2020 was a chaotic and unpredictable year from all sides. But despite the uncertainties in the encryption market, 2020 remains the year with the highest price records and unprecedented industry news.
Entering 2021, blockchain technology and cryptocurrencies began at a rapid pace, embracing major institutional interests to stimulate industrial growth. The future looks bright for investors and studies point to a huge revolution in the encryption arena.
In 2020, several central banks considered introducing digital currencies. Experts from reputable central banks around the world who serve on the central bank’s board are currently evaluating the pros and cons of using digital currencies as an alternative financial instrument.
At the end of 2020, the Bitcoin market capitalization exceeded the $ 500 billion mark, surpassing PayPal, Mastercard and Visa while now is at $ 844.
In 2021, the upward trend of BTC remained, reaching the high of $ 61 thousand.
Bitcoin’s dominance is one of the biggest drivers behind its institutional interest and mainstream adoption.
Altcoin traders had an exciting increase with Ethereum’s price hitting a new ATH of $4328,73 in this month. In fact, despite corrections, the altcoin was trading close to its ATH, leading many to suggest that the crypto might resume its rally soon.
Ethereum is the second largest cryptocurrency in the world, after Bitcoin, with a market capitalization of $ 393 billion. It emerged in 2015 and revolutionized the world of encryption as a decentralized blockchain-based open source software platform offering innovations, using smart contracts that allowed users to create a range of decentralized applications.
Ethereum has led the altcoin rally several times in the past, especially considering its relatively high correlation with Bitcoin and increasing correlation with other top crypto-assets. Ethereum’s (ETH) surge in the first quarter of 2021 has been the hot topic of discussion since the commencement of this year. In fact, this year’s first-quarter earnings alone were more than that of its previous years combined.
In March 2020, Tesla, the electric carmakers and automobile giant announced that it will start accepting Bitcoin payments. But in a very short time of just two months, the company has decided to reverse its decision.
In the middle of May, Tesla has announced that it will no longer accept payments in BTC, citing environmental issues related to the high cost of mining and processing Bitcoin transactions.
The news was relayed by Elon Musk, the founder and CEO of the company, saying that purchases using the flagship cryptocurrency had been suspended. According to Musk, the firm is “concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
However, Tesla will continue to hold the Bitcoin that it purchased in mid-February from the company’s balance sheet. It also notes that it intends to use Bitcoin transactions soon as mining operations move to more sustainable energy. Tesla has further added that Bitcoin is a great idea and thinks that it has a promising future.
Musk is, also, pushing further into dogecoin. His aerospace venture, SpaceX, announced last week it would accept dogecoin as payment to launch ‘DOGE-1 mission to the Moon.’ His endorsements have helped boost the price of the coin, pushing acceptance among some traders.
After this announcement Bitcoin (BTC) price slipped below $45,000 on Sunday 16th for the second time in four days, raising the specter of a deeper short-term correction for the flagship digital currency.
Despite all the noise in the market, institutions are accumulating Bitcoin with ever-growing conviction, offering compelling evidence that the bull market is far from over.
While Musk’s decision is a short-term blow to the sentiment of the market, it is unlikely to change the course of the crypto markets altogether because the institutional demand for cryptocurrencies remains high. Proof of this came as Cowen Inc., a 103-year-old bank, announced that it had partnered with Standard Custody and Trust Co. to enter the crypto custody business.
Another indication of increasing institutional interest in crypto is the sharp rise in “crypto under the custody” of Gemini crypto exchange. The Winklevoss twins’ led exchange now has $30 billion worth of crypto under custody.
The long-term picture for cryptocurrencies remains strong but the short-term price fluctuations may cause large drawdowns to portfolios. Hence, traders should watch the price action closely and follow their trading rules without getting sucked into trades driven by emotions.