2020 is the year of global change. The COVID-19 pandemic has overshadowed this year’s events and brought new challenges with it. No one prepared for it and changed the way we live, work and behave. Earlier this year, global financial markets were hit hard by plummeting prices for stocks, commodities, and even cryptocurrencies.
Against a backdrop of economic uncertainty and a depreciating US dollar, cryptocurrency assets soared on the radars of commercial banks, hedge funds, and other institutional investors. As we near the end of a tumultuous year, it is time to take a look at the decisive events in the crypto industry this year and look forward to new developments in 2021.
If you don’t have minds for most of 2020, you may have witnessed the explosive growth of the DeFi industry this year. Cryptocurrency loans in particular and decentralized exchanges, which have recorded a large amount of capital inflows in a short period of time. In the past few years, DeFi applications have kept pace with traditional financial systems, but the traditional financial services left over from this crisis were vacant, indicating the urgent need for the adoption of DeFi services on a large scale. In today’s world where cash payments are no longer welcome and most people are working from home and running businesses online, switching to DeFi seems normal.
Although the true potential of DeFi is undeniable, we must ask ourselves: Is this growth sustainable? As we’ve seen in other crypto sub-domains in the past, it tends to follow a cycle where the market enters into profit-taking mode after prices for new technology platforms and protocol tokens rise sharply. This led to a rapid drop in prices ahead of the slow recovery period. As adoption rates increase, platforms that survived these turbulent early stages are now slowly consolidating their positions, and token prices are increasingly determined by more basic criteria (such as number of users and number of platforms).
DeFi is currently only tested by high-yielding traders, so it remains to be seen whether DeFi will follow the same path in 2021 and beyond. However, a financial model that is transparent, liquid, and flexible undoubtedly offers great potential for the entire real economy.
See with fresh eyes
The economic roller coaster ride in 2020 and high volatility in the financial market make Bitcoin (BTC) and its function as a store of value stand out once again. This has attracted more and more well-known financial institutions. Although Bitcoin may not be used as a transactional currency anytime soon, it is clear that Bitcoin is maintaining its digital gold position and market participants are increasingly seeing it as a reliable store of value.
Large private and public companies are seen to diversify their Bitcoin stock positions to hedge against upcoming inflation and take advantage of the potential gains from higher Bitcoin prices – especially Michael Saylor’s MicroStrategy, the company closed for $ 425 million in September. The US dollar is sold in Bitcoin.
Perhaps the most interesting thing is that central banks around the world are gradually getting heated up in the world of cryptocurrencies. Although they were certainly in the spectator’s room with great interest, the COVID-19 crisis became a catalyst for them to take action. Several major central banks around the world, along with the Bank for International Settlements, have taken an early step in the right direction. The report released a report outlining a potential framework for introducing the digital currency to the central bank as a monetary alternative.
However, before CBDC becomes a reality, major technical and structural hurdles must be overcome. To support these efforts, MasterCard has created a virtual test platform that the central bank can use to evaluate and study the implementation of national digital currencies, and has already begun testing how to integrate CBDC into its business. PayPal also indicates its entry into the cryptocurrency market, allowing PayPal users in the United States to buy and sell digital currencies directly from their PayPal accounts.
In general, it appears that private and public enterprises are now focusing more on the blockchain and cryptocurrency industry as a class of technology and assets