As the final hours of 2020 trickle in, this year of ‘madness’ is slowly coming to a close. This year saw the crypto market collapse, recover and exceed expectations, while the Decentralized Finance (DeFi) and Non-fungible Token (NFT) markets have entered the scene with a bang. 2020 has been as volatile as the crypto market itself, but for many in the space, this year marks the crypto industries cementation in to the mainstream.
March: Covid Hits the Market
On the 12th and 13th of March, a Covid-induced liquidity crisis hit the markets as investors scrambled to secure their traditional assets in a mass crypto sell-off. Dubbed “Black Thursday”, the liquidity crisis marks one of the most rapid selloffs in crypto history as prices collapsed from $8,000 to as low as $4,000 per Bitcoin. As a result of the mass self-off, trading volume on exchanges spiked.
When reviewing Coinbase’s BTC/USD order book information, one can observe the crumbling of bid and ask trades around the mid-price level. As the liquidity crisis set in, the bid side of Coinbase’s orderbook collapsed as a result of intense pressure to sell. This rapid sell-off then triggered a self-fulfilling feedback loop, as sell orders were dispatched at ever deteriorating price levels, hammering support level after support level.
April: Stablecoins in the Spotlight
One of the most prominent trends in 2020 was the rise in use of stablecoins. In the traditional market, a study by the Bank of International Settlements indicated that both central and retail banks were experimenting with stablecoins via CBDC’s and self-issued tokens. In the crypto space, a wave of stablecoin purchases followed Black Thursday, with Tether in particular making gains in its volume traded against Bitcoin in Dollar terms.
Another interesting development in the stablecoin market was the volume of USDT/ETH address distribution. After the Black Thursday crash. The following chart depicts the number of addresses holding at least X amount of dollars in USDT/ETH increasing rapidly. A possible reason for this surge could be growing use of stablecoins as a medium of exchange in cross-border payments and attempts by investors to restore value following the Black Thursday price capitulation.
May: The Bitcoin Halving
In May, Bitcoin’s third halving took place, reducing the block reward from 12.5 BTC to 6.25 BTC, with 1,312,500 new Bitcoin being issued. As a result of the halving, the hashprice fell by 42 come June, signaling that the halving altered the value of the hashrate and subsequently the earnings made by miners.
Additionally, the halving led to a rapid increase in transaction fees and the ratio of total income among miners. The transaction fees climbed to the highest value of 21% on the 20th of May, as miners struggled to deal with the demand for newly issued Bitcoin and reductions in their block rewards.
August: The Summer of DeFi
One of the highlights of 2020 has surely been the surge to prominence of DeFi projects and the growth of the DeFi industry. Throughout the year, projects across the DeFi space undertook leaps and bounds in their development, with Maker DAO becoming the first DeFi project to lock in $1 billion, Compound assigned govnernance rights to users in their COMP token update, Uniswap released their anticipated UNI token and Yearn.Finance’s Yield farming saw 800% gains. Since August the DeFi industry growth has been parabolic, with $15 billion dollars locked into projects at the end of the year.
September: The NFT Market Explodes
Following the success of the DeFi market, the Non-fungible Token market kicked off in September. Platforms such as Axie Inifinity, Sorare and SuperRare in particular, have seen considerable growth since September, with all three projects seeing their trading volumes cross $1.2 million dollars. Other major stories from the NFT market include digital artist ‘Beeple’ raising an incredible $3.5 million in the sale of his “Everdays” collection, hosted on the Nifty platform.
November: The Ethereum Announces ‘Eth2’
In November, Ethereum announced the commencement their ETH2 network update, starting with Phase 0 that would see their consensus mechanism change from proof-of-work to proof-of-stake. In order for Phase 0 to launch, a minimum of 524,288ETH would be needed to initiate mining via a beacon chain. The ETH2 project has and will be one of the most ambitious undertakings in the crypto space, with Ethereum further cementing itself as one of the most innovative projects around.
December: Bitcoin Breaks All-Time High
If there was one event in 2020 that will be remembered throughout the industry, it is Bitcoins meteoric ascent between October and December. The flagship crypto has seen en-masse institutional interest, with government fiscal spending, asset price inflation and geopolitical uncertainty on the rise, making Bitcoin an ever more viable investment. 2020’s bull-run is very much attributable to this uptake in institutional interest, with MicroStrategy, Square and Paypal entering the crypto space. At the time of writing, one Bitcoin is worth $29,435, an impressive $10,000 increase on the last all-time high.