Crypto and Blockchain Trends in 2020: A Year in Review
An overview of important milestones and trends in cryptocurrency and blockchain space in 2020!
This year, the ramifications of COVID-19 led us all to adapt to new circumstances. Businesses, industries, and financial markets have been disrupted in one form or the other.
Similar to other financial markets, the cryptocurrency market has also been subject to the pandemic’s many impacts. Moreover, in 2020 we witnessed various cryptocurrency and blockchain trends. These milestones mark an important shift in the outlook of the crypto and blockchain space.
Which blockchain trends emerged in 2020? What trends in cryptocurrencies have changed the outlook for the industry? What has been the overall impact on the cryptocurrency market this year?
In this article, we explore the essential milestones that bring a new direction to the crypto and blockchain sector.
Bitcoin’s Predominance
Bitcoin started with an uprising trend at the beginning of 2020. Global conditions such as U.S.-Iran tensions boosted the price of Bitcoin as high as $10,000. COVID-19 impacted the cryptocurrency markets with Bitcoin falling down to $3,500 in March 2020.
However, the prominent cryptocurrency recovered swiftly. Bitcoin continues to dominate the cryptocurrency markets by more than 60%. In November 2020, the price of Bitcoin treaded close to $20,000.
Despite its downtrends in March, Bitcoin continues to beat traditional assets including gold and stocks. The overall performance of Bitcoin has made it one of the best investment assets in 2020.
DeFi Protocols
2020 emerged a new trend of decentralized finance (DeFi) in the blockchain industry. DeFi protocols - alternative solutions to traditional banking and finance systems - drew massive interest from the community.
Use-cases such as lending, borrowing, decentralized exchanges (DEX), and yield farming became widely popular in 2020.
The DeFi market increased from less than $1 billion in February to more than $14 billion in December 2020. One of the applications of DeFi, decentralized exchanges, also registered an increase in their trading volumes.
Cryptocurrency Services
Another cryptocurrency trend observed in 2020 is the increasing number of players developing products and services to offer a gateway to digital currencies.
Prominent Fintech institutions like PayPal, Visa, Mastercard, and Square have started offering solutions that facilitate payments through cryptocurrencies.
Products in the form of smartphone applications as well as debit/credit cards are in development to enable cryptocurrency payments between merchants and consumers.
The adaptation of solutions by prominent financial players is likely to continue in 2021 as well. Moreover, such cryptocurrency trends enable the mainstream adoption of digital currencies in the coming years.
Institutional Investments
Institutional players are making serious investments in digital assets. Square, led by ex-Twitter CEO Jack Dorsey, invested $50 million in Bitcoin in October 2020.
Microstrategy, which invested more than $700 million in Bitcoin, plans to further invest an additional $400 million.
Grayscale Investments registered its highest institutional investment in its Bitcoin trust in the third quarter of 2020.
Large crypto funds have recently registered an all-time-high influx of crypto funds.
In December, institutional investors poured more than $400 million in cryptocurrency products pushing the sector’s assets under management to more than $15 billion. This trend is likely to continue in 2021 as institutions, hedge funds, and investors draw their attention towards digital assets.
Ethereum 2.0
2020 recently registered a milestone in the blockchain industry with the launch of Ethereum 2.0 network.
On December 1st, the first phase of Proof of Stake (PoS) Ethereum 2.0 network went live.
ETH 2.0 supports the scalability of decentralized applications built on the top of its network. This is an important milestone in the cryptocurrency industry in 2020, and its effects will be felt throughout 2021.
Regulatory Clarity
One of the cryptocurrency trends that gives an insight into its future adoption has been the clarity of regulations pertaining to this space. Many countries including Germany, France, and Spain provided a structure of legal compliance for digital assets. The U.S. Office of the Comptroller of the Currency (OCC) permitted banks to offer custodian solutions to cryptocurrency holdings.
Many governments across the globe are in the process of drafting legal regulations for digital assets. This will further allow mainstream adoption and will bring clarity on various aspects of cryptocurrency asset holdings.
Central Bank Digital Currencies (CBDC)
Another trend growing relevance in the crypto and blockchain industry is the concept of Central Backed Digital Currencies (CBDC). Earlier this year, China announced the launch of its digital yuan, a legally backed cryptocurrency that is pegged to China’s fiat currency. China has already started experimenting by launching its digital yuan in some of its cities.
In 2020, the Bank of Japan (BoJ) also started exploring the concept of CBDC and its feasibility in Japan’s financial ecosystem. In the U.S., the Federal Bank of Boston partnered with the Massachusetts Institute of Technology to test the concept of digital dollars in April of this year. Furthermore, reports suggest that nearly 80% of central banks are exploring the concept of CBDC.
Traditional Financial Instruments In Crypto Space
Prominent financial institutes have started offering traditional financial instruments such as crypto futures, CFDs, and indices for cryptocurrencies. Recently, the Dow Jones Index stated its plans to launch a cryptocurrency index in 2021.
In the first quarter of 2020, the crypto derivatives volume surged 314% from the 2019 four quarters average. Interest has begun to grow for engaging in CFD instruments for digital assets. As the popularity of digital currencies grows, we are likely to see the applicability of traditional tools in the crypto industry.
Bottom Line
2020 experienced several milestones that reveal how cryptocurrency and blockchain trends are likely to develop as the next year rolls in. This year set the foundation for many developments that will go live by 2021, and, most importantly, this year lead us closer than ever to crypto mainstream adoption.
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