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DeFiJanuary 29, 2021

Cryptocurrencies: Key Themes For 2021

Shubham Goyal
Product Specialist
January 29, 2021

Amidst the rising excitement around cryptocurrencies, it appears that they are finally headed towards mainstream acceptance and this could open up new perspectives in the crypto space. As the year comes to an end, let us have a look at some of the key themes for 2021.

#1 Continued rise of DeFi and DeFi exchanges

As the popularity of DeFi exploded, 2020 was labeled the ‘Year of DeFi’ by many. According to DeFi Pulse, the US dollar value of ETH locked in DeFi protocols saw a whopping 1116% increase in about eight months since January. This dramatic rise, coupled with the many offerings of DeFi, such as earning interest, hedging, etc. potentially, means that advancements in DeFi are likely to be a continued crypto theme for 2021 as well. Moreover, the merging of these trends will also help propel DeFi further. For example, Bitbns has introduced an innovative new platform called Ascent, which is a decentralized launch platform that combines DeFi and IEOs (initial exchange offerings).

#2 Liquidity Mining or Yield farming

Yield farming or liquidity mining refers to a mechanism that allows users to earn a passive income within the Defi ecosystem. In this, a user would add their crypto assets to a liquidity pool of a platform and earn rewards in the form of tokens. According to a survey by CoinGecko, 81% of respondents had heard of yield farming by September 2020 and 31% of respondents had participated in it. In recent times, several new high-risk, high yield platforms have gained prominence and drew a lot of capital into the market. However, users also need to be aware of the risks as the possibility of exit scams can also be high. All the same, it appears that the trend might still be around in 2021.

#3 Bitcoin ETF

The Bitcoin ETF has been a much-awaited ETF for crypto enthusiasts but it has faced repeated rejections over the years. As of now, such an ETF has not been possible as getting approval remains a difficult task but if it were to become a reality, it could open up the crypto industry to a whole lot of new investors as they would be able to buy Bitcoin ETF without holding BTC. Whether this sees any progress in 2021 is yet to be seen.

#4 Oracles

Oracles, which provide a way of verifying and communicating real-world data to blockchains, and thus provide a lot of foundational support to projects. These enable smart contracts to operate even when the conditions depend on external real-time data. Important use cases can involve enabling interoperability via off-chain communication. Therefore, they help blockchain reach its true potential. For this reason, oracles are surely going to remain one of the key themes for 2021.

#5 Crypto Derivatives

According to a report, the trading volume of the cryptocurrency derivatives market in the second quarter of 2020 has seen a year-on-year increase of 165.56%. The rise of the crypto derivatives market has, amongst other factors, also been enabled by user-friendly exchanges such as Delta that have taken these investment options to the average investor. Considering the growing enthusiasm for cryptocurrencies and their derivative instruments alike, the trend is unlikely to disappear any time soon.

What’s Next For Cryptocurrencies: Trends in 2021

While it cannot be said whether digital currencies would see any dramatic price rises in 2021, cryptocurrency trends centered around investment instruments and technological advances can be expected with a little more certainty. Other cryptocurrency trends like interest in privacy coins like Monero and Dash, and non-fungible tokens, which allow assets to be tokenized on the blockchain, are also worth exploring. However, in an industry that is as fast-paced and dynamic as the crypto industry, trends can often evolve or change in very short durations.

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