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Crypto and Bitcoin Becoming Mainstream in 2021 - Emergence of a New Asset Class

Recent events suggest Bitcoin and the overall cryptocurrency industry are moving towards mainstream adoption.

The year 2021 is starting to take an exciting turn for the crypto and blockchain industry. Bitcoin continues to reach its all-time high (ATH) values, and cryptocurrencies are emerging as a new financial asset class. These recent events suggest a push towards mainstream adoption of digital assets.

Cryptocurrency Entering Mainstream Adoption in 2021

In addition to Bitcoin’s price breaking all its previous records, several developments point to the normalization of the crypto industry. Governments are considering tax rules for crypto as a financial asset. Leading banks are beginning to support crypto custodian services. Industry players argue that Bitcoin will cross $100,000 by the end of 2021, and even football players and companies are considering to offer salaries in Bitcoin

In this article, we review significant developments in the crypto industry in 2021 and a glimpse of what we can expect from the year ahead.

Tesla Enters Bitcoin

One of the events that made industry headlines is Tesla buying $1.5 billion worth of Bitcoin. In its recent US Securities and Exchange Commission filing, Tesla cited the interest for greater flexibility in diversifying and maximizing returns on its cash reserves as the reasons to invest in Bitcoin. Tesla also plans to offer Bitcoin as a payment method for buying its vehicles.

For such a large company like Tesla to invest and offer BTC as a payment method, it indicates a strong step towards the normalization of crypto as an asset class. Moreover, its CEO Elon Musk has advocated his support towards Bitcoin. The investment activity may start a series of events with leading industry players following the footsteps of Tesla in joining the cryptocurrency industry.

Crypto Custodian Services

In 2020, the OCC announced that banks could offer custodian services for digital assets. Following this announcement, various leading institutions have started offering cryptocurrency custodian solutions. Most recently, BNY Mellon, with $41 trillion in assets in safekeeping, announced that it is now including custodian solutions for digital assets.

The Deutsche Bank has also joined the ranks of financial institutions exploring crypto custody services. The onset of such prominent banking institutions offering custodian services for digital assets further pushes them into mainstream adoption as it simplifies the process of investments in cryptocurrencies.

FinTech Giants Bridging the Gap Between Traditional Finance and Digital Assets

In 2021, Mastercard announced that it plans to integrate digital currency payments functionality within its infrastructure. Merchants and customers will be able to settle payments with cryptocurrencies via Mastercard. PayPal has already enabled buying and selling using cryptocurrencies to its customers.

Additionally, Visa has introduced products that will allow the issuance of credit cards supporting digital currencies. With millions of customers in their ecosystem, the roll-out of such services and products helps bridge the gap between traditional finance and digital assets. This further enables the crypto industry to take a step towards normalization.

BTC and ETH Price ATH

It has been nearly 3 months in 2021, and leading crypto assets Bitcoin and Ethereum have surpassed their previous milestones. Moreover, unlike the last bull run, the interest in these digital assets has been driven by fundamental factors, including institutional adoption.

For the first time, Bitcoin crossed $60,000 while Ethereum surpassed $2,000. The overall market capitalization of cryptocurrencies surpassed more than $1.8 trillion. From hedge funds to university endowment funds, these institutions investing in prominent digital assets indicates rising interest towards a growing financial asset.

Scalability of Transactions

One of the challenges with mainstream adoption in cryptocurrencies has been the scalability factor. Previously, blockchains did not have the scalability in transaction processing required to adopt for day-to-day life. But the recent developments of scalable blockchain networks suggest that this issue may no longer be prevalent.

Moreover, the development of cryptocurrencies on scalable blockchain networks allows the use of digital currencies for our daily activities. This further helps to speed the adoption rate of digital currencies.

Regulations Underway

Regulative authorities have also noticed the growing interest in Bitcoin and the overall crypto industry in various parts across the world. Instead of issuing warning statements prohibiting crypto usage, regulators have now moved their attention towards forming legal compliance that binds crypto as an asset class.

Many countries have focused their attention on accelerating cryptocurrency regulations, from including crypto in tax returns to declaring crypto as a financial product. Placing a legally compliant infrastructure for digital assets makes it easier to drive digital currencies’ normalization as an investment class and as a payment method.

Crypto: A New Asset Class and What Lies Ahead in 2021

In the upcoming months, we are likely to witness new developments that bring more clarity to the crypto industry.

Some of the developments that are likely to dominate this year may include:

  • Institutional adoption grows - After Tesla, Square, and other institutions pouring a percentage of their cash reserves in Bitcoin, it is likely that we will see prominent organizations follow suit.

  • Banks and Crypto - With a certain degree of clarification regarding crypto services, leading banks may join this asset class in different roles.

  • Payment method - The services offered by prominent FinTech giants for digital currencies may allow merchants and eCommerce giants to adopt crypto as a payment method within their infrastructure.

  • Outlining regulatory framework - With countries developing legal compliance, we may witness a regulatory framework developed for the use, store, and trade of digital assets.

  • Blockchain solutions - The applications of technology in various industries are growing evident. In 2021, we are likely to witness crypto tokens focused on new use-cases for blockchain technology.

Cryptohopper provides a weekly rundown of breaking news in the crypto and blockchain industry each week. To remain updated with the latest events in the industry, subscribe to our newsletter!

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