08th Feb 2021

Advancements in Blockchain and How They Impact Crypto Prices

Article Table of Contents:

Blockchain Trends That Will Govern Market Prices in Future
Rise of BaaS (Blockchain as a Service) in Tech Companies
Decentralised Finance Applications (DeFi) and Tokenomics
Payment Settlement Systems and Technologies

An unprecedented global crisis rocked the financial markets in 2020. To counter the pandemic-induced economic crisis, governments injected massive amounts of money into their economies. In the United States, $9 trillion was injected into the economy, constituting 22% of all USD ever created. According to Morgan Stanley’s Global Head of Macro Strategy, by 2022, the cumulative balance sheet of the G4 central banks will double to what was seen in 2019, at around $29 trillion.

Against this backdrop of low interest rates, rising inflationary pressures and uncertainty, the cryptocurrency market saw a meteoric rise. Bitcoin (BTCUSD) alone witnessed a yearly gain of over 300%, while Ethereum (ETHUSD) climbed 470%. The pandemic also accelerated digital transformation in many areas, with major support from blockchain technology. While volatility and uncertainty in markets put many Distributed Ledger Technology (DLT) projects on hold, several companies increased their focus on using the technology to address day-to-day business pain points caused by the pandemic, such as supply-chain issues, digital finance and more.

Here are some recent advancements in the blockchain space, which are likely to impact crypto market prices going forward.

Rise of BaaS (Blockchain as a Service) in Tech Companies

Microsoft and Amazon are currently two of the biggest names working in this field. A number of start-ups and enterprises are invested in this as well. BaaS is a cloud-based technology that allows companies to develop their own digital products on top of blockchain. This could be decentralized apps (dApps), smart contracts or services that don’t require a blockchain-based infrastructure set-up completely.

This could provide a strong push to Ethereum prices in 2021. Two types of Ethereum transactions can impact its prices: ETH transactions (made by network validators) and ERC-20 and ERC-721 token transactions (for creating applications and use cases on top of the blockchain). Not only is the number of active accounts on the network rising in 2021, but the amount of ETH transferred in the form of smart contracts has doubled from last all-time high seen in 2016. This is a bullish indicator of Ethereum’s popularity as a dApp platform. Historically, ETH price has risen when its user base has increased.

Decentralised Finance Applications (DeFi) and Tokenomics

Strong demand for DeFi (Decentralised Finance) projects is already pushing ETH prices upwards. As of February 2, 2021, 8 of the biggest DeFi projects were worth more than $8 billion. Total value locked in the projects stand at $28.16 billion. Peer-to-peer lending and borrowing protocols constitute a majority of the projects in this space.

In the face of the continuing pandemic, a large number of corporates and consumers are expected to resort to crypto-based banks and DeFi services. In short, non-traditional financial institutions could become very important. In such a scenario, regulators won’t be able to ignore them. EU legislators are working on EU-wide regulatory systems for the digital assets market, including tokenisation of assets as a sophisticated investment.

There is a huge probability that ETH prices will soar to over $1,600 this year. Bitcoin CFDs could be a great way to capture on the price moves in the ETHBTC pair.

Payment Settlement Systems and Technologies

Two major developments have taken place in this field. The problem of incumbent payment processors has given rise to increased utilization of stablecoins. These are digital tokens pegged to a fiat currency. They can act as hedging tools against the decline in fiat prices.

Another asset that will act as potential hedge against fiat instability is Bitcoin. BTC prices will also increase with continuous enterprise adoption. Growing digitisation and demand for low-risk financial transactions are providing a boost to global Bitcoin payment processing solutions. An example of this is the blockchain platform, Trusple, or “Trust Made Simple,” launched by Ant Group. Trusple is an international trade and financial services platform for SMEs and financial institutions.

Through fintech and blockchain solutions, banks will be able to modernise their operations and streamline transactions. Contactless transactions are in demand due to the pandemic and Bitcoin is a viable way for financial institutions to adapt and serve their customers in an increasingly digital world. 

Are you trading cryptos? What other blockchain projects can impact crypto prices? Share your thoughts with us @CryptoGTGlobal.
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