Many moons ago, the pseudonymous Satoshi Nakamoto quietly introduced an idea that promises to liberate many aspects of finance and commerce. Since then, these novel ideas of cryptocurrency and blockchain technology have ballooned into a trillion dollar market – which is a mighty long way from it’s humble beginnings. However, one question might still linger in the mind of spectators and participants alike – where do we currently stand in terms of mass adoption?
Well, at this point in time, emphasising the history of Bitcoin and how the greater cryptocurrency market came to be has become a bit of a cliche to some. However, for new entrants and for the sake of this article, looking at certain aspects of this is crucial to understanding how we got here, and where this could lead us to in the future.
The Liberation of Finance
Bitcoin began life as a borderless currency “for the people”, free from central bank manipulation, completely fungible and, deflationary in its core design. However, as time elapsed since then, the most popular and most valuable crypto currency has gone from to a store of value – usually referred to as digital gold.
Furthermore, not only did Bitcoin initiate a change in the way we perceive, record and, exchange value. The birth of BTC also rewrote the crowdfunding textbook with the advent of the Initial Coin Offering (ICO) – kicking the barriers to early venture capital investing right off of their hinges. This tokenised business model opens up investment opportunities for people from all walks of life, in multiple jurisdictions, while exposing them to little interference and costs from middleman entities – however, there are still many risks involved.
In a relatively short period of time, the tokenised business model has proven itself robust and versatile – having spawned numerous potential use cases besides revitalising streamlining the archaic state of global finance. One prominent example is supply chain management. However, finance remains a leading driver towards adoption. This is evidenced by the parabolic rise of Decentralised Finance (DeFi) over the past year or so.
Though the idea of a completely decentralised financial services industry was quietly gaining traction for some time, it only really gained the public attention it deserves during the “DeFi Summer” of 2020. Many defi projects had long since been launched, but 2020 saw crypto’s new kind on the block explode with new projects and innovations like yield farming, that led to a growth in Total Value Locked from USD $700 million to $5 billion.
Until very recently, an open-sourced financial services mechanism with its foundations entrenched in a trustless business model was completely unheard of. Yield Farming took the liberation of financial services to entirely new heights by pushing equity distribution to boundaries of accessibility that had never been seen before. The idea that a platform belongs to its users and early adopters as much as it does to its creators is one that has been wildly successful in DeFi and could see itself being adapted for use in other aspects of the blockchain and cryptocurrency space in the coming years.
Adoption Now & In The Future
Moving on from 2020 and the pleasant memories of the DeFi Summer, the possibilities for crypto and block chain seem endlessly positive – with The two most capitalised digital assets, Bitcoin and Ethereum, both having recently recorded new all time highs at $63 000 and $2300 respectively. Much the same as the rise of DeFi, this energetic leg of crypto’s journey began in 2020.
A key moment for adoption would be when Microstrategy, a leading business intelligence enterprise, announced plans of $250 million buy into BTC back in August. This move was closely followed by other investment and finance giants like, Fidelity, Singapore’s DBS Bank and, Goldman Sachs Group. However, this takes nothing away from the potential impact of long time Bitcoin investment firm, Greyscale, and their efforts like the Drop Gold campaign.
This signaled a growing desire from institutional investors to participate in this new market. As the big banks reluctantly started to dip their toes in the world digital assets, PayPal took the boldest institutional step into crypto when it announced plans to partner up with Paxos exchange to allow its roughly 300 million users to purchase BTC directly through its own platform. As simple as that sounds, it opened the doors to an asset that many people were already interested in but found the process of buying and storage a little cumbersome.
These events were among the most reported on over the course of 2020. While quietly, a number of other events that solidified a forward march for digital assets were playing out. The one most notable of these was the proliferation of fiat currency backed stable coins – the most prominent being the USD backed Tether. The most popular of the stable coins that are pegged 1-to-1 with the greenback grew its share of the market to 3-quarters and increased the total circulating supply to $20 billion within that year.
Though some in the crypto space have criticised fiat backed stable coins for their centralised business model, one cannot deny their importance to the healthy adoption of cryptocurrency. This is because stable coins still – and likely will for some time to come – present themselves as the most productive fiat on-ramp into the crypto markets. Moreover, the US Dollar remains the world’s most liquid currency and still serves as the world’s reserve currency, making USD backed digital currencies the first obvious choice as reserve currencies for the crypto market.
However, there are a number of other stable coin models like, digital asset backed and Non-collateralised stable coins, that simply have not been able to achieve the same kind of growth as seen by the fiat back coins.
2021 & Onwards
The first quarter of 2021 has for the most part been a continuation of 2020 and, a growth from those milestones on the way to mass adoption – as Bitcoin and the broader cryptocurrency market continues to chart new territory. This trend is predicted to persist throughout this year, as analysts foresee an increase in institutional interest.
According to Bloomberg Intelligence, the current state of global economics has created the perfect environment for Bitcoin to flourish.
“Adoption iterations for Bitcoin have entered a unique state of human nature that supports the crypto’s ascent, in our view. Money managers reluctant to cross the Rubicon and allocate at least a small portion of funds may be at risk as Bitcoin simply does more of the same, advancing in price amid unprecedented low interest rates and elevated equities.” As per Bloomberg Crypto Outlook 2021.
This bright forecast for crypto is further evidenced by the behavior of the next most capitalised cryptocurrency, Ethereum (ETH). From Bloomberg’s point of view, ETH has greater correlation with the NASDAQ 100 index than it does with BTC and should not pose much of a threat to Bitcoin as a global reserve asset – however, it can still act as a sure indicator of the crypto market’s general well-being.
Looking as far back as the first quarter of 2018, the price of ETH held steady at around $100 correlated with a bottom in BTC prices and, with the rest of the market having been established. Fast forward to the beginning of 2021 when ETH breached $1000 for the first time since late 2017, the price of BTC shot above $30 000 – signaling a continued up side for the crypto market.
Moving into the second quarter, this prediction has proven its worth as the leading cryptocurrency seems destined to reach even greater heights than $60 000. Besides getting a boost from the world’s most capitalised automotive manufacturer – Tesla – and the institutional buying frenzy, Bitcoin is said to be entering the high point of a repetitive cycle that sees the leading digital asset soaring to new all time highs.
This happened before in 2013 and 2017 when the total mining rewards are slashed in half (the halving). This is expected to lessen the assets overall volatility, however, some predict that the price of BTC could go as high as $400 000 by the end of 2021.
“To reach price extremes akin to those years in 2021, the crypto would approach $400,000, based on the regression since the 2011 high. In September, 180-day volatility on the crypto about matched the all-time low from October 2015. From that month’s average price, bitcoin increased a little over 50x to the peak in 2017.” as senior strategist for Bloomberg Intelligence, Mike McGlone, elaborates.
All in all, the foreseeable future of Bitcoin and cryptocurrency adoption looks fairly bright. However, there are a number of concerns that could prove problematic to growth. The unprecedented success of Decentralised Finance – with 2020 and the first quarter of 2021 seeing record growth in crypto credit and TVL – and a massive boom in the Non-Fungible Tokens (NFTs) market, it was only a matter of time before regulators and tax authorities came knocking.
2020 saw many jurisdictions bringing out clearer guidelines around the trading of digital assets, some even going as far as restrictions – only to later launch their own centralised digital currency. As we progress through 2021, one can expect more countries making their exact stance on digital assets clear in their legislations – expect some hostility.
Final Thoughts
Though we’ve seen a development of massive appetites for digital investments among institutional investors, retail interest is still a mighty long way from where it should be. With the estimated number of individuals who own crypto at below 100 million, a global population count of around 7 billion shines a spotlight on how far we still have to go to achieve true mass adoption.
However, the knock on effect of this bull run might start to change that dynamic by attracting more retail investors. Plus, the cryptocurrency space and its innovations have already started to infiltrate the gaming industry – opening up another avenue for explosive growth.
