2020 has seen the cryptoeconomy turn decidedly bullish again for the first time since the first days of 2018. What’s changed since then? Well, just about everything.
In a macro sense cryptocurrencies are now officially viewed as a hedge against mainstream assets among the growing number of mainstream users who are familiar with the monetary tech. There’s also the blooming involvement of major, traditional mainstream institutions around crypto, as well as the vastly improved fundamentals of projects like Ethereum.
When you combine all these factors, it’s clear the cryptoeconomy is heading into 2021 on advantageous and bullish footing. That said, let’s dive into some of the specific developments that are paving the way to these increasingly bullish crypto
S&P Dow Jones Indices Launching Crypto Indices
S&P Dow Jones Indices, a partnership between CME Group, News Corp, and S&P Global, powers the most popular stock indices in the world — like the S&P 500 and the Dow Jones Industrial Average (DJIA) — and now it’s getting into crypto indices.
Announced last week, the S&P DJI-branded indices will work via data from digital currency firm Lukka to cover the performance of over 500 cryptocurrencies and tokens.
This notable dynamic will allow S&P’s customers to create their own crypto indices at will, which will considerably open up global investors’ exposure to the novel asset class. The floodgates to the mainstream are opening …
The Rising “Precious & Industrial” Crypto Paradigm
American billionaire investor Paul Tudor Jones (PTJ) has become a living legend when it comes to being talented at investments.
That’s why PTJ has been causing heads to turn with his recent support of crypto, as the investor took up a sizeable position in bitcoin this fall.
Ever since, PTJ has been showing increased savviness toward crypto in general. For example, this week PTJ was interviewed by Yahoo Finance, to which he noted the rise of “precious metal” cryptos like bitcoin and “industrial metal” cryptos like Ethereum. As the investor just noted:
“If I really had to kind of guess what the future’s going to be, it’s going to be a lot like the metals complex. Where you had you had precious crypto, that might be bitcoin, it’s the first crypto, first-mover, … then you’re gonna have transactional cryptocurrencies, along with the sovereigns, and they may be more like the industrial metals. So where you have gold as a precious metal, then you have copper, platinum … etc. So you may have precious crypto, and industrial crypto.”
As such, if we see markets continue to rally around BTC and ETH as “precious” and “industrial” crypto, then there are undoubtedly bullish days ahead in the near future.
(Note: go to minute marker 7:11 in the video above to skip to the cryptocurrency discussion).
BTC on Big Balance Sheets
This year we saw major companies like MicroStrategy actually start to buy up BTC as part of their balance sheets.
It’ll be extremely interesting to see how such company treasuries perform over the coming years, but let there be no mistake: the first dominos have already dropped in the BTC balance sheet adoption race with Microstrategy’s recent pivot to BTC.
MicroStrategy has purchased approximately 2,574 bitcoins for $50.0 million in cash in accordance with its Treasury Reserve Policy, at an average price of approximately $19,427 per bitcoin. We now hold approximately 40,824 bitcoins.https://t.co/nwZcM9zAXZ
— Michael Saylor (@michael_saylor) December 4, 2020
Accordingly, the firm’s increased crypto involvement bodes that other firms will conduct similar balance sheet moves going forward. That’ll be great for crypto, to be sure.
Visa and PayPal Have Arrived
One of the biggest narratives in the cryptoeconomy this year has been the increased involvement of major companies. No firms are provide a better example of this than PayPal and Visa.
For example, just a few weeks ago PayPal announced that it was opening up support for buys and sells around major cryptocurrencies like BTC and ETH. That alone was huge news for crypto going forward, but then this week the stakes surge even higher when payments giant Visa revealed it was going to add the USDC stablecoin (built on Ethereum) to its payments network of some 60 million merchants.
The grand takeaway? Major companies are directly embracing Ethereum now. Expect more to do the same in 2021!
In my mind, there have been three paradigm-shifting developments in the cryptoeconomy to date: the launch of Bitcoin, the launch of Ethereum, and the launch of Ethereum 2.0.
The cool news for us is that we just got to witness the activation of Eth2 on Dec. 1st, 2020. Since then, we’ve started to get a better sense of the returns that ETH 2.0 staking can offer. At the moment ~17% is an average return we’re seeing.
Of course, the wild decentralized finance (DeFi) sector has plenty of yield farms that are more lucrative than that right now. Yet you have to consider the fact that ~17% is way better than any mainstream returns right now, and Ethereum has no shortage of activist stakeholders who will stake ETH even if they could be making more in DeFi at the time.
This is all to say that I think Eth2 staking will be very attractive in the near future, for a variety of nuanced reasons. A lot of newcomers could surge into the cryptoeconomy accordingly. Watch this niche!
The DeFi Boom Is Just Getting Started
DeFi is decentralized trading, savings, and derivatives in general. And much more. And the arena is swelling at a frenzied rate lately as newcomers are adopting tech in the space more and more recently.
For instance, the total value locked (TVL) in DeFI right now (i.e. the assets under management, or AUM, for traditional finance products) is at $14.55 billion USD presently — less than $30 million shy of DeFi’s all-time high TVL of $14.8 billion that was reached just this week!
This is a relatively small sum generally speaking, yet it represents exponential growth for the DeFi space, which boasted a TVL of less than $1 billion just last year alone. Expect rapid growth to continue for the near future, considering how novel and powerful DeFi is.
NFTs Will Help Crypto Go Mainstream
Non-fungible tokens, or NFTs, have been the other major sector behind DeFi to hit the limelight atop Ethereum this year.
Simply put, NFTs are media legos. This means they can be just about anything, including gaming assets, virtual land, cryptoart, and beyond.
Of course, the NFT economy is still relatively small compared to DeFi as things stand, but the NFT ecosystem did also grow exponentially this year alongside DeFi. These developments suggest that “money legos” and “media legos” are here to stay. Look for NFTs to continue to boom and to be a driving force behind crypto’s growing popularity next year.
At the end of the day, the cryptoeconomy is inscrutable.
Things may seem bearish, or they may seem bullish. The best thing you can do accordingly is research the underlying matters as best you can. But if you do dig in, you might come to similar conclusions that this post has: DeFi, NFTs, and social tokens can’t be ignored at this point.
If you’re doing so now, then you’re completely oblivious to the way things are veering in the years ahead. Why? Because the future will be dominated by crypto, at least in a monetary sense.