More Crypto volatility and regulation predicted for 2021

The big crypto trends to look out for in 2021 are more volatility, tougher regulatory oversight and continued support from big institutional investors, says Luno in a recent newsletter to clients.

“2020 was a proper stress test with bitcoin hitting a low of around $5 000 in March and a high of $28 000.

“The new year is fo llowing the same trend with the price already reaching the $40 000 [R607 100] level,” says Marius Reitz, Luno’s general manager for Africa.

It was also the year institutional investors started backing bitcoin in a big way, with MicroStrategy,

Mode, Square and others moving some of their cash reserves into the crypto as a hedge against the inflationary potential of fiat currency.

“Corporations, institutional investors, family offices and hedge funds all want bitcoin to diversify their portfolios.

“While the numbers are small relative to traditional markets, institutional investment will continue to grow as the economic implications of Covid-19 become clearer,” says Luno.

Despite the extraordinary 300%-plus gain in bitcoin’s price over the last year, mainstream adoption will grow in 2021.

Major crypto players are increasing their investment and interest in cryptocurrencies. The retail market is also on fire on the back of booming crypto assets, greater media attention and easy access to cryptos.

With each bull run, more investors enter the market for speculative purposes.

This grows the user base and brings cryptos a lot closer to the critical mass needed for much more widespread adoption of cryptos for payments and other use cases.

With the crypto space maturing rapidly, regulators globally are accelerating efforts to either embrace or regulate cryptocurrencies.

In South Africa, proposed regulations have been tabled by the South African Reserve Bank, and the Financial Sector Conduct Authority (FSCA) last year published a draft declaration of crypto assets as a financial product, which effectively means that any entity or person who renders intermediary services in relation to crypto assets must be an authorised financial services provider.

“Internationally, we expect to see more guidelines come into effect this year.

“Numerous central banks held talks on central bank digital currencies during 2020, with many now either in the research phase or further along,” says Luno.

The first phase of Ethereum 2.0 finally launched on December 1, 2020 after years in the making.

This is a huge transition for Ethereum, unprecedented in the history of cryptocurrency, which could leave Ethereum in a state of flux for the next two years, possibly opening opportunities for rival blockchains with similar offerings.

Following its rapid transformation, Ethereum could get closer to its goal of becoming a globally-usable ecosystem for companies in all sectors and industries. –