Corporations and institutional investors seeking an alternate store of value amid the pandemic crisis drove crypto to new heights in 2020.
The COVID-19 pandemic dominated the news in 2020, affecting myriad sectors — health, economics, social justice, politics and trade, as well as the cryptocurrency and blockchain industry. As country after country locked down to halt the virus’s spread, governments seized upon stimulus payments to preserve economic life.
While necessary, these measures raised the specter of global inflation. This, in turn, pushed many traditional investors and institutions to take a new look at cryptocurrencies as an alternate store of value, especially Bitcoin (BTC), the top crypto. Following a March 11 dip, BTC went on a tear, reaching record levels by year end. With that as a backdrop, here are 2020’s top 10 stories of the crypto and blockchain world.
Bitcoin soars to record heights
The world’s oldest and most widely held cryptocurrency shattered price records and then some in 2020. Now, at the end of the year, Bitcoin’s market cap is standing at about $500 billion — surpassing Visa and Berkshire Hathaway — and its price on spot markets continues to inch toward $30,000.
The pre-rally record high of $19,850 was set in December 2017 by retail traders in Asia (many of which just discovering cryptocurrencies) driving the price, but this year, it was by mature investors continuously purchasing increments of Bitcoin and often holding it off-chain as a long-term investment, as the New York Times noted.
“We’re seeing fresh stories about institutional crypto adoption on almost a daily basis at this point,” Bitcoin Depot CEO Brandon Mintz told Cointelegraph in mid-December. MicroStrategy, Square, Paul Tudor Jones, Guggenheim Investors and even venerable insurance company MassMutual were among those purchasing BTC in 2020. “We are being driven by corporations and billionaires now, not just retailers,” said Minerd.
Decentralized finance bursts forth
“2020 was unequivocally the year of decentralized finance,” declared Da Hongfe, the co-founder of the Smart Economy network, in a Cointelegraph op-ed. True to that, the amount locked in DeFi had soared to almost $15 billion on Dec. 30, compared with only $658 million at the beginning of the year, according to DeFi Pulse.
Indeed, a new term, “yield farming,” entered the crypto lexicon. In return for staking one’s BTC or Ether (ETH) as collateral with a DeFi firm, a user might receive a governance token enabling the holder to “debate, propose, and vote on all changes to the [platform’s] protocol.”
Ownership of these governance tokens became quite lucrative in 2020. First issued in June, Compound’s COMP rose in value from $61 on June 18 to $382 on June 21 following its launch on United States exchange Coinbase Pro. It is closing the year at $148 on Dec. 31, 2020.
DeFi is a “game changer,” Giuseppe Ateniese, a professor at the Stevens Institute of Technology, previously told Cointelegraph. “With decentralized finance, there’s no human in the loop, no server, no organization. There’s no bias.” It isn’t like a traditional car loan, where if the borrower defaults, the bank goes after the car seeking repossession, he explained. “With DeFi, assets are digital and locked/committed through smart contracts. If I don’t pay the loan back, the digital asset that I used as collateral is taken, and there is nothing I can do about it.”
PayPal deals in crypto
It took Bitcoin 12 years to gain 100 million users. Then, in a single month, the network additionally gained a potential 300 million more users as payments giant PayPal announced it would allow users to buy, sell and hold Bitcoin, Ether, Bitcoin Cash (BCH) and Litecoin (LTC).
“It’s already having a huge impact,” declared Pantera Capital in November. “Within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins.” The following month, Pantera updated: “Within two months of going live, PayPal is already buying more than 100% of the new supply of bitcoins.”
Bitcoin survives quadrennial halving
Bitcoin halvings, designed to limit BTC’s issuance rate — which is capped at 21 million units — occur roughly every four years, and they are typically marked by some anxiousness. They are analogous to a company telling its workers to expect a 50% pay cut. Here, it is the block reward for the Bitcoin network’s validators, known as miners, that is sliced in half.
The May 2020 halving reduced miners’ block reward from 12.5 BTC to 6.25 BTC, and it came and went without calamity — no exodus of miners or collapse in the network’s computing power (hash rate), as some had feared. Seven months later, Bitcoin is selling at roughly three times its pre-halving level ($8,566 on May 11).