Cryptocurrency is a new concept for some. For others, this exciting world of alternative and digital currencies is proving to be highly lucrative. It’s no wonder why so many are looking to enter the space in 2021.
That said, it’s important to know what you’re getting into before investing in cryptocurrency. Understanding what cryptocurrency is can mean the difference between a smart investment and a huge financial mistake. While it’s easy to define crypto, it’s harder to pinpoint what’s going to happen in the market this year and beyond.
That’s why trends are so helpful, and we’re going to explore a few of the trends that will change the crypto world in 2021 and beyond. Firstly, we’ll start with the thing many investors have already seen happen to their favorite currency.
A Crypto Crisis is Bound to Happen - And That’s Okay
As mentioned above, crypto is new to many but it’s far from a new market. The increases in market security, awareness, and transparency are certainly leading to more economic shifts and challenges. One of the clearest ways to see this is the influence of bitcoin on the overall world economy. The cryptocurrency saw a record high in December 2020 but recently dropped 30% seemingly from nowhere. What does this tell us about the world of crypto?
In short, the crypto crisis is already showing signs of traction. The massive exchanges we see most commonly today come in waves as prices dip and rise. That’s not uncommon for the trade economy, but it is a sign that inflation and devaluation are playing major roles in the market. If this current trend continues, we will likely see the depreciation of minor cryptocurrencies as a few major ones like Bitcoin prove to win out.
There’s not a need to panic, however. These things happen within markets. When it comes to crypto, there’s so much we don’t quite know yet about what these currencies will look like in a few years let alone 5 or 10. Staying consistent and calm with crypto trading is going to be a must in 2021 and beyond.
Crypto Will See Tax Regulation Soon
One of the most impactful trends we’re seeing is a push for tax regulation within crypto. At the moment, crypto taxes are not that common but they are appearing more and more in countries that see the market as an opportunity for revenue and regulation. It’s obviously ideal to see a lack of taxation on these currencies; in a way, that’s part of the draw for investing in crypto at the moment.
That said, it’s unreasonable to believe this is how things will stay. In the world market, currencies and transactions are taxed to make up budgets for government action and processes. It’s just how things go.
The trend is leaning towards a gradual taxation but signs of steps that lead to a tax are already happening. Be aware of the tax mistakes you can make with crypto and keep an eye out for these gradual changes. One area we’re seeing a change in terms of taxation is the increase of user identification procedures that track transactions. If these become widespread, it will be very easy to track who is buying and selling crypto and monitors will track these actions.
Governments are also exchanging information about transactions within the crypto market, which will likely lead to a rise in tax evasion lawsuits. It’s expected that we’ll see the first of these lawsuits in 2021 or into the next year.
Transactions Will See a Change in Cost and Risk Assessment
One final trend is the overall change in cost and risk assessment when it comes to crypto transactions. Firstly, there are going to be fluctuating costs associated with crypto trading. Be ready in the coming year for increases and decreases depending on technology upgrades and the popularity of major cryptocurrencies like Bitcoin.
Likewise, risk assessment is changing how investors approach crypto. The market will increasingly grow better models for tracking crypto futures. This means great things for those who are serious about diversifying their investments with crypto. For those with little knowledge of these models and tactics, it’s a good time to start reviewing top helpful crypto resources.
Keep an eye on these trends and you’ll be well on your way to investing strategically within the crypto market!