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It’s been heady times for the crypto world these last 12 months and many are wondering if it can last. For those not yet invested, are there still any opportunities to be had? We’re sitting down with Constantinos Pavlides, CMO of gt.io to ask these and other very pertinent questions.

Will the crazy crypto rally of 2020 persist into 2021?

The crypto bull run of 2020 was very different from that of 2017. While the earlier rally had largely been driven by individual investors and whales, the 2020 surge was due to rising institutional interest in digital currencies.

This has given us hope that cryptocurrencies might finally receive the mainstream acceptance that they have sought for so long, which in turn could drive mass adoption.

Not just cryptocurrencies, blockchain technology itself witnessed a huge rise in popularity in 2020, with multiple industries expressing an interest in finding applications for the technology to enhance business operations and processes.

Credit for this should largely be given to the Covid-19 pandemic, which accelerated digital transformation across the world.

As a result, the size of the global blockchain market is now expected to rise from $4 billion in 2020 to a whopping $39.7 billion by 2025, growing at a CAGR of 67.3% during the 5-year period.

With such optimism in the cryptocurrency market, 2021 is likely to be another good year for the crypto market.

By institutional interest, are you referring to Central Bank Digital Currencies? How do you see CBDCs panning out in 2021?

Institutional interest goes much beyond CBDCs. But, yes, I do believe that one of the key factors that will drive interest in cryptocurrencies is an acceleration in CBCD projects in 2021.

The interest in launching their own digital currency has been rising among central banks across the world. So much so that the latest BIS report states that 80% of all central banks are looking at the pros and cons of CBDCs.

The Chinese government is ahead of the rest of the world in this regard, having accelerated their CBDC project due to the Covid-19 crisis.

They have already conducted multiple experiments among corporate and individual citizens and could be ready for a worldwide launch in the near future. The ECB is also gearing up to make a decision regarding the Digital Euro project by mid-2021. So, the race is on.

These projects are likely to accelerate in 2021, driven by increasing digitisation of economies across the world, diminishing use of physical cash and ease of cross-border transactions, which will help globalisation during a period when most economies are looking at ways to push recovery.

All this is good news, which is one of the key factors that drives the prices of cryptos.

What else could influence the crypto space in 2021?

Decentralised financial services or the much talked about DeFi projects could be one of the biggest trends in the crypto space in 2021. These projects have established the use cases of cryptocurrencies in the financial sphere quite effectively.

In fact, I firmly believe that DeFi success could be a key driver of the acceptance of digital storage of assets or tokenisation.

DeFi projects have proved how successful smart contracts can be and not just for financial services. They are likely to be the next big trend for all of fintech.

DeFi began 2020 with a total value of locked asset worth $683.35 million, ending the year with the figure well above $14 billion, which represents growth of more than 2,000%.

The DeFi sector has huge potential to bridge the gap between traditional financial services and the unbanked through applications in lending, insurance, mutual funds, decentralised exchanges and even derivatives.

All this also spells great news for Ethereum, the platform on which a large percentage of DeFi protocols have been built. So, a DeFi boom could also mean increasing investor interest in ETH.

On the topic of crypto investment, will the much-awaited cryptocurrency ETF see light of day in 2021?

Crypto enthusiasts have long yearned for a Bitcoin Exchange Traded Fund, similar to ETF available for mainstream investors. But, the US SEC has rejected or delayed its decision on such ETFs for a long time now.

VanEck, on the other hand, has been very persistent about its Bitcoin ETF offerings, pushing back repeatedly with the SEC for an approval.

If crypto ETFs do receive approval, it could open up the cryptocurrency world to a huge population of investors who are eager to participate in the market but unwilling to take the risk of buying and selling coins directly on exchanges.

On the other hand, we’ve found that during the peak of the Covid-19 pandemic, numerous retail investors showed an interest in cryptocurrencies, seeking a way to trade without needing to open exchange wallets or constantly buying and selling directly.

Contracts for Difference (CFDs) proved to be the vehicle of choice for such traders. In fact, we’ve experienced a significant rise in popularity for CFDs, not just for crypto trading but also as a means to participate in the forex and equity markets.

What about Bitcoin? Will it continue to rise from strength to strength in 2021?

What a dream run Bitcoin has had, at least through the latter half of 2020. The bull run has persisted into 2021, given that BTC price touched $40,000 in the beginning of January and hasn’t dipped below $30,000 since then. This rally has been largely driven by hedge funds and institutional investors.

PayPal and Square adding BTC to their payment options now allows customers to make payments in cryptocurrencies. Also, MassMutual, one of the largest insurers, bought Bitcoin worth $100 million in December 2020.

If financial giants are seen to be accumulating digital currencies, it provides confidence to retail traders to participate in the crypto market as well.

Bitcoin outperformed almost every other asset, with analysts making some seemingly wild predictions about its price target for 2021.

For instance, a Citigroup analyst estimated that BTC could be worth $318,000 by the end of the year, while Guggenheim analysts are looking at $400,000.

If Bitcoin soars, ETH can’t be far behind. What do you expect of this crypto for 2021?

Well, ETH began the year at about $740 and had crossed the $1,400 mark on January 19. Like Bitcoin, despite the price fluctuations, ETH is on an uptrend and has remained above the $900 mark so far in 2021.

The future of ETH seems incredibly bright, given that Ethereum is the platform on which smart contracts are executed. It is also the basis for dApps. So, real world use cases of cryptocurrencies are likely to stem from the Ethereum ecosystem.

We expect ETH to remain in the news through the year, serving as the foundation for DeFi projects, stablecoins and non-fungible tokens (NFTs).

The launch of Ethereum 2.0 has enhanced the scalability of the network, which spells good news for blockchain projects.

Then there’s CME Group, which has announced that its ETH derivative product is scheduled to be launched in February, regulated by the Commodity Futures Trading Commission (CFTC).

In light of this news, analysts forecasts of ETH reaching anywhere between $2,000 and $9,000 doesn’t seem too improbable. For individual investors looking for a piece of this pie, CFDs could once again prove to be the most viable means to participate in the cryptocurrency market.

Any last thoughts about how newbie traders could get in on the crypto action?

We’ve always believed that the best way to participate in any financial market for the first time is to first invest time in learning about the market and familiarising yourself with its intricacies through a demo account.

We also believe that CFDs could be useful in helping newbies start small. Since there is no need to purchase and take ownership of the underlying asset, traders can open positions with much smaller capital.

These suggestions hold true for the crypto market as well, especially given how volatile it tends to be. Understanding one’s risk appetite and then choosing the appropriate leverage is also an important part of long-term trading success.

All said and done, this is certainly an exciting time for the crypto space and I look forward to 2021 as another year of firsts for the digital asset class.

gt.io

Our top priority is our traders and partners. We seize every opportunity of improvement, striving to find ways to improve our trading experience and ensure the most favourable trading conditions. We remain at the core of the digital transformation of currencies and we embrace the widespread adoption of cryptocurrencies. That is why we are better every day, offering you more than what is out there.

Which Crypto Projects Are Based on Ethereum?

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According to the crypto app tracker, State of the Dapps, there are over 3,000 decentralized apps (also known as “dapps”) currently running on the Ethereum blockchain.

These apps differ from regular mobile and web-based apps because they aim to hand users more control over the data the apps manage. Traditional apps, such as Robinhood or Twitter, are managed by a central authority, which ultimately has the last word on how their customers’ data is secured and used – for better or worse.

Dapps take a decentralized approach to data management, theoretically putting control back in the hands of the user with the help of blockchain technology – the basis of the Ethereum network. Ethereum is the name of both the world’s second-largest cryptocurrency by market capitalization (after bitcoin) and the first platform to facilitate the creation of dapps.

While the promise of Ethereum is tantalizing to proponents of the technology, it’s an open-source platform, meaning the projects built upon it are often experimental and sometimes outright scams. Conducting diligent research before investing is highly recommended.

Top Ethereum projects

Right now, many of the top Ethereum projects are focused on decentralized finance, or DeFi. DeFi aims to expand the utility of cryptocurrencies from day-to-day transactions to more complex financial use cases, such as loans and derivatives.

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The DeFi space gained significant traction in 2020, with the total value of crypto assets locked in its protocols rising over 2,000% from $650 million at the start of the year to $16.05 billion at the close.

Ethereum dapps have become so popular that the increased congestion has pushed transaction fees – the amount of ether required to send payments over the network – higher than ever. This is a direct result of dapp users competing to get their transactions processed faster by miners. The higher the fee attached to a transaction, the more likely an ETH miner will add that to the blockchain sooner.

MakerDao

Stablecoins are an effort to improve upon one of the pain points of cryptocurrencies. Crypto prices fluctuate unpredictably, making them unsuitable as a means of payment and as a reliable store of wealth. While most stablecoins are centralized, MakerDAO is different in that it has put forth a detailed plan for how to eventually decentralize the control of its stablecoin, dai.

Uniswap

Inflatable unicorn representing Uniswap logo. (Andrey Danilovich/Getty Images)

Uniswap is a decentralized exchange, meaning that unlike most exchanges it never takes control of a user’s funds. It’s the most popular decentralized exchange so far. This exchange is a cornerstone of Ethereum’s recent booming DeFi movement, facilitating trades from coin to coin. The project even attracted a “vampire” competitor, SushiSwap, which tried to suck up all its users. Another unique aspect of Uniswap is that it utilizes an automated market maker (AMM) system for facilitating trading, meaning the underlying liquidity pools that manage the actual coin-swapping are run by smart contracts as opposed to a traditional order book system.

When trading on a regular centralized crypto exchange, the market price for an asset is determined by supply and demand. In order to buy and sell, a trader must find someone on the opposite side of the order book to provide liquidity to complete a transaction. With AMM-based exchanges like Uniswap, a pricing algorithm determines the market price of each asset. Investors are incentivized to provide liquidity which is pooled together and used to execute all trades at the set market prices.

Chainlink

Chainlink is an oracle platform, which means it connects smart contracts with real-time data from the outside world such as weather information or stock prices. A smart contract uses that data to execute pre-defined instructions. For example, payout an insurance claim in the event of a hurricane.

While Chainlink has been around since 2017, the project didn’t really come to the forefront of the space until 2019 – after it partnered with Google. Chainlink is fuelled by an ERC-20 crypto token, LINK, and runs on top of the Ethereum network.

Axie Infinity

Axie Infinity is an online role-playing game where users collect and raise digital, fantastical characters called “Axies.” Under the hood, Axies are types of nonfungible tokens (NFT), which means each one is cryptographically unique, gamers have full ownership over them and in some cases have a monetary value due to their scarce, collectible nature.

Aave

Aave is a decentralized lending and borrowing platform that recently raised $25 million from leading venture capital firms Blockchain.com and Blockchain Capital.

According to tracker DeFi Pulse, Aave is currently the fourth-largest DeFi app based on the $1.14 billion locked up in the app. It was briefly the largest earlier this year.

Other Ethereum dapps

Compound : A decentralized lending platform, Compound is credited with inventing liquidity mining, where the company releases a unique coin that only those providing liquidity to the platform can obtain. This DeFi technique has since become foundational, with users tapping the technique to make money and companies copying the idea to attract users.

A decentralized lending platform, Compound is credited with inventing liquidity mining, where the company releases a unique coin that only those providing liquidity to the platform can obtain. This DeFi technique has since become foundational, with users tapping the technique to make money and companies copying the idea to attract users. WBTC : Wrapped bitcoin is a token on Ethereum that is backed 1:1 by bitcoin. The goal is to bring bitcoin’s liquidity to Ethereum. It has grown in popularity partly because investors can earn interest on the bitcoin they lock up on Ethereum.

Wrapped bitcoin is a token on Ethereum that is backed 1:1 by bitcoin. The goal is to bring bitcoin’s liquidity to Ethereum. It has grown in popularity partly because investors can earn interest on the bitcoin they lock up on Ethereum. SushiSwap : This decentralized exchange (DEX) is a fork of the popular decentralized Uniswap exchange that rewards liquidity providers with its own native SUSHI token. To date, it is a top 10 Ethereum DeFi app, according to DeFi Pulse.

This decentralized exchange (DEX) is a fork of the popular decentralized Uniswap exchange that rewards liquidity providers with its own native SUSHI token. To date, it is a top 10 Ethereum DeFi app, according to DeFi Pulse. Status : An ether wallet and private messaging system.

An ether wallet and private messaging system. Unstoppable Domains : One of the oft-touted goals of Ethereum is to decentralize the internet by making apps that are not controlled by tech giants. Unstoppable Domains is playing its part by creating domains that can’t be taken down by a central entity or government.

One of the oft-touted goals of Ethereum is to decentralize the internet by making apps that are not controlled by tech giants. Unstoppable Domains is playing its part by creating domains that can’t be taken down by a central entity or government. Kyber Network : A popular AMM, like Uniswap, created by researcher Loi Luu.

A popular AMM, like Uniswap, created by researcher Loi Luu. Basic attention token : An ERC-20 token on Ethereum exchanged between users, publishers, and advertisers on the browser Brave. When using the browser, users receive BAT from advertisers for their attention. BAT is a project led by the creator of JavaScript and co-founder of Mozilla, Brendan Eich.

An ERC-20 token on Ethereum exchanged between users, publishers, and advertisers on the browser Brave. When using the browser, users receive BAT from advertisers for their attention. BAT is a project led by the creator of JavaScript and co-founder of Mozilla, Brendan Eich. OpenSea : A marketplace for buying and selling NFTs, including Axies (described above), unstoppable domains, digital art, etc.

A marketplace for buying and selling NFTs, including Axies (described above), unstoppable domains, digital art, etc. Livepeer : A network for decentralized live-streaming, providing an alternative to YouTube.

A network for decentralized live-streaming, providing an alternative to YouTube. Decentraland: A decentralized virtual reality game, where users own virtual plots of land and can build structures such as theme parks and casinos that can be monetized.

Additional types of Ethereum blockchain dapps

There are dozens of other crypto dapps with smaller user bases than the above services. Some were more popular prior to the DeFi boom and have historical importance.

Decentralized Exchanges (DEXs)

Lending Platforms

Stablecoins

Tether: This popular stablecoin actually lives on many blockchains simultaneously. It is now dominating Ethereum transactions.

USDC

PAX

Prediction Markets

Storage Apps

Misc. dapps

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Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De.

Are governments worrying more about the growth of crypto? Two countries already announced crypto-related bans, though this could be an extension of previous efforts at controlling the space – and their own economies – rather than new initiatives

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The crackdown begins (again)

The narrative

In recent weeks, both India and Nigeria have made noises about banning crypto industry participants’ access to the traditional banking sector. This could be a sign of renewed government crackdowns on the space.

Why it matters

Bitcoin and subsequent cryptocurrencies were designed to be censorship-resistant, stateless and a tool of economic freedom. Citizens in Belarus and Nigeria used bitcoin to raise funds for those who lost their jobs or otherwise faced repercussions for protesting against authoritarian regimes. People in other countries use cryptocurrencies as a way of cheaply transferring value across borders.

But the crypto space might not yet be mature enough to actually fulfill those goals – at least, not entirely. Ray Dalio, head of major hedge fund Bridgewater Associates, said government prohibition could have a significant negative impact on cryptocurrency adoption, and we’re indeed seeing governments try to enact or enforce stringent regulation.

Breaking it down

The Indian government began considering a bill that would ban private cryptocurrencies late last month, defining “private” as any cryptocurrency that’s not state-backed. The bill, which was introduced to the Lok Sabha, the lower house of the Indian parliament, also suggested that India could launch its own central bank digital currency (CBDC), issued by the Reserve Bank of India (RBI), the nation’s central bank.

There are two details here that stick out to me, The first is that the RBI tried to restrict cryptocurrencies once before, when it told banks they could not provide services to crypto companies in 2018. That ban was later struck down by the nation’s Supreme Court, though RBI vowed to fight the ruling. This new bill, which was also introduced in the Rajya Sabha (the upper house), could be a natural evolution of that policy goal, one that would have the force of law behind it.

The second detail is the Indian government has also tried to control its financial system before. In 2016, the government demonetized the ₹500 and ₹1,000 notes, some 86% of the circulating currency, nominally in an effort to stamp out “black money,” or cash held from illicit means. In 2018, India’s Aadhaar system decided every resident effectively needed access to the biometric identification platform in order to buy a cell phone or access banking services.

A continent away, the Central Bank of Nigeria (CBN) published a document saying banks cannot provide crypto exchanges with services. Binance and Bundle Africa immediately announced they would suspend deposits.

Here, too, the CBN says its ban isn’t new, but rather that its statement last week is merely reiterating a position it has held since 2017. Still, the timing of the move is interesting, coming just months after residents began using bitcoin to raise funds as part of the #ENDSARs movement.

Basically, this looks like a trend. Crypto is getting to a place where governments have to pay attention to it. Some industry insiders seem less alarmed about Nigeria’s ban than their Indian counterparts are about the subcontinent’s ban.

U.S. Congress

Meanwhile, Congress is gearing up to face a number of issues this year, beginning with an impeachment trial that starts this week and coronavirus pandemic relief. However, a number of cryptocurrency issues will likely work their way through Capitol Hill. Here are a few of the major players to watch:

House of Representatives

Representative Maxine Waters (D-Calif.) – Rep. Waters chairs the House Financial Services Committee, the main committee that oversees cryptocurrency and fintech issues in the House of Representatives. She has called a hearing next week on Robinhood and the GameStop pump.

Representative Patrick McHenry (R-N.C.) – Rep. McHenry is the ranking member on House Financial Services. McHenry has said publicly that he’s a proponent of cryptocurrencies and fintech innovation.

Representative Jim Himes (D-Conn.) – Rep. Himes is the chair of the HFSC Subcommittee on National Security, International Development and Monetary Policy, which is holding a hearing on domestic terrorism funding in the wake of the Jan. 6 Capitol Hill insurrection later this month. Expect bitcoin to come up.

Representative French Hill (R-Ark.) – Rep. Hill is the ranking member on the National Security subcommittee.

Senate

Senator Sherrod Brown (D-Ohio) – Sen. Brown is the new chair of the Senate Committee on Banking, Housing and Urban Development. In public statements he has said his focus will be on evaluating a real-time payments system , as well as paying more attention to housing and urban development issues than the committee has in years past.

as well as paying more attention to housing and urban development issues than the committee has in years past. Senator Patrick Toomey (R-Pa.) – Sen. Toomey is the ranking member of the Senate Banking committee.

Senator Elizabeth Warren (D-Mass.) – Sen. Warren, who drove the creation of the Consumer Financial Protection Bureau, is on the Senate Banking and Finance committees. She hasn’t explicitly said anything about cryptocurrencies recently but has been outspoken on consumer protection issues that could intersect with the crypto industry.

Senator Cynthia Lummis (R-Wyo.) – Sen. Lummis, who won her seat in last year’s election, is joining the Senate Banking committee as its first member who’s an active bitcoin advocate. She has already announced her intention to launch a fintech caucus in the Senate and said she hopes to “work with federal regulators to ensure that regulation of digital assets are structured to encourage innovation, instead of stifling it.”

Biden’s rule

Last week, President Joe Biden formally withdrew the nominations of Robert Benedict Bowes and Brian Brooks. Bowes was former President Donald Trump’s nominee to be a Commodity Futures Trading Commission commissioner to succeed current Commissioner Brian Quintenz. Brooks, the former Acting Comptroller of the Currency, was nominated to a full five-year term. Biden is expected to name Chris Brummer and Michael Barr to fill the CFTC and OCC roles.

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

Elsewhere:

Outside crypto:

Getting vaccinated is hard. It’s even harder without the internet.: This MIT Technology Review article looks at the difficulties Americans living in San Francisco – the heart of the nation’s tech scene – face trying to get internet access. It’s not just a matter of physical infrastructure either. Reporter Eileen Guo notes that even where the internet is easily accessible, people might not be able to afford telecom provider costs.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.