The digital asset industry is in the midst of a virtuous cycle of self-reinforcing feedback loops, where various impactful events begin to feed each other, witnessing world-changing trends; the most promising ones around investor enthusiasm fueling capital flow into top-tier crypto assets, world-class companies ramping up crypto-related technology investments, retail access expanding access to crypto payment, and more. It is always interesting to forecast the future of the crypto industry because thanks to, and as opposed to, the conventional financial system, it is simultaneously evolving.
The speed of distribution of cryptocurrency depends directly on how quickly transactions with different brands and flavors become available and accepted in any traditional bank or payment system. The mass use of digital assets is both what the world is striving for and what it is afraid of. It is an attempt to maintain a balance between profit and risk in the use of cryptocurrencies that will determine the trends of 2021.
1. Crypto Taxes- What & Why?
The tax regulation of cryptocurrencies is the principal topic for the near future. Crypto taxation is still an obscure thing today, an ideal image far detached from reality. Crypto taxes are not yet widespread, and while some are unwelcome, they have begun to appear in some countries as these markets mature and the governments see their potential to raise revenues to overwhelm previous crypto uncertainties.
However, the introduction of mandatory user identification through the know your customer (KYC) procedures, the development of protocols that allow transactions to be tracked, and the adoption of legislation on digital assets indicate that things are changing and doing so more quickly than some might expect.
Monitoring tools are being actively developed, along with governments exchanging information on the owners of cryptocurrencies and the transactions they make. As a result, the world is likely to face the first bitcoin tax evasion lawsuits in 2021.
2. The Perks of Crypto Taxation
Since there is an anti-trend for every trend, the introduction of crypto taxes will increase the attractiveness of jurisdictions that will resist this practice and allow users to legally minimize the cost of owning digital assets. Simply put, the so-called “Offshore Crypto Trading” will develop more actively. This role will most likely be played by countries with well-developed IT and financial markets.
3. The Setback
The maturing crypto-world shall not only become more open, regulated, and stable but also shall undergo several economic trials and challenges. We are already seeing the harbingers of the first crisis that have nothing to do with cybercrime or fraud.
In December, Bitcoin’s cost (BTC) set a new record, breaking the $34,000 mark. However, it was not only because of the increasing demand for BTC but also because of the excess supply on the market in stable coins Tether (USDT), used for 70 percent of crypto-exchange trading.
The Tether, registered in the British Virgin Isles, is gradually growing its emissions to increase the capitalization of its coins. At the same time, there are serious doubts among market participants that USDT stables are genuinely endorsed by fiat assets, i.e. USD. Moreover, Tether is owned by iFinex, which has been threatened by plaintiffs with a $1.4 trillion class-action lawsuit for manipulation of the market.
As a consequence, what we can see in crypto-business today, exchanges is almost what happens in the conventional economy when governments start the printing presses: an excess of the fiat money market contributes to dollar inflation and then to a devaluation of that number. We can see the depreciation of capital that is now USDT in the world of cryptography, which leads to higher goods costs that are BTC in the world of cryptography. As such, current trends may lead to more altcoin depreciation and an increase in bitcoin prices whose emissions are notoriously restricted.
4. Risks of the Crypto Market
Against the backdrop of the increase in the valuation of bitcoin, the advent of a high-quality risk assessment model is the need of the hour, as it is becoming increasingly difficult for users to critically determine the potential outcome of crypto-investment without succumbing to the general rush. Services that have a working solution will be able to easily conquer the hearts, minds, and wallets of both newcomers and seasoned investors in the cryptocurrency industry, not just “digital fortune-telling on the coffee grounds”.
There are more than 7,000 different cryptocurrencies in the world at present. More than 90% of them are just scams. However, out of the remaining 10%, many show growth rates no worse, and sometimes even better, than Bitcoin.
At the same time, several risks that can boost or crash the value of a particular coin must be considered by those who are going to invest in crypto:
- Organizational: for example, the country in which the issuing company and the crypto exchange operate and the legislative changes taking place in that country, for or against digital assets;
- Technical: code bugs, poor information security, and weak data protection, all of which can be used to steal cryptocurrencies by cybercriminals;
- Price risks: this type of risk remains the most difficult to assess. However, thanks to the ubiquitous principles of KYC (user identification) and KYT (transaction identification), analysts can track the movement of large quantities of cryptocurrencies, identify who owns them and analyze their sales-related behavior. Depending on the targets, time, and other features of such transactions, it is possible to make assumptions about adjustments in the value of the cryptocurrency based on the data collected. It also makes the rise in the size of the market less reliant on individual speculation.
There is less uncertainty in the crypto world today, and there are more opportunities to develop analytical tools. However, it is still difficult for novice investors to understand the intricacy of alternative finance.
5. What is attracting the masses?
This trend is interesting because it’s going to be multi-directional. Ether transactions will become cheaper as a result of technology upgrades, or Bitcoin transactions will continue to rise in price.
Changes in operating costs may affect the interest of players in the e-commerce sector in cryptocurrencies. Nowadays, the acquisition of crypto attracts online stores by the fact that dealing with fiat currencies is much cheaper. Whether this advantage can be maintained in the long term will largely determine the speed at which the crypto spreads as a means of payment.
6. Crypto through emerging technologies
A modern concept of data transmission, which is still underestimated by many, is the 5G standard. Its integration will lead to the emergence of new ideas and types of services and will impact the architecture of mining, the creation of DeFi applications, and more.
With 5G, transaction management capabilities will no longer be limited to the speed of network data. For example, 5G can significantly change the high-frequency trading segment when investment decisions are taken by computers, particularly with the ultra-low latency that 5G offers.
Today, traders are struggling to place their server as close to the crypto exchange as possible because the length of the wire affects how quickly they can place or withdraw the order. 5G will help solve this barrier: all networks, regardless of where the crypto exchange is located, will have a level playing field for transactions.
The things that happen before our eyes, which skeptics claimed to be unlikely until recently, are now multipolar in the world of finance. Increased cooperation is being made between regulators, conventional financial institutions, and crypto companies to optimize the benefits of crypto-technology in the world. While not all-important problems have been addressed today, there is a certainty that many of them will obtain answers in 2021. As crypto continues to evolve to global acceptance – a positive result is completely unavoidable