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  • Richard Dulude

2021 Predictions for Digital Assets

Published January 1st, 2021

As #crypto market sets all sorts of new records, here are our predictions for what is next, and how to manage through it in 2021:

/1/ - #Bitcoin: get your chum buckets ready, while the #volatility of the asset class may scare newcomers, $BTC will reach $1T in market cap value (current: $600B) fueled by “store of value” investing from institutional investors like hedge funds, family offices, insurance companies, endowments, and even public/private company balance sheets.

/1.1/ - Despite getting comfortable with bitcoin, very few of these folks will want to custody the underlying asset, creating huge tailwinds for custody businesses. Very few of these folks will touch alternative coins, but in the long run will underperform for not doing so.

/1.2/ - Retail dollars to date will look like fiddlesticks compared to these institutional inflows/outflows, and volatility will increase greatly along the way.

/1.3/ - Continued “infinite” global quantitative easing & fears around censorship will continue to fuel for the fire for all decentralized technologies, including money.

/1.4/ - Bitcoin will play a larger role in DeFi ー through a combination of decentralized wrappers, bridges, and synthetic assets pegged to $btc.

/2/ - #Stablecoins: will continue to grow. Algorithmic stable coins will get unbalanced and/or hacked (see empty set dollar $esd,@emptysetdollar), and @tether_to will (finally) untether, leading to a flight to quality and collateralized stable coins like @MakerDAO's $dai.

/3/ - Central Bank Digital Currencies (#CDBC): will be launched by a multitude of governments. The digital Yuan will be a winner, and this is when it "gets real" for governments around the world -- with The US Fed and Bank of England coming to the “oh s#it” conclusion and getting off their bums, fearing a change in their position within the world economic system.

/4/ - #Regulation: is coming. Hold onto your britches. This year will set the stepping stones to squash innovation in the space.

/4.1/ - While we are in a renaissance period, entrepreneurs will reasonably begin exploring geographic regulatory arbitrage (again) vs. spend runway getting nowhere.

/4.2/ - Institutional players won’t have that luxury and will lock arms together on capital hill, forming consortiums. They will likewise get nowhere. Crypto will remain cryptic to regulators yet see as a mounting as a threat to the status quo.

/4.3/ - This is both good and bad for the evolution of open finance, and will certainly change tax law.

/5/ - #Privacy: As a corollary, privacy-preserving currencies, smart contracting platforms, and technologies will see unprecedented volumes. Sadly, the lasso is closing around the self-sovereign individual will get tighter and tighter.

/5.1/ - Both self-custody and blockchain analytics business will boom.

/6/ - #Layer1: will continue to be dominated by Eth 2.0 (sorry I’m not sorry, but the most important feature #scalability will still be a barrier in 2021. Either way, transaction fees will be FAT.

/6.1/ - The platform network effects for $eth will begin to show. Other chains will be frustrated and try to specialize further to garner any use. A few will become zombie ghost chains, with surprising market caps.

/6.2/ - Everyone will have a "strategy" to be chain agnostic, and none will implement it due to time and resource constraints. This will look like the multi-cloud wars and development of the last decade.

/6.3/ - Universally, anyone trying to do anything, will shake their fist at unruly transaction fees. Good luck with your near real-time microtransaction.

/7/ - #Layer2: The tug-o-war between rollups and sidechains will hit an asymptote as preferred projects, like @maticnetwork and @polkadot gain usage. Cross chain technologies sound sexy, but in reality, are barely used.

/8/ - #DeFi: will see another banner year, but with less dominance from $eth as other faster-optimized chains enable low-gas, speedy, and parallel transactions. That said, there will be a BIG smart contract will be hacked and $100M+ of money will be “lost”

/8.1/ - The permissionless innovation on #DeFi primitives (lending, trading, payments, wallets, assets, etc.) will be unreal, and composed dapps (yield farms, interfaces, etc.) will be astounding. These will lay the underpinning experiments for what open financing can look like.

/9/ - #NFTs: will sadly go nowhere (read: I don’t want your art or e-plot); but some interesting projects will be run around composability.

/9.1/ - Tokenization of unique cultural items like @withotis and micro-markets (potentially fractional) will likewise see some adoption. The winners will be hiding all the crypto behind the scenes (see @superrare).

/9.2/ - There may be a total break out #NFT in big sport (e.g. baseball, football, etc.), but hard to pin it, so I'll stick to my cheese and art.

/10/ - Crypto's HQ: will not be Silicon Valley, and probably to a greater extent, non-US based teams. Pseudonymous teams will be responsible for much of the public infrastructure on Ethereum and beyond.

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