Cryptocurrency beats gold, becomes the best-performing asset in 2020
The cryptocurrency market has outperformed gold so far in 2020.
Thu, 24 Sep 2020, 08:16 am UTC
The rise of decentralized finance (DeFi) this year has propelled the cryptocurrency market’s performance despite the ongoing coronavirus pandemic. In fact, digital currencies beat global stocks, bonds, and commodities this year
In fact, cryptocurrencies outperformed gold in 2020, becoming the best-performing asset this year, The Economic Times reported. While gold surged more than 20 percent this year, the Bloomberg Galaxy Crypto Index of digital coins posted even bigger gains as it has gone up by around 65 percent since the start of 2020.
One of the key reasons for the massive gain of the cryptocurrency market is the surge of Ethereum (ETH) price. ETH, which traded at around $130 at the start of the year, managed to climb to more than $470 in early September, based on data from CoinMarketCap. The second-largest crypto by market cap accounts for more than a third of the crypto gauge’s weight.
Ethereum’s performance is driven by the increased adoption of DeFi or decentralized finance according to Bloomberg Intelligence strategist Mike McGlone. He added that ETH “appears to be maintaining its platform leadership status” in the sector.
DeFi applications allow people to do financial transactions such as lending or borrowing funds on the blockchain without going through traditional financial intermediaries such as banks. Many DeFi apps are on the Ethereum blockchain, which benefited the network’s native token ETH.
The DeFi also experienced explosive growth in 2020. From less than $700 million when the year started, DeFi collateral levels ballooned to a staggering $9 billion, according to the blockchain-based marketplace for infrastructure investment operator Fasset.
Aside from Ethereum, Bitcoin (BTC) also substantially contributed to the entire cryptocurrency market’s performance. Many fear that the huge stimulus programs aimed at mitigating the pandemic’s economic impact might trigger inflation and weaken the dollar. Thus, many now view Bitcoin as an alternative to cash as a dependable store of value, something like a refuge similar to gold.
For instance, Canada-based restaurant chain Tahini has converted all of its cash reserves into Bitcoin. Tahini owner Omar Hamam realized that the stimulus package of the government could cause the Canadian dollars to devalue.
“And that’s when we as a company decided to store all of our excess cash reserves into #bitcoin as it offers a much better alternative to saving cash,” Haman said. “We will continue to do that over the coming years and maybe forever if we don't have a need for the fiat.”
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