more will 2021 bring beyond vaccines to end the pandemic?
It’s always exciting to predict the crypto industry’s trajectory since it’s developing simultaneously because of, and as opposed to, the traditional financial system. On the one hand, the introduction of requirements for the identification of crypto users, the increasing interest in government digital currencies, the crypto service from PayPal and the upcoming launch of the stable coin, Diem (ex Libra), from Facebook, and numerous other events confirm that digital assets are actually starting to be more and understandable more mainstream at long last.
On the other hand, the speed of Bitcoin distribution directly depends on how quickly operations with the many brands of theirs and flavors start to be available and accepted in each traditional bank or perhaps payment system. The mass use of digital assets is actually both what the world is actually striving for and what it fears. It’s the effort to balance risk and profit in the use of cryptocurrencies that will determine the trends of 2021.
Trend One: Crypto is going to see tax regulation
The primary subject for the near future is actually 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; even though they’re unwelcome to some, they’ve begun appearing in several countries as those markets mature and governments see their revenue-raising potential outweighing previous crypto uncertainties.
Nevertheless, the introduction of mandatory user identification through knowing the customer of yours (KYC) procedures, the development of protocols that allow tracking transactions, and the adoption of legislation on digital assets clearly indicates that things are actually changing and doing so faster than some might assume.
We also see monitoring tools being actively developed, along with governments exchanging info on the owners of cryptocurrencies, as well as the transactions they’re making. Consequently, in 2021, the planet is actually more likely to face the first bitcoin tax evasion lawsuits.
Trend two: Silent crypto harbors are actually on the way
Since there’s an anti-trend for every trend, the introduction of crypto taxes will increase jurisdictions’ attractiveness that will resist this practice and allow users to minimize the costs of owning digital assets legally. To put it simply, the so-called offshore crypto havens are going to develop more actively. This role will most likely be played by countries in which IT and the financial market are actually both well developed, like in Singapore, of course, Japan and, Korea, Switzerland.
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Trend three: The first crypto crisis is actually coming
The maturing crypto world isn’t only becoming more transparent, regulated, and secure, but it’s also starting to be subjected to a range of economic challenges and tests. We’re currently seeing the harbingers of the very first crisis, which has absolutely nothing to do with fraud or perhaps cybercrime.
In December, the price of Bitcoin (BTC) set a new record, breaking the $34,000 mark. Nevertheless, the reason wasn’t only the growing demand for BTC and an oversupply in the market of stable coins Tether (USDT), which are used to conduct seventy % of the trading on crypto exchanges.
To boost the capitalization of the coins, Tether, which is registered in the British Virgin Islands, is constantly increasing its emission. At the same time, market players have serious doubts that USDT stable coins are actually backed by fiat assets, i.e., US dollars. Additionally, Tether is actually 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 standard economy: an excess of fiat money supply in the market results in an inflation of dollars devaluation of theirs. We see the depreciation of money, which in the world of crypto is currently USDT, which leads to a rise in the price of goods, which is actually BTC in the crypto world. Therefore, current trends may result in further depreciation of altcoins and an increase in bitcoin cost, the emission of which is well known to be restricted.
Trend four: Risk assessment models are going to improve
Against the background of the increase in bitcoin’s value, there’s an immediate need for the growth of a high-quality risk assessment model since it’s increasingly hard for users to objectively evaluate the potential result of crypto investments without succumbing to the general rush. Services that provide a working solution, and not only digital fortune-telling on the coffee grounds, will have the ability to quickly conquer the hearts, wallets, and minds of both – experienced participants and beginners in the cryptocurrency market.
Based on CoinMarketCap, there are actually more than 8,000 different cryptocurrencies in the world today. Over ninety % of them are actually fraudulent schemes, or perhaps scams’, as they’re called in the industry. Nevertheless, out of the remaining ten %, many show growth rates no worse, and sometimes a lot better, than Bitcoin.
At the same time, those that will invest in crypto need to think of several risks that can raise or perhaps collapse the value of a specific coin:
organizational: for instance, which country the issuing company as well as the crypto exchange operates in, and what legislative changes are actually taking place in that nation, in favor of, or perhaps against, digital assets;
technical: errors in the code, weak info security, and weak data protection, all of which could be used by cybercriminals to steal cryptocurrency;
price risks: this type of risk is also the toughest to assess. Nevertheless, because of the ubiquitous KYC (user identification KYT and) (transaction identification) rules, analysts can track the movement of significant volumes of cryptocurrencies, determine who owns them and observe actions related to the sale of theirs.
Based on the data obtained, it’s possible to make predictions about changes in the value of the cryptocurrency depending on the goals, time, and other sales attributes. The increase in the market size also makes it less dependent on individual speculation.
These days, there’s less uncertainty in the crypto world, and there are actually more opportunities for developing analytical tools. Nevertheless, it’s still hard for novice investors to understand the intricacies of alternative finance.