2020 has nearly come to an end and what a year it has been for all of us. The threat of a global economic meltdown, an extremely dangerous pandemic, and geopolitical tensions all around.
Don’t let go yet as 2020 is not yet done with us and 2021 will likely have its own set of challenges. While the outlook for vaccines from Pfizer and Moderna appear rosy, it’s far too early to tell what may happen next.
Nevertheless, good news is always welcome as we look forward to the future. As we prepare ourselves for the start of 2021, it’s highly likely that most of us would emerge from lockdown into a whole new world.
Throughout the COVID crisis, cryptocurrencies have seen a resurgence as investors scramble to hedge their risks. Bitcoin in particular has had a good year with BTC valuations surpassing previous records.
With increased institutional interest for cryptocurrencies, we have to ask the question – what will the future of cryptocurrencies look like?
While cryptos are a long way off from replacing fiat currencies, there is no doubt that digital assets will have a big place to play in the days to come. With all of that in mind, let’s take a look at why we believe that cryptocurrencies represent the future.
1. Increasing demand for cryptos
Institutional investors have taken a serious interest in cryptocurrencies and their potential as an investment. This is partly due in part to the economic devastation wrought by the coronavirus.
With hundreds of businesses forced to halt operations and millions in a state of lockdown, consumption has dropped dramatically. As a result, the global economy has been brought into a state of extreme uncertainty.
To help keep their economies afloat, governments have been forced to introduce various stimulus packages as a means of quantitative easing. With an excess amount of cash in the market, analysts have pointed out that inflation may soon be a real problem in the near future.
Being unregulated and entirely decentralized, cryptocurrencies are largely unaffected by government monetary policy. A key characteristic that makes them a valuable investment come 2021.
This increase in demand for Bitcoin could be one of the reasons why we’ve seen how BTC prices have hit new record highs recently.
2. The implementation of blockchain technology
It is clear to see that blockchain technology is in fact so much more than just a passing fad. In fact, blockchain technology has begun making its presence known in many industries.
The finance sector is one such area in which blockchain has been able to bring about sweeping changes. From instantaneous cross border transactions to automated smart contracts, it is clear to see that blockchains are here to stay.
More importantly is the fact that most blockchain platforms utilize their own form of cryptocurrency in order to facilitate transactions. The Ethereum platform and XRP on the RippleNetwork are two well-known examples of blockchain tech in the finance sector.
Both platforms have been adopted for their own purposes with Ethereum being used primarily in the creation of smart contracts and XRP for cash transfer purposes. Thus, making the case for the role that cryptocurrencies are set to play in our future.
3. Ease of liquidity
Liquidity refers to the ease in which an asset can be converted into ready cash. Cryptos such as Bitcoin and Ethereum have been steadily increasing in popularity over the past few years.
Click here to read the differences between the two currencies: blog.tezro.com/bitcoin-vs-ethereum
Besides facilitating the quick and easy transfer of funds, cryptocurrencies can be easily converted into cash at various crypto exchanges. With the uncertain nature of the market, it is highly likely that liquidity will become a major priority for investors.
Digital assets allow investors to quickly convert cash into crypto and vice versa in order to capitalize on the latest market developments.
Thanks to the flexibility of cryptocurrencies, we can expect the popularity of these assets to rise as we move into 2021.