Crypto – Year In Review – GrowSmart
After an abysmal 2018, most major cryptocurrencies bounced back strongly in 2019, although their performances can at best be termed as mixed. Incidentally, most asset classes, including equities, bonds and commodities, advanced strongly, thanks to accommodative global interest rates and stimulatory measures. Benevolent fiscal and monetary policy stances were adopted to tide over a soft economic patch orchestrated by the U.S.-China trade tensions, which for most of the year remained an overhang.
The S&P 500 Index, taken as a proxy for the broader U.S. equity market, rallied 28.8% to end the year at 3,230.78, shy off the record high of the intra-day high of 3,247.93 hit Dec. 27. The bond market also put up with a stellar show, with the yield on the benchmark 10-year Treasury yield ending the year down 28.56%. Bond yields and prices share an inverse relation. Among commodities, crude oil, precious metals and most base metals, with the exception of aluminum, closed in the green for the year.
It’s wasn’t a year to cherish for the U.S. dollar, which slipped against most major currencies. It weakened against the pound, Canadian dollar, yen, New Zealand dollar and the Swiss franc, but ended the year on a firmer footing against the euro.
A Mixed Year For Cryptos
Some of the heavily-weighted digital currencies such as Bitcoin, bitcoin cash and Litecoin recorded strong gains for the year. Cryptos got off to a strong start in 2019 after the previous year’s drubbing, and rose steadily through the middle of the year. Subsequently, some of them gave back part of their gains while a few others squandered all of their first-half gains to end in the red.
Bitcoin, which accounts for about 70% of the total market cap of digital currencies, peaked at a little above $12,800 in late June. After completing a double top formation in early July, the crypto gave back about 45% of its gains before ending the year at $7,193.60.
The total market capitalization of cryptos increased from $125.71 billion at the end of 2018 to $190.91 billion by Dec. 31, 2019. The combined market cap peaked at $366.03 billion in late June before it slipped back in the second-half of the year.
Source: CoinMarketCap
ChainLink The Winner, Binance Coin Follows
ChainLink, an Ethereum token of the ChainLink platform that helps establishment of a bridge between the blockchain-based smart contracts and the real-world data or applications, was launched by fintech firm SmartContract in June 2017. The platform serves as a blockchain middleware connecting smart contracts across blockchains, giving them access to off-chain resources such as data feeds, web APIs and traditional bank account payments.
The ChainLink token was up about 511% in 2019. Binance Coin, which has advanced about 123% for the year, is the next biggest gainer. Bitcoin has gained about 92%.
Factors That Dictated Price Action
The rally in the first half of the year came on the back of a confluence of factors, including U.S.-China trade tensions, increasing awareness about and acceptance of cryptos, derivative trading and rising interest among institutional investors.
Digital currencies are considered safe havens to which investors flock to in times of uncertainties.
Meanwhile, the rally’s momentum faded in the second half of the year amid increased regulatory scrutiny, crypto scams and security breaches at major crypto exchanges, which has led to the loss of huge amount of client funds. The easing of trade tensions also weighed down.
Key Developments In The Space
- In a surprising move, social networking giant Facebook announced its intention to launch Libra, which is likely to be launched in 2020. Libra is meant to facilitate the transfer of money on Facebook’s WhatsApp platform, with the company targeting mainly India, where it reportedly has 400 million WhatsApp users.
- The Chinese government is stepping up efforts to launch a government-backed crypto, with the nation’s central bank having begun work several years ago.
- Even as the Chinese government is planning to dip its heel into cryptos, it clamped down on the industry, which forced a few exchanges to either cease operations or operate with restrictions.
- The initial exchange offerings, or IEOs, were the most sought-after mode of fund raising by blockchain projects, as opposed to the initial coin offering, or ICOs, which were widely used in 2017. IEOs are facilitated by cryptocurrency exchanges, which help in marketing the project and are compensated with tokens.
- The year also saw Bitcoin (BTC) futures from Bakkt going live. Bakkt, a subsidiary of the Intercontinental Exchange, is a regulated custody platform and tool meant for institutional investors to buy, store and sell crypto assets. Later, the platform also launched options on its Bitcoin (BTC) futures.
- A Bitcoin (BTC) ETF continued to be a pipe dream, as the SEC, the U.S. stock market regulator, rejected an application from Bitwise and the NYSE Arca, citing its susceptibility to fraudulent and manipulative acts and practices. Earlier in September, the CBOE BZX Exchange withdrew its proposal related to its VanEck/SolidX BTC ETF.
- Litecoin, which was one of the best performers for the year, underwent halving, which occurs once every four years.
- Crypto exchange Binance stopped U.S. investors from trading using its flagship platform, although later on it launched its U.S.-specific platform.
The recovery seen in cryptocurrencies in 2019 is a testament to the fact that digital currencies are here to stay. With companies and governments shedding their apprehensions and preparing to embrace the technology and the cryptos, mainstream adoption is only going to get better.
Published at Wed, 01 Jan 2020 20:49:12 +0000
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