What should investors know about the world of blockchain-powered technologies and cryptocurrencies in 2021?
Click here to read the previous blockchain market update.
The world of blockchain-powered digital currencies is on a path of great promise, with widespread logistical applications. How is 2021 going so far for this sector?
Coming into the year, legitimacy and practical uses for blockchain and cryptocurrencies were already top of mind for investors. Halfway into 2021, the year has brought exciting new applications for digital offerings like bitcoin alongside an increase in interest for non-fungible tokens (NFTs).
The Investing News Network (INN) spoke with industry observers to get a look at the major milestones so far in 2021, and what’s ahead for blockchain and cryptocurrencies. Here’s what they said.
Blockchain market update: Interest and education on cryptocurrencies continues to grow
All the experts INN talked to agreed that 2021 has been a critical year for digital currencies.
Elliot Johnson, chief investment officer and chief operating officer at Evolve Funds Group, told INN he is encouraged by the level of interest in education surrounding cryptocurrency investments.
“A lot of times you have an institution that hasn’t really started to do it yet, because they have very long cycles for analysis and decision making,” said Johnson. “But the analysts you’re talking to, they personally hold some bitcoin, or they personally hold one of our funds and that kind of thing.”
One expert said he has been impressed by the fast-paced adoption these digital solutions have seen. “That has caught me a little bit by surprise, the speed at which this is moving,” Abhishek Sinha, partner at EY and the firm’s open banking and blockchain leader, said.
In the big picture, Sinha pointed to conversations surrounding a central bank digital currency (CBDC) from the Bank of Canada, which has published reports on the topic throughout the year.
In July, the banking agency issued a report arguing in favor of a CBDC. “(W)e argue that a CBDC could be necessary to support the vibrancy of the digital economy by helping solve market failures and fostering competition and innovation in new digital payments markets,” the report indicates.
“I think CBDC is probably the slowest-moving mass because it’s probably the largest iceberg, probably a continent more so than ice,” Sinha said.
Sinha said this topic will be discussed extensively by key nations and their respective banking agencies.
“We’re seeing crypto investments continue to become mainstream offerings from not just new players in the ecosystem, but a lot of traditional banks are starting to offer crypto-based wealth solutions, investment solutions for accredited investors,” Sinha said.
Blockchain market update: Increased business adoption of digital assets
While cryptocurrency investment has gone through periods of volatility, one question has remained constant through it all — how soon will everyday businesses and people adopt the digital tools that have attracted such passionate conversations?
According to Pat White, co-founder and CEO of Bitwave, that time is quickly picking up in 2021.
“There’s a very, very clear drive from businesses adopting crypto,” White said to INN. Bitwave is an enterprise digital asset management platform designed to help businesses incorporate digital assets, and was originally formed in 2018.
White, who described himself as a cryptocurrency aficionado, explained his business model by saying the rush to be an early adopter of new technology can lead to unexpected situations.
In the case of cryptocurrencies, users may end up not knowing how to manage their tax situation in relation to their assets. The same problem can occur on a larger scale, White said, when it comes to businesses adopting digital assets.
Sinha also sees the progression of business adoption as a key point for 2021. For him, the top instances of blockchain being deployed surround supply chain network optimization.
“Over the next two to three years, you’re going to see this explosion in businesses, Fortune 500 companies, consumer packaged goods companies — all these guys are starting to adopt cryptocurrency for various reasons,” White told INN.
White said that for Bitwave the goal is to act as an expert liaison with those seeking to quickly and efficiently integrate digital assets into their operations. One example he provided was the notion of delivering payroll using digital currencies.
“At some point, businesses are going to get really serious about crypto, and they’re going to need serious tools to support their mission,” the executive said.
Blockchain market update: El Salvador and Tesla shake the bitcoin world
Johnson told INN that bitcoin is leading the conversation regarding cryptocurrencies because of its valuation compared to the rest of the offerings available.
He pointed to two critical events for bitcoin, with the first being the role Elon Musk’s Tesla (NASDAQ:TSLA) has played in its adoption, and the second being the breakthrough decision by a South American country to make the digital currency legal tender.
When it comes to Tesla, Johnson said the company’s decision to purchase US$1.5 billion worth of bitcoin associates anyone invested in the company with the cryptocurrency. “You see how that thought process forces everybody to pay attention, which is, I think, a really big deal,” the Evolve executive said.
In June, lawmakers in El Salvador voted in favor of making bitcoin legal tender in the country, becoming the first nation in the world to do so.
El Salvador President Nayib Bukele has spearheaded this decision and wishes to build a “bitcoin mining hub around the country’s geothermal potential,” according to a report from Reuters.
“They’re trying to get some currency sovereignty back by using bitcoin, which is sort of what it was invented for,” Johnson told INN.
The move has caused disruption on the financial stage worldwide, with the World Bank declining to support El Salvador’s endeavor, while the International Monetary Fund recently indirectly warned against the decision to implement cryptocurrencies in such a way.
“It’s an experiment. It will be interesting to see if it works or not, but the implications, if it doesn’t, are very serious,” Ricardo Castaneda, senior economist and coordinator for El Salvador at think-tank Icefi, told the Financial Times in early August.
El Salvador’s decision may eventually offer a clearer picture on how bitcoin can be implemented on a larger stage. The move may also help inspire more countries to follow suit.
Blockchain market update: NBA and NFT craze offer mainstream exposure
This year the world got a glimpse into the way blockchain can help change how users interact with something as simple as a trading card by way of turning it into a digital asset.
The National Basketball Association (NBA) launched a blockchain-based experience through which users can buy digital highlights from actual NBA games via a platform dubbed NBA Top Shot.
In an explainer article the NBA said:
How it works: the NBA cuts the highlights and then Dapper Labs decides how many of each highlight they are going to sell and number them. They place each highlight into digital packs, just like regular trading cards, and sell the packs on the official NBA Top Shot website for prices ranging from $9 to $230.
NBA Top Shot has been a massive success in terms of bringing attention to digital asset technology by seeking to replace an established product.
By limiting supply and establishing a resale market where users can engage and barter, the hype for these digital NFT highlights has skyrocketed to the point of viral video reactions to digital pack openings.
“All of that is interesting, and it helps get the word out, get people interested in what this is,” Sinha said.
The EY expert explained he views the NFT craze and its counterparts as a way for users to adopt that excitement. But maybe, he added, the education is still missing.
“I’m not sure that everyone who was suddenly really interested in NFTs really understood what they were getting into and what the NFTs represented,” Sinha said.
At the same time, Sinha fervently believes that NFTs will evolve into a refined business application that will definitely stick around.
“Do we think that NFTs are here to stay, and they’re going to be a valid medium for value exchange? Absolutely. I think they’re just going to get a little bit more business as usual, a little bit more mundane, a little bit more boring, but a lot more essential,” Sinha said.
Blockchain market update: New ETFs offer investors easier access to coin investments
Another key trend of 2021 so far in the investment landscape has been the proliferation of new exchange-traded funds (ETFs) offering investors an easier path to access coin-based bets.
The Canadian capital markets have seen a rush of new funds with the launch of several ETFs tracking the progress of bitcoin:
- BetaPro Bitcoin ETF (TSX:HBIT)
- CI Galaxy Bitcoin ETF (TSX:BTCX.B)
- Purpose Bitcoin ETF (TSX:BTCC)
- Evolve Bitcoin ETF (TSX:EBIT)
“Purchasing bitcoin through an ETF structure is far superior to a closed-end fund — thus the reason many closed-end fund providers are considering launching a bitcoin ETF,” Raj Lala, CEO and president of Evolve Funds Group, previously commented to INN.
Sinha told INN the do-it-yourself approach to cryptocurrency investing has dominated the space with early users, but with a bigger adoption rate he expects to see more traditional investors pursue established methods such as these ETFs.
“The core reason for these products is to provide easier access to investing in cryptocurrencies. No question, that’s what we’re doing,” Johnson said. He added that these funds help cut the complexities of cryptocurrency investing since they meet investors where they already trade.
Evolve has also launched a fund based on a different cryptocurrency, ethereum. The Ether ETF (TSX:ETHR) made its debut in the public markets earlier this year as well.
“The volatility of cryptocurrencies is both the biggest challenge, and I think a lot of people see it as the biggest opportunity in investing in them,” Johnson said.
The investment expert said his fund is not providing price forecasts, noting, “We leave that to others who are far more focused on them, and frankly with the amount of volatility there is, it’s a real challenge to model any kind of price with any kind of strong argument behind it.”
Blockchain market update: Investor takeaway
Investors evaluating the cryptocurrency sector know at this point that if anything can be expected it is volatility. Nothing is guaranteed when it comes to the world of blockchain-powered investments.
At the same time, experts are encouraged by market developments in 2021. Easier accessibility and further forays into the mainstream will help keep users wondering about the power of digital currencies, whether it’s for their own use or for an investment opportunity.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.