2020 is one of the most challenging chapters for the global financial system and economy. The coronavirus pandemic has struck the global economy hard–even more than the financial meltdown in 2008. Governments worldwide have imposed strict lockdowns and social distancing to control the spread of the disease, which severely limited business activities. These draconian measures devastated economies and relegated global economies to a recession and massive unemployment.
To curb social unrest and violence and ameliorate the economy's downfall, governments have announced huge stimulus packages of trillions of dollars, euros, and anything else they can get their hands on. Economists believe that unless there is a viable vaccine or containment of the virus, many countries' economies will contract. The stimulus packages will cause unprecedented inflation and devaluation of the major currencies. With the fear of a global recession and depreciation of the fiat currencies, more and more institutional investors are fleeing towards cryptocurrencies as a safer and more stable alternative to traditional financial assets.
It seems that 2021 will be the perfect time for further adoption of cryptocurrencies and to become a potential contender as an asset in the existing financial system.
The Meteoritic Rise of Bitcoin
Bitcoin broke its records earlier this month by surpassing the $20,000 mark. The world's most recognizable cryptocurrency is now trading at over $27,000 when this article is written. Bitcoin has witnessed an unprecedented increase in value this year—a colossal 240 percent increase since the beginning of 2020. In October this year, the price of Bitcoin climbed from the $11,000 range and hovered around $19,000. Even more smashing is that Bitcoin's market cap recently was above $345 billion. It's an all-time high. It is becoming more common for people to invest some of their retirement into a Bitcoin IRA.What's behind the meteoric rise in the price of Bitcoin? Many people want a definitive answer, but there hasn't been one. Market observers say the cause is straightforward: more buyers with deeper pockets. That explains one side of the story, but there's another plausible theory. Recently, some unusual circumstances might have constrained the supply of Bitcoin to almost half. Albeit its temporary status, this incident has ramified Bitcoin's continued gains. We will discuss some of the events later in the article.
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Ethereum: The King of Decentralized Finance
Speaking of cryptocurrencies rising in value, you can't help but mention Ethereum—one of the most promising cryptocurrencies to invest in 2021. Ethereum, the second-largest cryptocurrency after Bitcoin, has shown an excellent performance in 2020, and this month, Ethereum has a market capitalization of $80 billion, according to OKEx. The cryptocurrency traded around $125 at the beginning of this year, soaring to about $600—a 380 percent price surge in 12 months.So, why is Ethereum lucrative to invest in 2021?
Ethereum operates on an open-source blockchain network and is the best network for decentralized applications (dApps). Its native cryptocurrency, Ether (ETH), supports Uniswap (UNI), Aave (AAVE), Maker (MKR), and other crypto platforms, which are highly preferred cryptocurrencies in the Decentralized Finance (DeFi) sector. Industry experts are highly optimistic about DeFi and believe it can transform savings, loans, and insurance schemes, making them sovereign from traditional banks and other financial institutions. Investing in an Ethereum IRA is also gaining in popularity https://www.brokerchoices.com/ethereum-ira/.Ripple: A New Payment Ecosystem In The Making
Ripple was created to replace traditional financial payment by transforming and facilitating cross-border payments. Ripple went live in 2013, but it took the platform years before it was adopted by mainstream financial institutions. Today, Ripple is supported by over 100 financial institutions, and this year, the Ripple blockchain is being supported by more than 300 providers in 40 countries, including industry titans such as American Express, JP Morgan, Bank of America, Banco Santander, HSBC Holdings, and the HDFC Bank, India's largest bank.That begs the question: what makes Ripple one of the top 10 cryptocurrencies to invest in 2021? According to the Official Monetary and Financial Institutions Forum (OMFIF), Ripple could become an alternative to SWIFT. Thanks to Ripple's proprietary distributed ledger technology or DLT, the platform can solve significant issues plaguing SWIFT: speed, security, cost, traceability, transparency, and risk management.
The cryptocurrency was valued at around $0.60 per coin during December 2020, twice the amount in October this year. Ripple's perspectives only seem to get brighter as the European Commission actively encourages its member states to transition to digital finance through DLT technology and cryptocurrencies. Ripple is now also available to add to your IRA; you can find more information at this source.
Inflation and the Gradual Decreasing Purchasing Power of the Dollar
Massive stimulus spending over the years by the US Congress, the recent stimulus bill of nearly $1 trillion, aimed to help those suffering from the coronavirus pandemic, has increased the money supply, which led to more excellent inflation rates, ultimately lowering the purchasing power of the US dollar. To hedge against this inflation, investors turn to assets that appreciate or maintain their value. Besides gold and other precious metals with limited supply, Bitcoin has become an asset store of value.The Halving
Gold has long been considered a store-of-value asset due to its scarcity. We still need to find out how much of it exists with complete certainty. But, with Bitcoin, we know how many will ever exist. We can confidently tell how many Bitcoins will be mined now and will be in circulation in the future. This makes Bitcoin the only asset with a finite and fixed supply.To understand why Bitcoin has a finite supply, it's time we get acquainted with the term 'Halving.' Bitcoin is undergoing a halving. For every 210,000 blocks mined, or after every four years, the rewards to miners for successfully mining a block or processing Bitcoin transactions are reduced in half. This inflation adjustment mechanism will continue until all 21 million Bitcoins are mined and released into the market. This will automatically increase Bitcoin prices because there will be 900 fewer new bitcoins coming to the market daily, but new investors are growing daily.
PayPal now Supports Bitcoin.
In March 2020, PayPal announced that US customers could use their services to buy, hold, and sell Bitcoin and use it to make payments. This significant development increased the price of Bitcoin from $5,000 to $25,000, an enormous 400 percent increase in the last eight months.Institutional Adoption and Maturity
Due to the advent of uncertainty, inflation, and fear of a new recession, the demand for Bitcoins and other cryptocurrencies as store-of-value assets increased substantially with institutional investors in 2020. The confidence in the future of Bitcoin and cryptocurrency is more vital than ever before when it comes to institutional investors. Furthermore, the infrastructure built around Bitcoin and other cryptocurrencies underwent significant development and maturity over recent years, elevating its status as a safer investment than ever before.Several institutional investors, both public and private, have been diversifying their assets by buying Bitcoin instead of cash. According to BlackRock, while speaking to CNBC, said, "It could take the place of gold to a large extent." A Citi analyst predicts the priceBitcoin could surge to $318,000 at the end of 2021. Furthermore, JPMorgan claims that institutions are now accumulating Bitcoins and other cryptocurrencies three times more than they bought in the previous quarter of 2020. Governments and Central banks worldwide are also considering the potential of introducing a central bank digital currency (CBDC).
These events increased the institutional adoption of cryptocurrencies, particularly Bitcoin, both as a safe investment and as a service, enabling its price surge.
