Stone Ridge Capital's 2021 Cryptocurrency Market Prediction: Do Not Underestimate Wall Street's Greed for Bitcoin
TechFlow Selected TechFlow Selected
Stone Ridge Capital's 2021 Cryptocurrency Market Prediction: Do Not Underestimate Wall Street's Greed for Bitcoin
The bull market expected in 2021 will end when the U.S. federal government takes action, just as it did three or four years ago, which will spook the market.
Navigating Web3 tides with focused insightsOne of the keys to investing is identifying trends early.
Since Stone & Wood Capital follows developments in both China and the United States, with team members based in China, the U.S., and Canada, we can identify trends in Beijing and Shanghai that Westerners may miss, as well as spot trends in New York and Silicon Valley months before many Asian investors become aware. This allows us to invest early in high-quality projects on both sides of the world.
For example, the DeFi bull market began in New York in April 2020, while other markets didn't show signs until June or July—meaning some partners in China and Europe likely missed part of the gains from this cycle.
We were also able to observe developments in China’s market earlier than most Western investors—by two to three months—such as the impact of the coronavirus in January and February, and the tightening of OTC markets leading to reduced global Bitcoin supply, which helped inform our investment decisions.
Below are six Western trends we see emerging in 2021:
1. Do not underestimate Wall Street's appetite (greed) for Bitcoin and cryptocurrency. Despite major players like PayPal and BlackRock entering the space, even more large institutions will join in 2021. Last month, many Chinese BTC miners sold their Bitcoin around $25,000—but they didn’t realize we would aggressively buy above that price. More institutional giants from the U.S. are expected to enter, potentially opening the door for institutions in Japan, Europe, and Latin America. Just as Japanese investors flocked to New York real estate in the 1980s and focused only on the largest, most famous buildings—like the Empire State Building and Rockefeller Center—while overlooking smaller, more profitable properties, so too will mainstream investors favor well-known cryptocurrencies like ETH, LINK, ADA, and DOT, perceiving them as safer, while ignoring smaller, potentially more lucrative tokens. What’s my BTC price prediction for 2021? In January 2020, I predicted BTC would reach $20,000 by year-end—it actually hit $29,000. So even if I predict $50,000 by the end of 2021, it might still be too low!
2. Base-layer protocols will grow. Even as Ethereum progresses toward ETH 2.0, it will take years before reaching ETH 3.0 (Ethereum's full proof-of-stake transition), meaning challenges in DeFi and other blockchain applications remain constrained by technical limitations. Alternative base-layer protocols such as Polkadot, Mina, Hathor (HTR), and CasperLabs (CSPR) will benefit. Since September 2020, many key figures from Ethereum have joined CasperLabs—including the chief developer who co-wrote Ethereum’s mining protocol with Vitalik, one of Ethereum’s lead cryptographers, and Ethereum’s former CMO, who brought her entire team to CasperLabs. The mainnet launch for CSPR is scheduled for March 2021. These experienced ex-Ethereum members recognize the trend and know where the greatest advantages lie. As long as Ethereum delays delivery of ETH 3.0, alternative base-layer protocols will continue to gain traction.
3. More crypto projects will enter public equity markets via exchanges in London, New York, and globally. This will happen through IPOs and SPACs (special purpose acquisition companies). Coinbase is expected to go public in early 2021 with a valuation between $20 billion and $30 billion. Celsius plans to list in London, and BlockFi (via SPAC) may follow suit—spurring a wave of smaller projects, including many from China, to enter public markets. After Coinbase lists, we expect massive retail demand for Bitcoin in the U.S., meaning its IPO could give BTC prices another boost.
4. On Christmas Day, a partner at a crypto fund we invested in woke up to find 9.75 million 1INCH tokens in his MetaMask wallet—an airdrop gift from 1INCH because he actively provided liquidity during its summer liquidity mining campaign, worth $27.5 million. He told me, “Even after eight years in crypto, this industry still surprises me every day.” He received such a large reward because he engaged in extensive liquidity mining and trading on early-stage DeFi platforms before they issued tokens. This trend will continue in 2021—users will seek out DEXs, AMMs, and other DeFi platforms that haven’t yet launched tokens, as early users stand to gain the most. It’s like participating in a seed round at the earliest stage of a startup. In 2021, watch for these rising DeFi projects that haven’t issued tokens yet. But make sure to audit them and, if possible, conduct due diligence on the teams to ensure they are trustworthy.
5. The SEC is pursuing action against XRP. For the past 30 months, many insiders knew this was coming—and it finally happened at the end of 2020. SEC Chairman Jay Clayton, who has been largely unfriendly toward crypto, stepped down at year-end and delivered a final blow by targeting XRP, one of the largest cryptocurrencies by market cap. We should remember that the SEC’s actions were a primary factor behind the end of the previous bull market in January 2018, when Clayton testified before Congress that “all ICOs are securities,” and in February 2018 issued 80 subpoenas to individuals and projects across the industry—after which Bitcoin’s price crashed and didn’t recover to prior levels until late 2020. A new acting commissioner has just taken over the SEC, and he is relatively crypto-friendly, suggesting the SEC may not take aggressive actions this year. However, the U.S. Commodity Futures Trading Commission (CFTC) might target DeFi, and the U.S. Treasury or Office of the Comptroller of the Currency could propose new regulations imposing restrictions on stablecoins. The bull market in 2021 is expected to end when the U.S. federal government takes regulatory action—as it did three to four years ago—shaking investor confidence. Even highly decentralized protocols like Uniswap could face scrutiny.
6. Last month, Vitalik said one sign of a crypto bull market is: “Gold no longer holds an advantage, and the younger generation realizes this.” He’s right. By 2021, millions of institutions, family offices, and high-net-worth individuals will come to this realization and begin allocating capital into crypto—primarily Bitcoin. Just like you and I were captivated by this technology years ago, 2021 will be the year many conservatives finally “go off track.” They’ll make money, and lose money, but either way, many will change their beliefs. In 1996, there were 50 million internet users. Four years later, that number reached 500 million. At the beginning of 2020, we had 50 million crypto users. Over the next four-year cycle, we’re headed toward 500 million users—especially with China’s DC/EP and Facebook’s Diem (formerly Libra) entering the scene. Many of these users will onboard for the first time in 2021 and stay forever. Because it’s true—gold’s dominance is over, and cryptocurrency will go global.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
