If you have kept track of the financial news at all in the last six months, then you are likely aware that the cryptocurrency market has picked up considerable momentum this year, with many cryptocurrencies experiencing incredible growth in recent months.
Since the beginning of the year, major cryptocurrencies like Bitcoin (BTC-USD), Ethereum (ETH-USD), and XRP (XRP-USD) have outperformed practically all other asset class classes, by achieving 165%, 342%, and 156% respectively against the US dollar (USD) in this time.
These figures dwarf those achieved by major stock indices during the same period, Including the S&P 500 (^GSPC), which is up 14.36% YTD, and the DOW Jones (DOW) — which gained a modest 5.28% YTD in 2020.
This growth was driven primarily by a dramatic, and rather sudden shift in consumer sentiment — which was catapulted by major developments made by several prominent cryptocurrencies, as well as renewed interest among financial institutions.
Altcoins Steal the Show
Though Bitcoin is undoubtedly the best-known cryptocurrency, it isn’t one of the best performers this year when measuring the top 100 major cryptocurrencies by their performance.
Instead, a wide range of altcoins has managed to eclipse the gains seen by Bitcoin during this period, with cryptocurrencies like Aave (AAVE), Band Protocol (BAND), Yearn Finance (YFI), and Reserve Rights (RSR) all clocking in gains of between 1,000% and 4,600% YTD.
The vast majority of the most successful cryptocurrencies this year operate in the decentralized finance (DeFi) niche. Essentially, these are the tools and services that offer functionality similar to that provided by traditional financial institutions, such as banks, brokers, insurance providers, exchanges, and more — but in a decentralized way thanks to blockchain technology.
The DeFi sector has seen explosive growth in 2020, with the total value of digital assets locked up in DeFi protocols soaring from $650 million to over $14.7 billion in the last year according to stats from DeFi Pulse.
But more than this, 2020 has been the year where many blockchain-based projects revealed their full potential — kicking up a great deal of interest in the altcoin space. Ethereum began transitioning to its long-anticipated Ethereum 2.0 platform, Polkadot (DOT) began laying the foundations for its parachain slot auctions, and Tron (TRX-USD) made a major DeFi push with the release of several DeFi projects.
On top of this, Velas (VLX) — a platform that uses “artificial intuition” to power its next-generation blockchain platform — is set to launch its own suite of products that might just fuel another wave of interest in the altcoin space.
As per its recent announcement, Velas is set to launch a blockchain-powered social content platform known as BitOrbit, with a built-in multi-asset wallet and support for solidity-based MicroApps — potentially signaling the first wave of DeFi apps on Velas. In development for more than a year, BitOrbit will feature a secure chat solution and IPFS-powered storage, making it a potential gamechanger for the cryptocurrency industry.
Institutional Adoption On the Rise
Although the striking developments in the blockchain project and altcoin industry have dramatically improved the utility of cryptocurrencies, and hence their desirability among everyday users, there is another major driver behind their recent boom — institutional interest.
Widely regarded as one of the biggest challenges facing modern cryptocurrencies, getting major financial players to adopt digital assets and invest in blockchain-based infrastructure has proven challenging in recent years — as many major players instead adopted a wait and watch approach to the technology.
But it appears this approach is slowly changing, thanks to a massive wave of institutional investments and adoption by several surprising names in the finance industry.
First and foremost is the global online payment giant PayPal (PYPL), which made its foray into the cryptocurrency space with its recently released cryptocurrency wallet and online shopping feature. As a result, PayPal is now the largest financial player to directly support cryptocurrency deposits, and bought the vast majority of all newly mined Bitcoin in recent months.
This sent PayPal’s stock price soaring to its highest ever value, at over $220 a share. Likewise, Square’s (SQ) competing online payment platform Cash App has also ramped up its BTC purchases in recent months, seeing a similarly massive spike in its stock price as a result to reach its all-time high.
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Beyond this, major crypto investment funds like Grayscale, Pantera, MicroStrategy, and MassMutual have ramped up investments in major cryptocurrencies, and Bitcoin in particular, in the second half of 2020.
This renewed interest among institutions and major financial entities has kickstarted a bull run for many cryptocurrencies. And with more banks than ever before now exploring the use of blockchain technology and considering cryptocurrency custody services, it might not be due to end any time soon.
Disclosure: No positions. This Op-Ed is written by Reuben Jackson. Insider Monkey News Department isn’t involved in the production of this article.