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Blockchain Capital has made a complete review of the cryptocurrency market this year, from macroeconomics, crypto finance, to prime brokerage and compliance, and finally made ten guesses about 2021.
Original Title: “The Wonderful Moments of Cryptocurrency in 2020, and the Top Ten Conjectures in 2021”
Written by: Blockchain Capital
Sorting out: block rhythm
In 15 days, the turbulent and magical 2020 will usher in the final chapter.
This is a year worthy of a good resumption of all walks of life. For some people, 2020 is a disaster, and some people think that this year is the best year in the past few years. Especially from the secondary market, 2020 is a tenth year. A bull market not seen in a few years.
The cryptocurrency market is of course also. After catching the high-speed train of commodities and technology stocks flying together, Bitcoin has set a new high. The daily trading volume of Bitcoin in the US stock market has reached 400 million US dollars, even exceeding this year’s market darling. Medical assets.
Bitcoin is obviously not the only highlight of cryptocurrency in 2020. In the “2020 Year in Review”, Blockchain Capital has made a complete review of the cryptocurrency market for a whole year, from macroeconomics to encrypted finance, to prime brokers and Compliance, and finally made ten predictions for 2021.
As the top investment institution in the blockchain industry, Blockchain Capital’s investment landscape almost covers those thunderous names in the industry: Coinbase, the largest trading platform in the United States, Xapo, the largest trading platform of NFT, Opensea, the parent company of EOS, Block. There are dozens of well-known projects such as CoinList, a regulated financing platform.
Combining the summary of Blockchain Capital and the finishing of Rhythm BlockBeats, we will do a review and imagination together.
The macro-environment of 2020 can basically be summarized into one word, release water, which is an unprecedented release of water.
As can be seen from the above figure, the currency issuance of the Federal Reserve, the European Central Bank, and the Bank of Japan has risen sharply this year. The Federal Reserve is the most obvious. The issuance of US dollars will increase by almost 90 degrees in mid-2020.
The interest rates of various central banks are also on a downward trend. The United States, the United Kingdom, and Japan have all used zero interest rates to stimulate the economy, and Switzerland has even adopted a negative interest rate strategy.
But even so, the global economy has also been severely hit. The economic growth of China and the United States in 2020 has reached the lowest point in recent years. Compared with 2019, the global economic growth rate is only 2.4%, which is since the 2009 economic crisis. Minimum growth.
The effect of the water release is visible to the naked eye in the capital market. Among all the major assets this year, Bitcoin has the best market performance, setting a new record high, with a unit price close to US$20,000. From the perspective of Ludong, everything originated from the epidemic.
The general environment is releasing water, money flows into the capital market, and Bitcoin, which has attributes such as commodities, technology, and hedging, has entered the field of vision of institutions, and more and more institutions are buying Bitcoin through gray capital. At the same time, retail investors also have investment needs. Tesla and NIO in the U.S. stock market have long been intimidated by their historically high targets, and Bitcoin, which has been sitting at $10,000 for a long time, is a good choice.
As a result, PayPal has provided a channel for its 300 million users to buy Bitcoin. With the support of institutions and retail investors, the price of Bitcoin has risen, but this is not a bull market for Bitcoin alone. A large number of assets have emerged this year. Bitcoin is just one of them.
Many people think that this year’s new high for Bitcoin does not appear to have the sound of the previous bull market, because we can’t just focus on Bitcoin. Looking at the world, almost all assets are rising. Bitcoin is not so recognizable. It is an asset allocation.
Ethereum and decentralized finance
Ethereum in 2020 has initiated two conversions. One is consensus conversion, which starts from PoW and enters the process of converting PoS, and starts the 0th phase of the original plan. The second is value conversion, which is the value conversion from the IC0 token financing era to DeFi. era.
In Ludong’s view, the development of DeFi may also be related to the general environment, and the continuous increase of underlying assets such as stablecoins has become the basis for the outbreak of DeFi.
The development of the DeFi field this year cannot be summarized in a few sentences. I recommend reading two articles: “Multicoin Capital: A Comprehensive Understanding of the DeFi Ecological Dependence”, which is currently the most comprehensive review of the DeFi full stack; “2020 Encryption “Financial Market Report” , this is the annual development of encrypted finance compiled by the Rhythm Research Institute, which details the evolution of decentralized finance.
Stablecoin and CBDC
Stable coins ushered in explosive growth this year.
From about 6 billion U.S. dollars at the beginning of the year to more than 26 billion U.S. dollars today, of which USDT has issued more than 20 billion U.S. dollars, Tether still firmly occupies the leading position in the stable currency market.
The fast-growing stablecoins are unknowingly affecting the crypto industry. The rise of derivatives markets, liquid mining and DeFi has enriched the use of stablecoins such as USDC and DAI, and infrastructure such as encrypted wallets has also been boosted. The popularity of stablecoins. Data shows that the current daily settlement volume of stablecoins on the Bitcoin and Ethereum blockchains can account for 40%.
In addition to stablecoins, countries have also accelerated the development and launch of central bank digital currencies (CBDC). It is obvious from the figure below that countries around the world have different attitudes towards CBDC.
Among them, many countries including China and Russia have formulated corresponding bills on CBDC, while the United States and Japan are still studying. In October of this year, Fed Chairman Powell expressed his opinion that CBDC may be able to improve the U.S. payment system. The Fed needs to assess how CBDC may affect a series of key issues.
Since the beginning of this year, the transaction volume of centralized trading platforms has begun to explode. From the data point of view, Binance, Coinbase and Kraken still maintain market leading positions, and this year’s fastest-growing decentralized trading track, the brightest non-Uniswap It must be. On December 15, according to the data provided by Uniswap founder Hayden Adams, the total transaction volume of the platform has exceeded 50 billion U.S. dollars, ranking it as the leader of the encrypted asset DEX subdivision track.
In addition to providing a platform for asset trading, the crypto brokerage business also has sub-tracks such as pledge, custody, execution, lending and solutions. With the development and growth of companies such as BisonTrails, Xapo, SFOX, Galaxy Digital, and BitGo, the entire crypto brokerage The market is gradually maturing.
The strong are always strong. In 2020, several acquisitions and IPOs occurred in the brokerage sector in the crypto field. Teams such as Binance, Coinbase, and DCG have all accelerated the pace of acquisitions, and the entire market structure has been consolidated.
The market enters the early stage of mergers and acquisitions, and prime brokers are showing signs
In 2020, the supervision of cryptocurrencies by government agencies is still advancing.
This year, the Kik lawsuit that lasted for three years came to an end. Telegram also stopped development under the regulatory ban. With the disappearance of “IC0”, the US SEC is still “settling accounts after the fall”, and EOS, Engigma and other projects have to pay tens of millions. After the US dollar settled with the SEC, even John McAfee was involved in the lawsuit because of the previous platform.
In addition to the sale of tokens, offshore trading platforms and markets that have been identified as non-compliant regulatory agencies have also begun to face civil and criminal lawsuits in the United States. The most typical case is BitMEX.
Regulators are paying more and more attention to artificially manipulated markets. Regulators believe that commodity markets like BitMEX are extremely vulnerable to manipulation and conflicts of interest, and do not comply with regulatory requirements including KYC/AML; tools such as Helix that provide currency mixing services can easily facilitate or confuse criminal activities. Based on the above considerations, CFTC and FinCEN took civil proceedings, and the Ministry of Justice initiated criminal proceedings.
Correspondingly, compliant or “regulator-friendly” entities, such as Securitize, Kraken, Coinbase, TRM, and Chainalysis platforms or institutions, are supported by regulators.
The following is a time chart of major global compliance practices in 2020:
Blockchain Capital believes that IC0 regulations will ultimately benefit non-token-issuing service providers. The Federal Court’s practice of encryption-related cases this year has also reviewed the scope of investment contracts as long as the following two requirements are met: (a) Use of proxy The funds obtained from currency sales are used to accelerate the development of the network or protocol; (b) Issuing tokens without actual usage scenarios. It is worth noting that even if tokens are issued, they are not necessarily securities.
Since the beginning of this year, with the rise of DeFi, regulation has also put forward new requirements for token issuers. In order to avoid touching the “red line”, the team can build the agreement before the token is issued; the issued tokens are used as compensation for the participants of the agreement, not for sale; in addition, the value of the tokens is based on the governance rights of the agreement , The role of users is equivalent to shareholders and directors.
The decentralization agreement should be “software, not service.” The DeFi protocol provides interactive services to users around the world, and this operation is carried out through smart contracts. It is especially important that the smart contract must be open source software and not subject to the long-term technical or governance control of the core developer. At least the developer should not have the authority to “close the agreement”; according to the design, the DeFi agreement should allow users to participate in governance. in.
In 2020, cryptocurrencies will gradually become known to more people. One of the most direct manifestations is that according to official data released by MetaMask, from April to September this year, MetaMask monthly active users increased from 270,000 to 1 million, and the influence of Ethereum and DeFi is expanding.
In addition to encrypted native applications, fintech portals are also “filtering” the market’s interest in Bitcoin.
Some important use cases are commendable. For example, PayPal announced the opening of cryptocurrency buying and selling services to 300 million users; Square’s Cash APP witnessed changes in the perception of Bitcoin by users outside the circle; eToro continues to strengthen the cryptocurrency staking and asset expansion; and SoFi The approval of NYBitlicense cleared the way for more people to provide encrypted trading services, etc.
Top 10 predictions for 2021
Predicting the future is a tricky thing, no one can be 100% correct, but there will still be many people trying to do it. Last year, Blockchain Capital gave 11 bold predictions for 2020. Judging from the results, some have become reality, and some are not yet clear:
An encryption company will be acquired for more than 500 million US dollars;
The value of assets locked in DeFi will exceed US$2 billion; (Realized)
In the face of competition from China, Libra will become an approved stable currency backed by US dollars;
A federal judge will make an unfavorable ruling on the SEC’s conduct in an encryption case;
According to the definition of network value, no Layer 1 protocol launched in 2020 can enter the “Top 10” position;
USDC will usher in 300% growth (measurement indicators include transaction volume, issuance, market value and transaction volume); (achieved)
The increase in demand for Bitcoin will drive transaction fees to exceed $100 and further expand the transaction scale;
The United States Financial Crime Enforcement Network and Financial Action Task Force (FinCEN/FATF) will have stricter requirements for stablecoins than banknotes; (achieved)
KYC/AML will become a new battlefield for DeFi regulatory compliance;
Privacy coins will be offline from mainstream trading platforms;
The price of Bitcoin will hit a record high. (Realized)
Looking forward to the new year, Blockchain Capital gives the following 10 predictions for 2021:
Coinbase will be the first IPO case in the crypto field, with a market value of over US$30 billion;
The industry will witness two cases where the purchase amount exceeds 500 million U.S. dollars and one purchase exceeds 1 billion U.S. dollars;
The issuance of stable currency markets (Tether, USDC, Libra) anchored to USD will exceed 150 billion USD;
The total market value of the top three DeFi governance tokens will increase from 33% of the total market value of ETH to 66%;
The loan balance in the DeFi agreement will increase 10 times to more than 30 billion U.S. dollars;
33% of cryptocurrency spot trading volume will come from DEX;
WeChat and Alipay will support DCEP;
SEC approved the first BTC ETF and the first digital asset broker-dealer for “custodial” business;
The market value of Bitcoin increased from 4% to 10% of the market value of gold;
Microstrategy will be renamed Macrostrategy :).