Cryptocurrency predictions, altcoins and events to watch in May 2021
Market analyst Josh Gilbert of eToro highlights some of the biggest events likely to impact cryptocurrency markets in May.
May has historically been an important month for cryptocurrency.
Last year Bitcoin halved for the third time ever on 12 May, cutting the issuance of new Bitcoin down from 12.5 to 6.25 per block. And like clockwork, the price began to rise 6 months later – in line with previous halvings and forecast models.
The 12-month mark after a halving is also important – after the second halving in 2016, Bitcoin was worth 4 times more a year later, spurring a bull run that led it to its historic all-time high of US$20,000 only a few months later in 2017.
Market analyst at eToro Australia, Josh Gilbert, notes that recent price action is also likely to play into a bullish trend for Bitcoin:
"After the dip in April, we could see some bullish trends throughout May. Bitcoin's sell-off from it's ATH of US$64,854, down to as low as US$46,930 was the sharpest sell-off we have seen since 2020. Often when we see these sharp sell-offs, it will often be bought up very quickly. The price of these assets are at much more favourable prices to retail and institutional investors."
Whether by chance or by design, May also plays host to Consensus – the cryptocurrency industry's largest conference. This often leads to a raft of major announcements right across the cryptocurrency sphere – such as protocol upgrades, new products, token launches and more.
So let's take a look at what else we can expect from May 2021, what we know already and which coins to keep an eye on.
Decentralised exchanges and the race for Layer-2 solutions
One of the major areas heating up right now is the decentralised exchanges (DEX) space. As far as Ethereum-based DEXs are concerned, it involves Layer-2 (L2) technology in a big way, presenting a two-fold opportunity for savvy investors.
For the uninitiated, L2 technology refers to a range of technologies that move transactions onto a second layer in order to escape the congestion and high gas fees currently plaguing the Ethereum network.
Uniswap (UNI), the biggest Ethereum DEX is about to upgrade to version 3 (v3), using a L2 technology called Optimism to provide cheaper fees to users – which have recently ranged as high as US$40 for a simple trade.
Analyst Josh Gilbert notes that Uniswap v3 is expected to go live on 5 May and that the focus of the upgrade will be on "allowing increased capital efficiency and fine-tuned control to liquidity providers, which will also provide a flexible fee structure". In short, v3 is expected to create improved income opportunities for liquidity providers which in turn could attract further users and capital to the platform.
Other DEXs that are undergoing similar upgrades this month include Balancer (v2) and Pancakeswap (v2) – considered the Uniswap of Binance Smart Chain. Another to keep and eye on is Quickswap (QUICK), which uses the Layer-2 service Polygon (MATIC) for gas-less trades – both of which have exploded in value in recent weeks.
Another protocol that powers DEXs like Uniswap, Balancer and Quickswap is Chainlink (LINK), which also happens to be in the process of upgrading its network to version 2.
Chainlink is an absolute powerhouse that provides smart contract data oracles for decentralised applications. In plain English this means it acts as middleware, making sure that any data (like price feeds) used by dApps is up to date and accurate. According to Gilbert, the next iteration of Chainlink is going to bring a wide range of upgrades that are likely to further cement LINK at the centre of the DeFi landscape:
"Chainlink 2.0 has very ambitious prospects, which will include a new form of building hybrid smart contacts. The key focus is that the Decentralized Oracle Networks offer key capabilities that blockchains cannot."
For anyone looking to capitalise on these developments, eToro recently introduced UNI and LINK trading on its platform.
SPONSORED: Seven stocks to get in on the Bitcoin boom, including established payments companies, Bitcoin miners and even sustainability stocks.Read more…
Ethereum killers set to gain traction
As Ethereum continues to struggle under the weight of its own success, a number of well-established competitors are finally starting to bring market-ready features online, such as DeFi services and smart contracts.
First cab off the rank is Cardano, which Gilbert says is likely to introduce its Alonzo testnet in May. Alonzo is the final phase of the major Deadalus upgrade which will bring smart contracts to Cardano (ADA), greatly improving the functionality of its token ecosystem and enabling DeFi at last. Keep in mind though May is a testnet launch, with the mainnet not going live until around August.
Another network set to compete with Ethereum is Tezos (XTZ), which is set to offer a strong environment for NFTs. Unlike many other tokens which have grown exponentially in recent months, Gilbert notices that XTZ is yet to have its moment, adding that:
"Trading at around US$5, the XTZ has only jumped around 80% in the last year, so could still have some room to run, especially with many users complaining about Ethereum's high gas fees as of late."
As mentioned earlier, May is typically an announcement-rich month thanks to New York Blockchain Week and Consensus, so it's likely that there will be even more events and coins to add to your watchlist as the month goes on.
Disclosure: The author holds cryptocurrencies including LINK at the time of writing
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