2020 review and 2021 outlook for crypto markets around the world
“When I first heard of Bitcoin, I thought it was impossible. How can you have a purely digital currency? Can I just copy your hard drive and have your bitcoins? I didn’t understand how it could be done, then I looked and it was awesome.“
–Jeff Garzik, co-founder of blog.inc
At the end of 2020, Bitcoin, the best-known cryptocurrency, closed the year at an all-time high. Some of the reasons for this sudden surge in interest in cryptocurrency include approvals from mega-companies, institutional investors who participate heavily, increased usage, and growing uncertainties in traditional markets.
2020 CRYPTO-MARKETS REVIEW
Like the first decade of the 21st The century has come to an end, here are the top 5 major developments in the crypto markets in 2020:
- Regulatory maturity: Many jurisdictions have published regulations to govern cryptocurrency (also known as virtual assets) and exchanges. Here are some key regulatory developments in 2020 applied by countries:
- Starting with South Korea, the East Asian nation has become one of the first countries in the world to legalize cryptocurrency.
- the Financial action group also during this year they lobbied to strengthen anti-money laundering measures for virtual assets with member states.
- European Parliament implemented an action plan for a comprehensive Union policy on the prevention of money laundering (with specific reference to virtual assets).
- France adopted Ordinance 2020 No. 2020-1544 where enhanced anti-money laundering measures targeting cryptos are introduced, in particular activities involving the exchange of digital assets and other digital assets (aka crypto to crypto).
- In a move in the midst of Brexit, UK, adopted a policy statement that sets out rules to prohibit the marketing, distribution and sale of derivatives and exchange-traded notes to retail clients.
- united states of america Currency Chief’s controller announced the holding of stablecoins in his reserves. Cryptocurrency: Enforcement Framework was also announced by the Department of Justice.
- The growth of decentralized finance (“Challenge”), The industry accelerated in 2020, from $ 700 million by December 2019 to $ 13 billion by December 31, 2020. DeFi are financial applications built using blockchain technology like underlying technology for operations (eg smart contracts). Smart contracts are automated enforceable agreements that, when implemented, will not require executing intermediaries.
- China has launched electronic payment in digital currency (“DCEP“) For its central bank digital currency (“e-CNY”) And tested for the first time in Xiong’an, Shenzhen, Suzhou and Chengdu. The e-CNY is hailed as the first digital currency issued by a large economy.
- Mass adaptation of institutions. In a surprising twist, Goldman Sachs, a company historically reluctant to recognize the potential of cryptos in the past, has appointed a new head of digital assets. Fidelity, one of the world’s leading asset management groups, has launched a Bitcoin fund for high net worth investors.
- Enter Paypal. Finally, PayPal entered the cryptocurrency market, announcing that its customers will be able to buy and sell Bitcoin and other virtual currencies using their PayPal accounts in October, a move that many hailed as a large-scale proliferation of cryptos becoming widespread.
Overall, not only have we seen Bitcoin Rising 2.0 in 2020, but the significantly higher number of institutional recognition the market has received across the board (compared to the previous surge in 2017) provides a lot of excitement for the industry as a whole at the start of the new decade. As Elon Musk enthusiastically puts it:
“Paper money is going away “
CRYPTO MARKET OUTLOOK FOR 2021
“If you love gold, there are many reasons why you should love Bitcoin“
Here’s a quick look at the crypto markets for 2021:
- Regulatory: The Bureau of Financial Services and Treasury (“FSTB») Published a consultation document on November 3, 2020, proposing amendments to the Ordinance on the fight against money laundering and the financing of terrorism, chap. 615 (“AMLO”). Essentially, this is legislation designed to introduce a licensing regime for virtual asset service providers (“VASP (s)”). It is likely that cryptocurrency trading platforms in Hong Kong will consider applying for such a license if they want to operate in Hong Kong / prepare for such a request before the legislation is passed (unless they want to be cut off from Hong Kong.).
- Integration of virtual asset funds: With the launch of the first cryptocurrency fund in Hong Kong by Venture Smart Asia Limited on April 20, 2020 to buy, hold and track the price of Bitcoin, and the launch of 4 crypto-related funds (which include a tracking fund BTC, an ETH tracker and multi-strategy virtual asset fund) by Huobi Asset Management (Hong Kong) Limited on April 22, 2021, we can see a trend of companies in the crypto market to launch their own funds. However, at present, these funds are only available to professional investors as defined by the OFS and the Securities and Futures (Professional Investors) rules.
- Scheduled launch of e-CNY: According to a publication released by the Hong Kong Monetary Authority on December 4, 2020, Hong Kong authorities are actively working with the Chinese central bank to test e-CNY in payment scenarios, especially cross-border payments. We may see e-CNY circulation in Hong Kong sooner or later.
- Environmental concerns: Criticisms that Bitcoin uses more energy to produce than the energy consumption of entire developing countries is not new. However, with global warming continuing to be a serious global crisis (aside from COVID), more environmentally friendly virtual assets could eventually overtake Bitcoin.
- Integration trend: When Tesla first announced its adoption of Bitcoin, the price of Bitcoin skyrocketed. Just as quickly as Bitcoin prices inflated, the price of Bitcoin also fell when Elon Musk announced the suspension of acceptance of Bitcoin for the purchase of Tesla due to environmental concerns, followed by the virtual ban on mainland China on Bitcoin transactions (many enthusiasts attributed the ban to China. Bitcoin as the competition for the next e-CNY). China’s act of banning Bitcoin (to set the stage for e-CNY) has been argued by some as a validation of the virtual asset.
CONCLUSION AND MAIN WAYS OF ACTION
Overall, the market expects rapid and large-scale application of virtual assets in Hong Kong and the rest of the Asia-Pacific region. The following is a brief summary of the key points:
Crypto-exchange operators should remember:
- The regulations are coming. Far better to have your exchange ready to go in a regulated world when laws are passed than to move. Exchanges should lead (not react) to change!
- Opportunities abound. The ambitious deployment of regulations in Hong Kong should not frighten trade but be seen as an opportunity to be approved (and therefore integrated) by the leading financial center in Asia!
Traders on the other hand, must be aware of:
- Prices will fluctuate: How regulators and businesses treat each token will impact the price. It is therefore crucial to understand the underlying technology and how it should work (to be received by regulators and users) before each purchase.
- Understand your purchase: Understanding what you are buying is crucial for success. Each buyer must know the strength and issues (eg. Market potential, energy, etc.) of each purchase.
This article is co-authored by Anna Lau ”and links Anna Lau to her profile at Ravenscroft & Schmierer