5 Crypto Investment Trends to Expect in 2021

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The crypto market never sleeps, and the spate of innovation never slows. New use cases and applications for cryptocurrency are regularly emerging, while enterprising developers are creating new ways to interact with tokenized assets and generate profitable trading opportunities.


While defi was the trend that dominated 2020, complete with the abilities for yield farming, decentralized trading, and synthetic asset swaps this entails, there were also other narratives coming into play. From the shifting derivatives market, which saw a changing of the guard as BitMEX hemorrhaged users to rivals, to an emerging NFT space, 2020 was a year of crypto innovation across the board. This year, expect the following trends to ossify, presenting crypto investors with multiple avenues for turning a profit.


1. More Public Companies Buy Bitcoin

MicroStrategy caught headlines last year for buying up bitcoin by the bucketload, while Square also allocated 1% of its treasury to BTC. Expect this trend to accelerate this year, as Bybit notes in its article on crucial crypto signals to watch this year. “Will 2021 be the year where Bitcoin as a treasury reserve asset goes mainstream?” asks Bybit, the derivatives exchange that has seen its user numbers swell in the wake of BitMEX’s demise, and as interest in BTC has grown among retail and traditional investors.

From a trading perspective, more publicly listed companies buying bitcoin provides two ways to profit. One is simply by following the herd, and stocking up on as much BTC as possible to front-run the influx of enterprise money. The other is by buying shares in the companies themselves, and betting that their newly acquired exposure to bitcoin will boost their balance sheet.


2. Defi Exits Ethereum

The bulk of all defi activity, and thus the profits, has centered around Ethereum so far; just check the top protocols listed on Defi Pulse, where the only non-ETH entry in the top 20 is Lightning on the Bitcoin network. Expect that to change in 2021, as decentralized finance transcends Ethereum, with its exorbitant fees and endemic congestion, and finds a home on other smart contract chains. Polkadot is likely to be the primary beneficiary of this trend, as its interoperable framework supports cross-chain swaps and boasts much greater scalability than ETH.

TRON is also likely to capitalize on this trend. The network has just added support for WBTC and WETH, allowing defi to flourish on the blockchain founded by Justin Sun. With its lower fees and ETH-like defi primitives such as JustSwap, TRON is well placed to pick up the slack from Ethereum. Investors should consider acquiring the native tokens of new defi networks such as Polkadot, and those of new projects that are launching on them, to cash in on the hype.


3. NFTs Become a Thing

There was lots of talk about NFTs last year, and lots of innovation too. We saw the debut of NFT yield farming through projects such as MEME, and a lot of money being thrown down on NFT artworks too, including at the prestigious Christie’s auction house, no less. New platforms have emerged that are focused on NFTs, including Polyient Games and Terra Virtua, which is creating a marketplace for selling and exhibiting digital collectibles.

The question for investors eyeing the NFT space this year is what to go for: governance tokens, aka the picks and shovels of the goldrush, or the gold itself: unique art that’s represented in tokenized form. The trouble with the latter is that art is highly subjective and illiquid, and there is no guarantee that you will find a ready buyer for the NFT art you snap up. Unless you know your stuff when it comes to digital art, it may be safer to invest in the native tokens of projects that are leading the way in the non-fungible token space.


4. Stablecoins Explode

With any luck, stablecoins will explode in a good way this year – through increased adoption, legalization, and market capitalization – rather than imploding due to a regulatory crackdown on their usage. Signs point towards stables being regulated with a light touch, by the standards of US financial forces, allowing banks to utilize them, and giving legitimacy to these dollar-pegged crypto assets.

Provided Tether doesn’t feel the same force of punitive justice that smashed BitMEX last year, given USDT’s dominance of the stablecoin market, the stage is set for stables to transcend crypto and permeate traditional finance over the next 12 months. For risk-inclined investors seeking a way to profit from stablecoins, there are options to explore in the field of algorithmic coins whose supply is programmed to expand and contract to maintain dollar parity. Look to ESD, DSD and their many clones as a starting point for learning more about the thrills and spills of algorithmic stablecoins.


5. Tokenized BTC Will Be Everywhere

You’re going to be seeing a lot of tokenized bitcoin this year, not just on Ethereum, but also on TRON, Polkadot, TomoChain, and any other smart contract network worth its salt. Staples such as BitGo’s WBTC have been complemented by tBTC, sBTC, oBTC, renBTC and scores more. With bitcoin coming soon to a high throughput blockchain near you, the opportunity this offers, from a profit-making perspective, is the ability to earn yield without losing out on bitcoin’s price appreciation.

With tokenized or wrapped BTC, you can lock your bitcoin into yield farms and staking platforms and use it to earn an APY – all while getting to enjoy those sweet BTC gains. If you want to keep your bitcoin but still profit from defi to its fullest extent, expect to be wrapping, swapping, and staking a lot of tokenized BTC this year.


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