The Crypto Market in 2021 a Detailed Analysis by Adel Al Shirawi
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Adel Al Shirawi is a Harvard-educated financial advisor and crypto enthusiast who developed the smartphone application Go Finance. For Shirawi, who is highly educated in the intricacies of crypto, believes that the impact of virtual currencies on finance is really significant. He is optimistic on the crypto industry, and thinks that the alternative financial markets have a lot of potential for both short term and long term future. Despite uncertain economic conditions, cryptocurrency markets have seen considerable growth and there has been a flurry of activity in this sector recently.
Shirawi asserts that recent announcements from different institutions and investment management companies has created a unique opportunity for investors to invest in the DeFi (decentralized finance) indexes. There are several DeFi protocols included in these indexes including the likes of Uniswap, Aave, Maker and Compound. Moreover, there are also announcements from large financial services and investment management companies on launching their own DeFi Index Funds, which will be passively managed funds tracking DeFi's performances.
The announcement of several mobile payment service companies to incorporate crypto support on their platforms is a sign that many more corporations are ready to start accepting and recognizing virtual currencies. Shirawi believes that a new Digital Assets Group will soon enable their high-net-worth customers invest in cryptocurrencies via their private wealth management divisions, which will assist these clients to do so.
A major Fintech firm has lately made measures to allow US users to pay for goods at more than a million online retailers across the world using bitcoin. Possessing this new development, consumers with virtual currencies will be able to utilize them at the checkout to pay for their goods or services.
Additionally, popular trading platforms have started offering Bitcoin and other popular cryptocurrencies to their users and have experienced an increase in their crypto trading volumes and new traders. According to estimates around six million new funded accounts were created on different trading platforms in only the first two months of 2021 alone.
The crypto market is not just attracting retail investors, Shirawi argues, but also traditional financial institutions and large corporations searching for ways to profit from the digital assets trend. Therefore, we are experiencing the highest rate of appreciation for cryptocurrencies in history and it is becoming clear that this field will not disappear anytime soon.
Recent surveys show that customer interest in the crypto sector is increasing:
- According to one popular survey, respondents planned on investing close to 1,645 USD in cryptocurrency this year and keeping it for longer than five years.
- 60 percent of respondents to a separate study thought of cryptocurrencies as long-term investments, and 11 percent of U.S. respondents used their stimulus checks to acquire cryptocurrency as well.
- According to a third survey, bitcoin trades in Africa are over 17 million USD, which puts it ahead of North American peers worldwide.
According to Shirawi, the crypto sector has sparked tremendous interest from the general public, institutions, and businesses all over the world, and this trend is likely to continue in the future years.
Growing Interest in DeFi, Stablecoins & New Regulations
Defi sector is booming
Shirawi is bullish on the DeFi sector. In the first quarter of 2021, DeFi apps took in 15.1 billion USD in crypto assets for management, representing a 150 percent increase from 20 billion to 50 billion USD. Over the last year, the dollar value of ETH and other Ethereum-based tokens has risen significantly, but the number of managed crypto assets has not expanded comparably.
Considering this "price impact", we find that total value locked (TVL) in DeFi increased by 50% throughout the quarter, with a modest decline at the end of March.
Shirawi believes that DeFi will be the key driver for digital asset storage or tokenization to gain greater traction. In addition, with Ethereum's growth (based on DeFi protocols), DeFi is poised for growth as well. Moreover, 5G technology will also play a big role in expanding the reach of DeFi.
New DeFi applications and new services will be introduced through 5G. In the near future, 5G will eliminate network issues for traders, allowing cryptocurrency exchanges to use servers closer to their locations.
Rise in Stablecoins popularity
It is estimated that the volume of stablecoins in circulation has increased by 500% in 2021. Market leaders like USDC and Tether are dominating the stablecoin sector right now. Which is evident from the fact that stablecoins are among the most popular cryptocurrencies. Shirawi states that due to the nature of stablecoins it offers many advantages to investors who want a solid hedge against volatility and inflation therefore they have become hugely popular within the crypto space and they will continue to rise in popularity in the near future.
It is evident that this bubble is going to get bigger as cryptocurrency applications increase across the globe. As a consequence, certain modifications will be made to the currently confusing crypto taxing procedures. It is possible that crypto activities and transactions will be governed by standard crypto regulations by the end of this year, according to Shirawi. We will soon see the implementation of this trend in the crypto market.
Central banks, exchanges, ETFs and NFTs have crucial roles to play
- Trend of Central Bank Digital Currencies (CBDCs)
A central bank digital currency (CBDC) will also be part of the game when regulations become a part of the picture, Shirawi adds. Payments and finance could also be transformed by this. In China, an entirely new digital currency was invented - the digital yuan. Similarly, other nations such as the United States, the United Kingdom, and Europe are creating tokenized currencies as well.
- Exchanges are becoming public
IPOs may be on the horizon for cryptocurrencies companies that are growing in popularity. With crypto exchanges becoming more popular, they will also become publicly traded. Shirawi believes that the crypto market will be more established if major players define its future.
- Exchange-traded funds (ETF) will attract tremendous interest
Every year, crypto enthusiasts look forward to Exchange-traded funds (ETFs). Shirawi’s forecast is that the procedure will take some time since the US Securities and Exchange Commission (SEC) has repeatedly rejected its judgement on exchange-traded funds (ETFs). Despite this, if exchange-traded funds (ETFs) become permitted, more traders will turn to cryptocurrencies rather than exchange wallets for their investments.
- There will be a growing trend in adopting NFTs (Non-fungible Tokens)
Shirawi believes NFTs are the next big thing in crypto. NFTs are already finding use in a variety of sectors, including the arts and video games. Reports by Reuters indicate that NFT sales volume surged to 2.5 billion USD in the first half of this year, a nearly 200-fold leap from the first half of 2020. NFTs serve as a way for digital artists and others to monetize their work, as well as contribute to the development of a new asset class dedicated to cryptocurrency investment. It is these qualities of NFTs that will lead to future growth and popularity of this sector.
Conclusion & Expectations
Until now, we have only briefly discussed the Crypto Market in 2021. In Shirawi's opinion, this is only the tip of the iceberg, as there is so much going on in the cryptosphere that can't be discussed in a single setting. Nevertheless, here are a few major takeaways for the crypto market.
- The crypto ecosystem is gaining a lot of attention as many institutions seek to allocate capital.
- More and more use cases are being served by DeFi, and its growth will continue.
- Taking a look at recent indicators, NFTs appear to be increasing in popularity - trading volume has risen to 40 million USD in 30 days, according to some reports.
- We can expect some regulations to start appearing in late 2021 since the crypto market is likely to experience increasing regulatory clarity in the next few years.
- It is very likely that decentralized applications will have a huge market.
- CBDCs and stablecoins are redefining the crypto market.
- Approval of Crypto ETFs is likely in the near future.
- Market dynamics will change as exchanges become public
- A greater level of liquidity is expected in the market.
- There will continue to be fewer skeptics who fear catastrophic collapse.
It is almost certain that major investors will not accept or ignore cryptocurrency as an unusual alternative asset class, free of laws and conventions, given its rapid maturity and market share growth since mid-2020. They will view this asset class as a critical one requiring the same level of scrutiny as any other asset in their portfolio.
Multipolarity is now the norm in the banking industry, something that doubters viewed as unthinkable until recently. In order to maximize the benefits that crypto technology has offered the globe, regulators are increasingly working with traditional financial institutions and crypto firms. We'll figure out many of the answers to many of these certain challenges before 2021, Shirawi adds, and proposes that the adoption of crypto is inevitable as it matures towards global acceptance.