In 15 days, the final chapter of the tumultuous and magical year 2020 will be ended.
This is a year that deserves a good review in all sectors. For some people 2020 is a disaster, while others believe that this year is the best year, especially from the secondary market, it is a bull market not seen in more than a decade.
The cryptocurrency market certainly did, as bitcoin set new highs of its own after riding the high-speed train of commodities and tech stocks. The U.S. stock market reaching $400 million in daily trading volume for bitcoin, surpassing even this year’s market darling, pharmaceutical assets.
Bitcoin is clearly not the only high point for cryptocurrencies in 2020, as Blockchain Capital has a full review of a full year of cryptocurrency markets in 2020 Year in Review, from macroeconomics, to crypto finance, to bulk brokerage and compliance, and finally a top 10 prediction for 2021.
As the top investment institution in the blockchain industry, Blockchain Capital’s investment landscape covers almost all of the industry’s most recognizable companies: Coinbase, the largest trading platform in the US; custodian institution Xapo; Opense, the largest trading platform in NFT; Block.one, the parent company of EOS; CoinList, the largest compliance funding platform; and dozens of other well-known projects.
Combining Blockchain Capital’s summary, let’ s do a review and reflect together.
Macro Situation
The macro environment of 2020 can basically be summed up in one word, easing.
As you can see from the chart above, the Fed, the ECB, and the BOJ have seen a dramatic rise in currency issuance this year, most notably by the Fed, with dollar issuance pulling up by nearly 90 degrees in mid-2020.
Various central banks’ interest rates are also on a downward trend overall, with the U.S., U.K., and Japan all having used zero interest rates to stimulate their economies, and Switzerland even enabling a negative interest rate strategy.
But even so, the global economy has been hit extremely hard, with economic growth in the U.S. and China reaching its lowest point in recent years in 2020. Compared to 2019, the global economy grew by just 2.4%, whihch is the lowest growth since the economic crisis in 2009.
Bitcoin
The effects of the easing were visible to the naked eye in the capital markets, with bitcoin having the best market performance of any major asset class this year, setting new all-time highs. In our view, it all started with the Covid-19.
The general environment is easing and money is flowing into the capital markets. Bitcoin, with its commodity, technology and safe-haven attributes, is entering the institutional landscape, and more and more institutions are going to buy bitcoin through Grayscale Capital. At the same time, retail investors also have demand for investment. Tesla and NIO in the US stock market have already reached new highs, which makes them feel scared, while the bitcoin of $10,000 for a long time is a good choice.
So PayPal provided its 300 million users with a channel to buy bitcoin, and with the added support of institutions and retail investors, the price of bitcoin rose. but it wasn’t a bull market for bitcoin alone, a large number of assets came out of the ‘deep V’ curve this year, and bitcoin was just one of them.
Many views that this year’s new bitcoin highs do not seem to be preceded by the sound of a bull market, because we can not focus only on bitcoin, looking at the world, almost all assets are rising, bitcoin is not so strong recognition, simply an asset allocation.
Ethereum and decentralized finance
In 2020, Ethereum made two conversions, one is the consensus conversion, starting from PoW into the process of converting PoS and initiating the original plan’s Phase 0; the second is the value conversion, from the value of the IC0 token financing era, to the DeFi era.
In our view, DeFi’s growth may also be related to the general environment, where underlying assets like stablecoins continue to increase and become the basis for DeFi’s explosion.
CBDC Stablecoins & CBDC
Stablecoins have seen explosive growth this year. From about $6 billion at the beginning of the year to over $26 billion today, with USDT issuance exceeding $20 billion. Tether remains firmly in the lead of the stablecoin market.
Rapidly growing stablecoins are unknowingly influencing the crypto industry, with derivatives markets, liquidity mining and the rise of DeFi making stablecoins such as USDC and DAI more and more accessible, and infrastructure such as crypto wallets fueling the popularity of stablecoins. Data shows that stablecoins can now account for 40% of the daily settlement volume in the Bitcoin and Ethereum blockchains.
In addition to stablecoins, countries have also accelerated the process of developing and launching central bank digital currencies (CBDCs). From the chart below, it is clear that countries around the world have different attitudes towards CBDCs.
Among them, several countries, including China and Russia, have already developed corresponding bills for CBDC, while the United States and Japan are still under study. In October, Federal Reserve Chairman Jerome Powell expressed the view that CBDC may improve the U.S. payment system, and that the Federal Reserve should assess what impact CBDC may have on a range of key issues.
Brokerage Market
This year, the volume of centralized trading platforms has started to explode, and Binance, Coinbase and Kraken still maintain their market-leading positions in terms of data, the most rapidly growing decentralized trading track this year is Uniswap. On December 15, according to Uniswap founder Hayden Adams, the platform now has a total trading volume of more than $50 billion, placing it firmly in the lead of the DEX segment of crypto assets.
In addition to platforms that offer asset trading, there are also niche tracks in the crypto brokerage business such as staking, custody, execution, lending and solutions. The overall crypto brokerage market is maturing as companies such as BisonTrails, Xapo, SFOX, Galaxy Digital and BitGo grow and develop.
The strongest will always be strong. 2020 also saw several acquisitions and IPOs in the brokerage segment, with teams such as Binance, Coinbase, and DCG all accelerating their acquisitions. The entire market structure has been consolidated.
Compliance
In 2020, government agencies are still groping toward the regulation of cryptocurrencies.
This year, the three-year-long Kik lawsuit came to an end, Telegram also stopped development under a regulatory ban, and as “IC0” disappeared, the U.S. SEC is still “settling scores,” with projects like EOS and Engigma having to pay tens of millions of dollars before settling with the SEC, and even John McAfee was involved in the lawsuit because of his previous stand.
In addition to token sales, offshore trading platforms and marketplaces found to be non-compliant by regulators are beginning to face civil and criminal actions in the United States. The most typical case is BitMEX.
Regulators are increasingly focusing on artificially manipulated markets. Regulators believe that commodity markets such as BitMEX are highly susceptible to manipulation and conflicts of interest and do not comply with regulatory requirements including KYC / AML, and that instruments such as Helix, which provide coin mixing services, can easily facilitate or confuse criminal activity. As a result of these considerations, the CFTC and FinCEN have taken civil action and the Department of Justice has initiated criminal proceedings.
In contrast, compliant or ‘regulator-friendly’ entities such as platforms or institutions like Securitize, Kraken, Coinbase, TRM and Chainalysis are supported by regulators.
The following is a timeline of key global compliance practices for 2020.
Blockchain Capital believes that IC0 regulations ultimately benefit service providers that are not token issuers, and this year’s federal court practice in crypto-related cases has also revisited the requirement that an investment contract is covered as long as it has both of the following requirements: (a) the use of funds obtained from token sales to accelerate the development of the network or protocol; (b) the issuance of tokens that have no actual use scenario. It is worth noting that even if a token is issued, it is not necessarily a security.
Since this year, with the rise of DeFi, regulation has imposed new requirements on token issuers. To avoid hitting the ‘red line’, the team can have the agreement built before the token is issued; the tokens are issued as compensation for the participants of the agreement and not for sale; furthermore, the value of the tokens is based on the governance rights of the protocol, and the role of the users is equivalent to shareholders and directors.
A decentralized protocol should be “a software, but not a service”; the DeFi protocol provides an interactive service to users around the world, and this operation is carried out through smart contracts. It is particularly important that smart contracts must be open source software and not subject to long-term technical or governance control by the core developers, at least the developers should not have permission to “close the protocol”; by design, DeFi protocols should involve users in governance as well.
Application
In 2020, cryptocurrencies began to gradually become more widely known. One of the most direct indications is that the influence of Ethereum and DeFi is growing as the monthly active users of MetaMask grew from 270,000 to 1 million from April to September this year, according to the official data released by MetaMask.
In addition to crypto-native applications, fintech portals are also ‘filtering’ the market’s interest in bitcoin.
Some important use cases are noteworthy, such as PayPal’s announcement to open up cryptocurrency buying and selling to 300 million users; Square’s Cash APP witnessing the changing perception of bitcoin by users outside the circle; eToro’s continued strengthening of cryptocurrency staking and asset expansion; and SoFi’s approval of the NYBitlicense, clearing the way for crypto trading services for more people..
10 Predictions for 2021
Predicting the future is a tricky business, and no one can be 100% right, but there are plenty of people who are trying to do so. Last year, Blockchain Capital gave 11 bold predictions for 2020, and judging from the results, some have already come true, while others are not yet clear：
1. a crypto business will be acquired for more than $500 million
2. the value of assets locked in DeFi will top $2 billion; (achieved)
3. Libra will become an approved dollar-backed stablecoin.
4. a federal judge will rule against the SEC’s actions in crypto cases
5. no Layer 1 protocol that goes live in 2020 will make it into the “Top 10” position based on the definition of network value.
6. USDC is poised for 300% growth (measured by volume, issuance, market cap and trading volume); (achieved)
7. growth in demand for bitcoin will drive transaction fees above $100 and further expansion of transactions
8. the U.S. Financial Crimes Enforcement Network and Financial Action Task Force (FinCEN/FATF) will have stricter requirements for stablecoins than for paper money; (achieved)
9. KYC/AML will be the new battleground for DeFi regulatory compliance.
10. privacy tokens will be taken offline from mainstream trading platforms.
11. Bitcoin prices will hit new all-time highs. (Achieved)
Looking ahead to the new year, Blockchain Capital offers the following 10 predictions for 2021：
1. Coinbase debuts as the first IPO in crypto, market capitalization surpasses USD 30bn
2. Industry sees two acquisitions above USD 500m and one acquisition above USD 1bn
3. USD-pegged stablecoin market issuance (tether, USDC, Libra) surpasses USD 150bn (today, it’s around USD 25bn)
4. The combined market capitalization of top three DeFi governance tokens increases from 33% to 66% of ethereum (ETH)’s market capitalization (today, it’s over USD 62bn)
5. Loans outstanding in DeFi protocols increases by 10x, surpassing USD 30bn
6. 33% of all crypto exchange spot volumes will come from DEXes (decentralized exchanges)
7. WeChat Pay and Alipay support China’s digital yuan
8. The American regulatory Securities and Exchanges Commission approves first bitcoin ETF (exchange-traded fund) and first custodial digital asset broker-dealer
9. Bitcoin market capitalization grows from 4% to 10% of gold’s market capitalization
10. MicroStrategy rebrands to MacroStrategy:)
Article from BlockBeats
Translated by Yang(Mengyan Finance)