Future of Cryptocurrencies: The Progress During A Global Pandemic
Currency valuation worldwide faced turbulence last year; however, the cryptocurrency industry has seen an unprecedented bull run. Before 2020 came to an end, Bitcoin surged past $29,000, quadrupling in value during the pandemic year and thrusting itself into the center of conversations among big investors and Wall Street companies.
Bitcoin’s price trajectory in 2020 changed because of its growing adoption as a hedge against the potential currency debasement that might come from trillions of dollars of coronavirus-related stimulus payments from central banks and governments worldwide.
The thesis derives from the hard-coded limits on bitcoin’s supply programmed into the underlying blockchain network. Contrary to government currencies issuable subjectively and at will by central bankers, only 21 million bitcoins will be in circulation.
Increased Crypto Wallets
Rival cryptocurrencies like Ethereum, Litecoin, and Ripple are also catching up. Ethereum is thriving in market capitalization. Its growth is attributed to changes in its structure from PoW to PoS; the blockchain is more efficient and scalable because of the ETH 2.0 upgrade. All in all, most cryptos may see a significant uptrend in price from the first quarter of 2021
According to NetCents CEO Clayton Moore, the global upheaval of 2020 has accelerated cryptocurrencies’ growth, a boon for the company. Today there are more than 50 million cryptocurrency wallets globally. This number should double in the next five years if the growth rate holds up, with Moore adding that number is a conservative estimate.
Institutions Warming up to Cryptocurrencies
A recent report from Grayscale noted that in Q4 2020, institutions accounted for 93% of capital inflows, or $3.0 billion. Institutions have warmed up to Bitcoin. Indeed, Grayscale Bitcoin Trust accounted for 87% of all inflows to their product family, the highest proportion since 2Q17, further evidence of institutions looking to Bitcoin as a reserve asset.
Grayscale began the year 2020 with $2.0 billion in assets under management and completed the year with $20.2 billion. In 2020, Grayscale Bitcoin Trust was among the fastest-growing investment products globally, growing from $1.8 billion to $17.5 billion AUM.11 This is magnificent proof of the digital currency ecosystem maturity.
Institutions have historically accounted for most Grayscale inflows. The average commitment among institutions is also growing at a significant pace. The average commitment from institutions was $6.8 million, up from an average of $2.9 million in 3Q20.
Mainstream Investment Class
Cryptocurrencies and gold have been a cushion to protect fiat portfolios because of their inflation-breaking qualities. Previously, investors used gold to hedge against stock volatility, but now crypto is emerging as a mainstream investment class, especially among millennials. Bitcoin seems to be cloning the gold price rise.
Cryptocurrencies need neither a central issuing authority nor a central validating agency for transactions as a medium of payment. They thrive outside the realm of regulation, and their price is highly influenced by supply and demand in the market, which is the reason behind their high volatility.