According to a recent report by Bloomberg, digital currencies are by far the top-performing asset of 2020. Surprisingly, the growth of cryptocurrencies has been higher than that of gold, which is considered to be an investor’s hedge during an economic meltdown. While the Bloomberg Galaxy Crypto Index (BGCI) reflects a 66% jump, gold’s performance increased by a little over 20%.
Evidently, this performance surge was led by the increased interest in Decentralized Finance (DeFi). According to Bloomberg strategists, the adoption of DeFi has been growing throughout 2020 and this drove Ethereum to its all-time high of $481 in 2020. As Ethereum accounts for more than 11.44% of the total crypto market cap, and DeFi largely runs on ETH, its growth has had a more pronounced effect on the BGCI.
DeFi turned unstoppable
DeFi aims to recreate traditional finance without any middleman. It bought many of the traditional actions like structuring derivative products, lending, borrowing, and more to the blockchain. And this stimulated crypto-mania, which then turned unstoppable. According to the data shared by DeFi Pulse, the total value locked in DeFi jumped from $676 million to $9.51 billion in the last nine months. That’s a whopping 1,300% growth!
We are pretty sure Peter Schiff might not be very happy with this news. He has been an ardent fan of gold and has been criticizing cryptocurrencies for ages. Ironically, his company, SchiffGold, accepts cryptocurrency payments. Here is a screenshot of the official website.
. @PeterSchiff ladies and gents
Roleplaying since '09 pic.twitter.com/q8KNzo3GVh
— //Bitcoin 𝕵ack 🐐 (@BTC_JackSparrow) September 17, 2020
Will DeFi sustain the growth?
Skeptics believe crypto and its new DeFi mania might not be able to sustain this growth. Undoubtedly, crypto has a long history of being a very volatile market. In the last couple of days, we have witnessed a massive blood bath in the market.
As a matter of fact, Bloomberg Galaxy Crypto Index also tumbled by more than 8% since September 22. Overall, it is down by over 20% from its highs in August 2020.
Apart from that, the total value locked in DeFi plunged from its all-time high of $13.35 billion to $9.41 billion in just two days.
However, that is not hindering the gamers, yield farmers, and institutional investors from venturing into the DeFi space. Some notable investors like DG Lab Fund, Framework Ventures, ParaFi Capital, 3Arrows, and veteran crypto investors like Pantera and Multicoin Capital are investing in DeFi.
Real economy is on pause
Not only Ethereum but the leading cryptocurrency Bitcoin also touched new all-time highs of 2020. It became a key portfolio hedging strategy for many investors. This was triggered primarily by the endless quantitative easing and dollar printing by the U.S. federal government.
According to Marc Fleury, CEO of Two Prime, ethereal instruments like Bitcoin perform well during times of economic contractions. Due to COVID-19 infused economic crises, investors started seeking refuge in Bitcoin just like gold.
Overall, investors’ interest in cryptocurrencies is broadening. Recently, the Nasdaq-listed MicroStartegy added more Bitcoin holdings to its balance-sheet.
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