One year into the Corona pandemic
One year of Corona- how have the crypto markets fared?
It’s been a year since the COVID-19 pandemic sent global markets into a tailspin. Things have largely recovered since then, but the crisis has led many to look for alternative investments – particularly in cryptocurrencies.
This rising demand for cryptocurrencies is evidenced by the explosive rise in prices on the crypto markets. While some have risen considerably, there is not a seamless transition for every asset.
Exactly one year ago, Bitcoin briefly traded below $4,000 after going into freefall from the $8,000 mark.
Its steady rise in price over the past year can be attributed to a number of factors. As workers were sent home due to the Corona virus lockdown, many began to look at the Bitcoin System markets. In the United States, this was compounded by the fact that many received the stimulus packages.
Institutional investors began to worry about the potentially shrinking leverage of the dollar. At the same time, the Federal Reserve continued to pump money into the economy to stave off a COVID-induced recession.
Many investors, both large and small, began to turn to Bitcoin – as a hedge against inflation. This philosophy is cultivated by MicroStrategy CEO Michael Saylor, for example.
His company first began acquiring Bitcoin in August 2020 and currently holds 91,064 BTC. Since then, high-profile acquisitions of Elon Musk’s Tesla and Jack Dorsey’s Square have bolstered its prospects.
Although Bitcoin experienced greater momentum, it was only natural that the rally spread to the entire crypto markets. This, of course, helped boost the second-ranked cryptocurrency Ethereum (go to the Ethereum buying guide). However, the growing popularity of ETH applications, particularly decentralised finance (DeFi) and non-fungible tokens (NFTs), also helped.
According to DeFi Pulse, the total value across all DeFi protocols was only US$680 million at the beginning of 2020. By the end of the year, it had reached $15 billion – an increase of 2,100 %.
Last year, the total value of transactions in the NFT sector increased by 299% year-on-year. According to a joint study by NonFungible.com and foresight firm L’Atelier BNP Paribas, this value reached more than $250 million.
Today, we see NFT artworks selling for millions of dollars each.
Meanwhile, Ripples XRP (to buy Ripple guide 2021) has not fared as well as its former crypto podium peers. The company’s reputation took a significant hit when the U.S. Securities and Exchange Commission (SEC) formally filed charges against Ripple Labs Inc. and its former and current CEO.
The company and its executives have been working hard to fight the allegations, but the damage appears to have been done. While XRP is undoubtedly better off than it was a year ago, its market capitalisation has dropped significantly.
A quick review of the three shows that while BTC is up around 1,000% since the start of the year, ETH has done even better, up over 1,500%. In contrast, Ripple’s XRP shows a „mere“ 232% increase for the past year.