It's a new year, and industries are adjusting to the way forward. Based on the events of 2020, several developments could be pivotal to the future of the crypto industry as we advance.
Here are some of the most important topics of interest in the crypto industry in 2021:
Can Bitcoin Continue Its Rally?
Bitcoin had perhaps the best half-year in its history, jumping so close to the $30,000 mark by December 31st. While it wasn't able to hit the milestone, it made a quick fork of $30,000 on New Year's Day and grossed $32,000 a day later for good measure.
Considering that the leading cryptocurrency was only trading at about $14,000 in October, this surge is even more impressive. However, with 2020 comes new challenges. One of those will be whether Bitcoin will be able to maintain this surge for long.
While crypto enthusiasts have been pumping the cryptocurrency and reveling in what has been an impressive year, critics also believe that the asset is in a significant bubble that could take millions down when it pops.
Data from CoinMarketCap shows that Bitcoin has jumped by 186.9 percent since September. Such returns are almost unexplainable. If the asset can hold its own in the long term, its status as the world’s best investment asset will be without doubt. If it can't, then we could be looking at the biggest short-term financial bubble in the history of the world.
Opinions about the asset's viability vary for now. Still, if there is one thing that the Bitcoin price trajectory has taught us over the years, it's that analyses often never go as planned. However, 2021 could be the most consequential year in Bitcoin's history.
How Will the Biden Administration Focus on Crypto Regulations?
On January 20th, Joe Biden will take his place as the 46th President of the United States. His entrance into the White House will mark a significant change in policy from the Trump administration, and crypto industry insiders will be looking to see what this could mean.
Under the Trump administration, there was little to nothing in terms of crypto regulation. However, with the industry becoming more mainstream, there is every indication that the Biden administration will be more conscious of it.
Biden already announced Janet Yellen as his pick for Treasury Secretary. While she has said some bad things about Bitcoin in the past, this is no indication that she will be anti-crypto. Whatever it is, the Biden administration has a considerable task of navigating crypto regulations.
Will Institutional Investors Keep Flooding the Market?
2020 was the year of many things – including and especially the growth of institutional investment. Several companies and high-net-worth individuals made commitments to Bitcoin in 2020, effectively pushing the asset's price even higher.
As of October, Coin 98 Analytics reported that public companies had invested $6.8 billion in Bitcoin. Since then, MassMutual, a Massachusetts-based life insurance company, bought $100 million worth of the asset. MicroStrategy, a business intelligence firm, also announced the sale of $650 million in convertible senior notes, with most of the haul going to Bitcoin purchases.
Many of these firms bought Bitcoin when it was just about to begin its recent rally. Now that the asset has delivered staggering returns, the firms have enjoyed significant gains. Other firms will be looking to see if these gains can hold the line, and they should make similar investments in 2021.
Considering that institutional adoption was one of the many catalysts for the Bitcoin rally in 2020, a continued trend in 2021 will be good for the market.
What Happens to DeFi?
The decentralized finance (DeFi) space saw a significant surge in 2020. Many have become enamored with the prospect of using decentralized platforms to handle their finances. Currently, data from DeFi Pulse shows that the total assets locked in these decentralized platforms have hit an all-time high of $16.23 billion. Everyone is excited about the prospect of possible increased growth.
However, there is also the possibility of the sub-industry floundering in 2021. No one likes a one-hit-wonder, and all eyes will be on DeFi's ability to scale. Compound, one of the top DeFi protocols, announced its Compound Chain last month. The protocol will be looking to use its blockchain to grow and become independent of Ethereum.
Many have criticized DeFi for allowing dominance from the Ethereum blockchain. With rising gas costs and lack of support for other blockchains, Ethereum has become ill-suited to handle the growing DeFi space. Compound hopes to use the Compound Chain to combat these issues and get better.
Other developments are coming to the DeFi space, many of which hope to improve its ability to accept new investors and serve customers better. Still, the market will determine whether these developments can really live up to the hype.
Who Wins the SEC vs. Ripple Labs Showdown?
For a long time, San Francisco-based Ripple Labs had been the subject of several criticisms over the handling of its XRP token. Crypto insiders chastised the company, and its investors even filed a class-action suit against it.
However, Ripple eventually got a significant dose of reality when the Securities and Exchange Commission (SEC) hit it with a lawsuit over its token's status. The filing, which was made at a federal court in Manhattan, alleged that Ripple issued an unregistered security in its XRP Initial Coin Offering (ICO) back in 2013.
The SEC also alleged that Ripple's top brass – CEO Brad Garinghouse and co-founder Chris Larsen – had failed to report XRP sales of about $600 million.
Ripple and its executives are battening down the hatches and getting ready for a fight. However, the company has lost a significant amount of support from top names in the crypto industry. Since the filing came out, names like Coinbase, OKCoin, and Bittrex have delisted XRP.
Top asset management firm Bitwise Asset Management has also removed XRP from its Bitwise 10 Crypto Index Fund. Simultaneously, the website for Grayscale's XRP Investment Fund states that deposits have now closed.
Without support from the industry, Ripple Labs is essentially on its own. As far as positions when getting ready for a fight go, this is not where the company will want to be.