2020 was an enormous, loopy, and essential 12 months for cryptocurrencies. After the COVID-19 pandemic brought about chaos in the international economic system, plainly increasingly more individuals began taking cryptocurrency extra significantly than ever earlier than.
As a end result, each capital and a focus had been showered onto the crypto area: now, nearing the finish of the 12 months, Bitcoin has held sustainable worth ranges near $20okay; the DeFi area has held onto an inflow of new funds and new customers, and main companies have introduced big investments into cryptocurrencies.
If the previous can inform us something about the future, 2021 could also be a really thrilling 12 months for crypto. So, earlier than we glance into the future, let’s peer into the previous. Here are 5 of the most essential crypto traits of 2020.
Bitcoin’s Status as a Hedge towards USD Inflation Is More Widely Accepted
Perhaps the most vital factor that occurred in 2020 is the indisputable fact that increasingly more individuals appeared to start to see cryptocurrencies, notably Bitcoin, as a hedge towards inflation.
Indeed, Brandon Mintz, Chief Executive of Bitcoin Depot, advised Finance Magnates that “one of the most alarming developments of the last year was the revelation that the Fed printed an incredible amount of money – more than 20 percent of all dollars were printed in the last year.”
A quantity of analysts consider that “this leads to fear of hyperinflation and instability,” he added. “On the other hand, BTC is on an aggressive growth trajectory.”
“There is a finite supply of BTC and it’s been referred to as digital gold, similar to the days when the value of the dollar was directly linked to the fixed supply of gold in federal reserves,” Mintz defined.
“This means that, despite its reputation for volatility, BTC could be more stable than the dollar at times, especially for savvy individuals looking to diversify their assets. As the adoption rate increases, the value will only continue to rise.”
Investors Are Showing Increased Interest in Bitcoin as a Portfolio Optimizer
Beyond Bitcoin’s rising recognition as a potential hedge towards inflation, Steve Ehrlich, Chief Executive of crypto dealer Voyager, advised Finance Magnates that crypto is rising in popularity as a portfolio optimizer.
“At Voyager, we’ve seen retail investors rushing in to convert their cash into crypto, to build their digital asset portfolio and build wealth by earning compounding interest,” he mentioned, including that “we expect this adoption to skyrocket in 2021 by all the trends we are witnessing.”
“With PayPal and other major financial services also introducing digital assets, Grayscale buying more Bitcoin than is being minted on a weekly basis, mass adoption of crypto is no longer a hopeful dream, it’s a reality which is coming to fruition,” he defined.
“It’s also anticipated that the U.S. Dollar is expected to continue to weaken into 2021, and more dollars being printed to stimulate the economy, which will in turn likely push Bitcoin’s price into record-breaking territory.”
“Defi Has Grown from USD$1 Billion in ‘Locked’ Assets to over $14 Billion in This Year Alone.”
Another crucial half of 2020 was the creation of the decentralized finance area, also referred to as DeFi. During the months of June and July, cash poured into DeFi; consequently, the costs of tokens related to DeFi platforms skyrocketed.
To a big extent, token costs have corrected since then. However, the progress that has occurred in the DeFi area is spectacular nonetheless.
“Defi has grown from USD$1 billion in ‘locked’ assets to over $14 billion in this year alone,” mentioned Steven Becker, Chief Operating Officer and President of the Maker Foundation, to Finance Magnates.
This is as a result of customers “clearly see the value in increased accessibility and transparency to the economy,” Becker mentioned. After all, the rules of DeFi are such that conventional monetary methods could be rebuilt on extra clear, decentralized, peer-to-peer “rails.”
Still, DeFi is a great distance from actual adoption. While the quantity of capital locked in DeFi methods could also be rising at lightning velocity, the progress quantity of customers has occurred at a a lot slower tempo.
However, Becker believes that progress is underway: “next year we’ll begin to see increased investing from traditional finance leaders as DeFi projects tackle major roadblocks in the current economy,” he mentioned.
“As the world navigates the pandemic’s impact on the economy, I believe DeFi has the power of versatility and adaptability to move quickly and efficiently in times of financial crisis,” he mentioned. As such, “we’ll continue to see more use cases surface including opening up the market for greater financial inclusion.”
However, Vadim Anchugov, Chief Operating Officer at Luxembourg-based digital asset funding platform VNX, identified that whereas “DeFi is a truly amazing innovation,” it might be clever to “be a little bit cautious before assuming that its success will be long-living.”
“[…]Obviously, we’re in the hype stage of DeFi now similar to the ICO boom of 2017, and that will end eventually, but whether the DeFi platforms will become more mature or just decline afterwards remains to be seen,” he mentioned.
CBDCs Have “Arrived”
Another main space of progress this 12 months was the rise in recognition of central financial institution digital currencies (CBDCs.) All round the globe, governments and central banks alike started explorative research, trials and even launches of central financial institution digital currencies.
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Indeed, Anchugov identified to Finance Magnates that “this year, a huge step closer to adoption of central banks’ stable coins (known as Central Bank Digital Currencies or CBDCs) was made.”
“We saw an increasing number of countries and central banks running assessments, developing practical steps to develop CBDC adoption,” he mentioned.
Earlier this 12 months, Reuben Yap, Project Steward of Firo (previously Zcoin), advised Finance Magnates that CBDCs appeared to have “arrived” in 2020.
Why now? “Distributed ledger technology has matured significantly to a point that CBDCs are now possible,” he mentioned. “China’s aggressive move with their DCEP initiative as part of its vision and the internationalization of RMB along with Libra’s efforts have raised many eyebrows, so much so that many central banks may be worried that they’ll get left behind.”
Maurizio Raffone, Chief Financial Officer of Credify, additionally advised Finance Magnates that CBDCs are taking an enormous step ahead now “due to a convergence of factors.”
“Distributed-ledger technology is now well-proven and beyond the ‘proof-of-concept’ stage, the Central Banks’ drive to reduce infrastructure costs for the banking sector and the greater focus on tools to combat money laundering and criminal financings,” he mentioned.
2020 Was a Big Year for Regulatory Progress in Crypto
“In 2020, the crypto industry took a quantum leap forward,” mentioned Ehrlich to Finance Magnates, particularly mentioning that “regulatory clarity” performed an essential half in paving “the path to mass adoption.”
Mintz particularly pointed to the open letter that the Office of the Comptroller of the Currency (OCC) revealed in July of 2020.
The letter “granted banks the ability to hold crypto assets on behalf of customers signaling that mainstream acceptance of BTC has begun to occur, and that BTC is beginning to revolutionize the economy as we know it,” Mintz mentioned.
As a end result, in 2021 and past, “we expect to see payments made with BTC become more commonplace and a rapid adoption of ‘crypto cards’. These cards will allow users to spend bitcoin through traditional payment networks and then those networks will pay merchants in fiat currency.”
In Europe, Anchugov identified that “2020 signified a new step in the crypto era of the European Union as the European Commission introduced a draft regulation on Market In Crypto Assets (MiCA),” which lastly gave nationwide governments of the EU member nations an understanding of what a regulatory framework for cryptocurrencies ought to appear to be in the future.
Additionally, MiCA gave “businesses operating in a crypto-related sphere a predictable perspective of the requirements, which allows them to adjust their business models and forecast possible impacts from both a business and a financial perspective,” in addition to “licensing and compliance regimes with the new laws.”
Proof-of-Stake Became Much More Prominent all through 2020
2020 was additionally a 12 months that noticed a shift in the mechanics of the blockchain sphere. Indeed, Tim Ogilvie, Chief Executive of Staked, advised Finance Magnates that “the most important trend in crypto in 2020 saw Proof of Stake blockchains come to the fore in a shift that will accelerate next year.”
“Currently representing about 15% of the total crypto market cap, proof-of-stake blockchains drive most of the activity outside bitcoin, and we can expect this to accelerate in 2021,” Ogilvie mentioned. “This dominance will expand and spur further adoption and developer engagement, which in turn will help foster many more user-facing projects and apps.”
The time period Proof-of-Stake describes a sort of blockchain algorithm that retains blockchain networks operable by incentivizing customers to ‘lock’ their cash right into a community; against this, Proof-of-Work algorithms (like Bitcoin’s) incentivize customers to have the strongest computing gear.
Indeed, “almost half of the top ten crypto assets by market cap are now on a path to Proof-of-Stake,” Ogilvie defined. “At the beginning of the year, there were practically none.”
Additionally, “a lot of 2020’s crypto market cap growth can be attributed to proof-of-stake blockchains, such as Ethereum, Polkadot and Cardano,” he mentioned.
Moreover, Ogilvie pointed to a significant growth in the life cycle of Ethereum: “this month’s launch of the Beacon Chain as part of the upgrade to Ethereum 2.0 was the biggest event in staking this year,” he mentioned.
“The fact that the blockchain with a market cap second only to Bitcoin is finally moving to proof-of-stake underscores the shift.”
“Other PoS networks are recording successes, too,” he added. “Polkadot has more than $3 billion staked and is currently the largest PoS chain. Chainlink, the fifth-largest crypto asset by market cap, has announced that it too plans to shift to PoS. In 12 months time, we will see that many of the top chains, outside of Bitcoin, will have moved to proof-of-stake.”
What do you assume the most essential crypto traits of 2020 have been? Let us know in the feedback under.