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Hey DEFI TIMES community,
It is essential to test your beliefs when you invest in any asset. You want to make predictions and try whether they are right or wrong.
If your predictions are right, there are two possibilities: you could have acted on reasonable beliefs, or you could have been lucky.
If your predictions are wrong, you should reflect and examine your decision making. Did you consider all relevant information? Did you think about the possibility of a Black Swan event? Are you biased?
The beginning of every year is an excellent opportunity to reflect on your decision-making system. It is also essential to make new predictions that you are going to test during the year. Write your predictions down, remember them, and be skeptical. The best investors are those who generally believe that they could be wrong.
Today, we want to make five predictions about DeFi and the crypto industry.
2020 has been a wild year, and 2021 could be even crazier!
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DeFi on the rise
DeFi had just been getting started in 2020. DeFi summer gave us a taste of what is about to come in 2021.
As mainstream is turning special attention to the crypto industry, they will realize the power of DeFi. We are living in a zero interest rate environment. People who save their hard-earned money in their bank account are the real losers of today. Sooner or later, they will discover decentralized money markets.
What will happen when the middle class realizes that the interest rate for stablecoins on Aave is higher than zero percent? That’s right; retail FOMO will break out.
I expect that the middle class will find out about DeFi. They will take their US dollars, buy stablecoins, and deposit them on Compound.
Inflation will cause big problems
At the same time, inflation will become a bigger problem. The money printer will continue to go brr; central bankers desperately try to avoid deflation. That means asset prices could reach highs we have never seen before.
Luckily, we have Bitcoin, which brings me to the next topic.
Bitcoin will soar
The institutional FOMO will kick Bitcoin to price levels we have never seen before. For the first time, the Bitcoin ETF is a real possibility.
Bitcoin could easily hit $100,000 at some point in 2021. It could even go far beyond that price level. If the FED continues to print money at this speed, I see Bitcoin reaching gold parity already this year. This implies a Bitcoin price of $250,000.
Inflation will be the main driver for Bitcoin’s rally. Already today, institutional investors are buying Bitcoin. Why? Because they know the USD is going to depreciate in the short and long term.
In 2021, the mainstream will learn about it the hard way. As more and more people cannot pay their rent anymore, people will opt-out of the system. Retail money will flow into Bitcoin.
That's something we are yet to see.
Although Google searches for Bitcoin are continuing to climb, they are nowhere near 2017.
Retailers will come
We will see another retail FOMO in 2021. We already experience the first signs of inexperienced traders coming into the crypto space.
I expect this trend to continue throughout the year.
Retailers will buy Bitcoin first, but they won’t stop there. Just as in 2017, people will explore altcoins and speculate with them.
That’s why we could see another big retail FOMO occurring, which will be even more significant than the 2017 bubble. The combination of institutional and retail FOMO will leave us speechless.
Expect a new Bitcoin all-time high on a weekly or monthly basis.
Stablecoins will become big
Over the last few years, Tether became the third-largest cryptocurrency in the world (by market capitalization). Today, Tether is the only stablecoin that has made it into the top ten cryptocurrencies.
This is likely to change. Why? Because of news like this:
This week, the OCC announced that US-based banks are now allowed to hold and transfer stablecoins, which means that you will be able to store stablecoins on your local bank account.
For me, this is as bullish as it can get. It just shows how much demand there is for stablecoins and DeFi services.
Apart from this news, I expect the usage of stablecoins to grow exponentially in 2021. People will realize that they will earn approximately 3-5% per year when they deposit USDC on money markets like Aave.
As more and more people realize the arbitrage opportunity, stablecoins could become a good asset this year.
All in all, the market capitalization of all stablecoins combined could reach hundreds of billions of dollars. I expect several stablecoins in the top 20 cryptocurrencies by December 2021.
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.