Following 2021’s crypto bull cycle, the adoption of digital assets could go mainstream. Most people have come to appreciate the potential benefits of the blockchain and different innovators across the world are tinkering how to boost process efficiencies using the technology. It’s no surprise that we are going to see several trends shape themselves and positively influence the direction of the blockchain. In this guide, we are going to look at the three most important cryptocurrency trends of the year.  You will learn how these trends are going to influence cryptocurrency markets and how different key players are responding or will respond. 

Institutionalization 

Bitcoin has already attracted billions of dollars of investments from leading companies and institutions. Tesla kickstarted this year’s institutional investment by staking $1.5 billion into Bitcoin. Canadian technology firm Microstrategy followed suit by investing over $15 million to purchase  328 bitcoins. 

However, Microstrategy has been a long term investor of cryptocurrency and the recent 328 BTC was only an addition to its long term portfolio. Institutionalization of Cryptocurrencies has emerged as a primary theme since 2020. 

Such entrants into the crypto sphere will possibly increase the speculation surrounding the price of digital assets. And as a result, increase the value of the stacked coins. Tesla’s $1.5 billion represents at least 8% of the entire company’s reserves. 

To some extent, if other giant companies follow suit and invest a percentage of their reserves on Bitcoin; the price will keep surging, bringing us closer to the target of a $2 trillion market capitalization.  For example if Microsoft, Apple, Google, Twitter and Facebook did the same , the entire investment would be approximately $7 billion.  

Now remember the percentage gain of Bitcoin after Tesla came in. A $7 billion worth signal would be bearish enough to drive BTC above $300,000. 

Already, most bullish predictions are targeting $100,000, $250,000 and $500,000. So far, a lot of them are backing their explanation with the idea of institutionalization of BTC. According to Bitcoin Pro, institutional adoption of cryptocurrencies will be the key theme of this year’s market cycle. 

Besides companies showing interest in cryptocurrencies, Institutional adoption also involves the creation of Central Bank Digital Currencies (CBDCs) and stablecoins. Both Big firms and central banks have gambled with the idea of launching their own stablecoins.  A study by BIS indicates over 80 percent of central banks are accessing the possible benefits and risks of building CBDCs.  China’s government accelerated their digital renminbi project at the onset of Covid-19 so as to reduce the transmission of the infection through fiat cash transfers.

Governments are tinkering with ideas of digitizing their economies and CBDCs are going to be the roadmap.  This will also solve the problems of banking  and cross-border remittance in developing nations. 

Regulation will go Mainstream in 2021

The dramatic growth of the blockchain market is attracting regulatory interests. It seems law makers are intensifying their research on new methods of tightening cryptocurrency regulations. 

There is no way regulators will ignore Decentralized Finance given the majority of transactions have already moved from traditional institutions. 

If Bitcoin crosses  the $100,000 mark ,regulations may limit the percentage each company allocates to cryptocurrencies on its reserves.  The restrictions could take the form of how US companies must not purchase back over 25 percent of the average daily volume of their individual stocks. With this kind of rule , it would be hard to hold on to bitcoin (or any other coin ) after it surges in price beyond a certain value.

Lawmakers might also draft new regulations for brokers who hold  digital assets. These regulations will call for custodial oversight of cryptocurrencies. 

Nevertheless, there are those who feel cryptocurrencies must be left unregulated for a duration of time. This will encourage innovation and adoption in the space. Besides, it’s difficult to solve all the challenges posed by crypto and other emerging technologies.

Bitcoin Exchange Traded Funds

Cryptocurrency proponents have been anticipating a Bitcoin Exchange Traded Fund. This asset will allow mainstream investors to invest and trade in Bitcoin. 

However, the decision to launch a Bitcoin ETF has delayed and remains unclear. VanECK, a fintech company has been pushing SEC repeatedly so that the regulator can approve the fund. The inception of a Bitcoin ETF will pave the way for the general population to invest in bitcoin, especially those not willing to trade crypto directly through exchanges. 

The pandemic increased the number of people seeking to trade digital assets without the need of creating wallets and constantly trading on exchanges.  This led such investors into Contracts for Difference (CFDs). Which have not only rose in popularity over the past months, but also become a means for trading equity markets and forex.Appointment of Garry Gensler as chief of SEC has renewed interest in Bitcoin exchange-traded funds. There is hope the commision is going to approve the asset this year. However, the big question remains whether the market is solid enough to meet listing requirements under the Securities Exchange Act.