There’s more to cryptocurrencies today than Bitcoin (CCC:BTC-USD). Ethereum (CCC:ETH-USD) and Litecoin (CCC:LTC-USD). Other digital assets are coming on strong and, when it comes to crypto, investors are increasingly diversifying into new digital coins and tokens.
In fact, the entire cryptocurrency market is maturing and evolving as the digital assets gain more mainstream acceptance. Moving beyond the fringe, a growing number of investors now hold cryptocurrencies in their portfolio in one form or another.
As we head into the second half of 2021, here’s a look at the four biggest crypto trends to watch:
- The rise of Ethereum
- Focus on energy efficiency
- Greater regulatory oversight
- Mainstream acceptance
Biggest Crypto Trends to Watch: The Rise of Ethereum
Many of the most enthusiastic crypto bulls see big things ahead for Ethereum. Currently the biggest digital coin after Bitcoin, Ether’s price currently stands at $2,580.96. Some analysts forecast the price could rise as high as $5,000 within the next year. And some see the digital coin’s price reaching $20,000 by 2025. Some people go so far as to say that Ethereum will eventually supplant Bitcoin as the world’s most valuable and important cryptocurrency.
The enthusiasm for Ether is based on the fact that the digital coin’s algorithm is the main one used in both decentralized finance (DeFi). In other words, it’s a blockchain-based form of finance that does not rely on brokerages, exchanges or banks to offer traditional financial instruments, and non-fungible tokens, the digital art that has skyrocketed in popularity this year. Ethereum’s rally year to date has outpaced Bitcoin’s, with Ether rising more than 1,000% compared to Bitcoin’s 300% increase.
Focus on Energy Efficiency
Mining cryptocurrencies takes a lot of energy and has drawn the scorn of environmentalists the world over. In an email to InvestorPlace, James Angel, Associate Professor at Georgetown University’s McDonough School of Business, explains: “Bitcoin relies upon an extremely wasteful ‘proof of work’ algorithm that currently consumes the equivalent of 15 Chernobyl nuclear power plants running around the clock. An increase in the price of bitcoin brings in more mining activity and thus more electricity consumption.”
Tesla (NASDAQ:TSLA) Chief Executive Officer Elon Musk recently drew attention to the power consumption of cryptocurrency mining when he told his social media followers that Tesla will no longer accept Bitcoin as payment for its electric vehicles because of the huge amount of energy needed to mine the digital coin. Cryptocurrency fans initially freaked out at Musk’s reversal on Bitcoin, but later cheered him again when Musk announced that he had met with a group of Bitcoin miners to discuss ways to make mining digital coins more sustainable.
Biggest Crypto Trends to Watch: Greater Regulatory Oversight
Much of the current volatility in crypto is due to regulators around the world threatening to crackdown on the digital assets. Securities and Exchange Commission (SEC) Chair Gary Gensler has said that he aims to bring “similar protections to the exchanges where you trade crypto assets, as you might expect at the New York Stock Exchange or Nasdaq.” At the same time, the Chinese government in Beijing has said that it plans to take a more active role in regulating cryptocurrencies moving forward.
The oversight is an effort to reduce the risks posed to retail investors by the $1.5 trillion cryptocurrency market. Regulators say that they are concerned about the current volatility in cryptocurrency markets, as well as the fact that digital coins can be used by cyber criminals and terrorists and are hard to track. The prospect of greater oversight has dampened enthusiasm for cryptocurrencies, which have, until now, operated independently from traditional financial systems. The enhanced regulatory oversight has many proponents of digital coins claiming that the good times are about to end.
Cryptocurrencies are going mainstream. There’s plenty of proof to support this. For example, online brokerages such as Robinhood allowing investors to buy and sell cryptocurrencies on its platform, fintech companies such as PayPal (NASDAQ:PYPL) enabling people to hold cryptocurrency assets in digital wallets, the proliferation of Bitcoin and Ether exchange-traded funds (ETFs) in neighboring Canada and investment banks such as Goldman Sachs (NYSE:GS) making digital coins and tokens available to their wealthy clientele.
Consider that a few years ago most people had no idea what cryptocurrencies are, yet today they are becoming part of the lexicon. It’s clear that digital coins are gaining more mainstream acceptance. Once associated only with computer hackers, underground financial transactions and the dark web, cryptocurrencies are now becoming part of our everyday lives. The digital coins are increasingly accessible to investors and demand for them seems to only be rising despite the continued price volatility and risks associated with them.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.