According to the recent Bloomberg report, cryptocurrencies are way better than gold in terms of investments in 2020. Which is interesting, most cryptocurrencies have been growing much faster than gold this year. It's not a secret that gold is considered a safe-haven asset amid crises. Bloomberg Galaxy Crypto Index (BGCI) has gained 66% this year,while gold has gained only 20% over the same period.
Managing Decentralized Finance (DeFi)
The sharp increase in the market of cryptocurrencies was caused by an increased interest to DeFi. According to Bloomberg and NordFX, the introduction of DeFi was growing throughout the year and eventually raised the price of Ethereum (ETH) up to 481 dollars per coin. Since Ethereum makes up for almost 12% of the entire cryptocurrency market cap, and DeFi relies heavily on ETH as its major implementation, the rally of ETH apparently caused a major impact on BGCI.
Decentralized Finance (DeFi)
DeFi was created in order to recreate conventional finance but without any third parties involved. Simply put, DeFi makes it possible to implement many conventional transactions, including lending and borrowing money. Basically, this is something that caused the recent ETH market rally. According to DeFi Pulse, the total cost of the DeFi smart contract increased from 676 million dollars all the way up to 9,51 billion dollars in a matter of just 9 months. This literally means that the entire DeFi market increased by as much as 1300% over the mentioned period.
Will DeFi Keep Growing?
At the same time, skeptics say that cryptocurrencies and DeFi won't be able to back big profits. Digital assets have always been unstable and volatile. Just consider the recent drops we have seen over the past few trading days: Bitcoin lost 700 dollars, Ethereum dropped down to 335 dollars per coin.
On September, 22nd, Bloomberg Galaxy Crypto Index started seeing losses as well. It lost 8% on that day. Since peaking in August, the index has already dropped by 20%.
The total cost of the blocked DeFi (TVL) has decreased as well. In just a few days, TVL has dropped from the peak at 13.35 billion dollars all the way down to 9.41 billion dollars.
However, this not prevents miners and institutional investors from entering the market. Famous investors such as DG Lab Fund, Framework Ventures, ParaFi Capital, 3Arrows, as well as the veterans of the cryptocurrency market such as Pantera and Multicoin Capital, keep on investing in DeFi.
Cryptocurrencies Turn Into Safe-Haven Assets
Earlier in 2020, both BTC and ETH reached their 12-month highs. The cryptocurrencies became safe-haven assets for many investors, mostly because of the endless monetary easing, which boils down to massive money printing. It seems like such financial assets work well during financial and economic crises.
HTe latest news only contribute to the growing interest in cryptocurrencies. Not so long ago, MicroStrategy, a company listed on NASDAQ, bought a considerable portion of BTC. All in all, the company invested around 475 billion dollars into Bitcoin. The company's managers think that Bitcoin is a perfect assets to secure funds against inflation and the recent purchases is part of the company's new investment plan.
