What Should Crypto Traders Be Ready for in 2021? - Global Trade Magazine
  July 25th, 2021 | Written by

What Should Crypto Traders Be Ready for in 2021?

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  • Cryptocurrency is still in its infancy. Tokenization is even more so.
  • Experts point out that the volatility of cryptocurrency is comparable to the gold rush back in the 1850s.

There is still much to explore in the staying power of cryptocurrency. While its previous peak in 2017 made waves, it slightly went off the radar for a few years since then; until 2020. The shift towards the further digital transformation of business processes due to the global pandemic has renewed interest in it, peeking up to 63% gains in November according to InvestorPlace.

Decreases and Increases in Bitcoin Price

Experts point out that the volatility of cryptocurrency is comparable to the gold rush back in the 1850s. There’s really no telling what’s going to happen next. The main difference, however, is there was a lack of data sharing and analysis back then. Today, we have various platforms and tools to monitor and examine the current activity in real-time.

For instance, we know through CNBC updates that Bitcoin hit a record high of above $23,000 this December and that most of the investors are not solely made up of retail investors anymore but billionaires and other investing experts and pioneers like Stanley Druckenmiller and Paul Tudor Jones.

Viral Cryptocurrencies in 2020

Here is a quick look at the cryptos that ran viral this year:

Bitcoin (BTC). Bitcoin remains to be at the top of the game and is still rising. Investing analysts expect that it will still continue to dominate the market in the years to come.

Ethereum blockchain network’s native cryptocurrency probably still has a long way to go before it reaches Bitcoin’s level of recognition and reputation. However, we certainly believe that this standing won’t be for long given its current high demand. Its secret lies behind its flexible and widely customizable applications.

Ripple (XRP). Finally, there’s XRP, another leading cryptocurrency tied in second place with ETH. Again, it is currently in high demand thanks to its popularity amongst leading financial institutions.

Why Some Cryptos Succeed and Others Don’t

There are undoubtedly other cryptocurrencies that are on the rise much like the ones aforementioned. However, there is still a considerable number that fails. In fact, there are currently almost 2000 entries listed as “dead coins” at Coinopsy.

They have also listed some of the possible reasons behind their demise. Among the leading reasons are:

The lack of reputation. While there are benefits to having the support of “big finance”, this transition also has a major downside.

They can potentially cripple cryptocurrencies from humble beginnings, especially those lacking renowned developers to back them up.

The lack of resources. We’re not entirely surprised why bigger financial institutions are thriving. Sometimes, they simply have the resources to invest in the needed infrastructure to make a cryptocurrency operational.

Even basic services or financial products like a cryptocurrency loan will already need a lot of financial capital to launch. This is also the reason why a lot of cryptos are simply left abandoned or neglected.

The abundance of schemes. Finally, the lack of resources probably won’t be an issue if there are more investors to start with.

Unfortunately, there is still a (rather well-founded) stigma against cryptocurrencies. In fact, just last year there were executives running a Nevada-based firm who was charged for running an $11 million Ponzi scheme.

What We Can Expect in 2021

We are expecting a very good outlook next year, though.

The added interest and the support of big finance can pave the way for stricter regulations that will benefit both investors and developers (regardless of the scale).

It will also encourage more clients that can hopefully sustain even smaller institutions.

Classic Cryptos vs Prospect Tokens

Another factor that we also expect to change next year is people’s lack of understanding of these new forms of currency. For instance, cryptos, altcoins, and tokens are often used interchangeably despite their differences (that further adds to the confusion between these terms).

In a nutshell, cryptocurrency is digital currency while altcoins are independent cryptocurrencies that are recognized as an alternative to the classic currency, Bitcoin (hence the name). Lastly, tokens are an entirely different form of currency altogether. Think of a token as a unit of value within a certain organization that is also supported by a blockchain.

Considering tokens as an investment is a good idea if you want to maximize your earning potential. Think of them as similar to reward points that have various functions. For instance, they can be made to offer security, a form of ownership, or provide extra services.

Conclusion

Cryptocurrency is still in its infancy. Tokenization is even more so. We can still expect a lot of improvement in the system.

However, understanding how digital currencies work certainly holds a lot of insight into how the landscape of the global economy and investing will inevitably shift in the future. And who knows? Maybe this future might not be too far off. Maybe this significant shift happens in 2021.

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Lidia D. Staron is the Head of Content at OpenLoans.com. As a financial advisor and former financial planner at an insurance company, she knows that life is full of major events and challenges. She enjoys helping people navigate through important financial decisions while avoiding common mistakes.