The yields of cryptocurrencies have even surpassed those of gold in 2020. Are they the best asset to invest in?
The yields of digital currencies this year exceeded those of stocks, bonds, commodities and gold itself, the ultimate safe haven asset, which peaked in August with prices over $ 2,000.
In trend, there is an increasingly widespread use of DeFi (decentralized finance) and consequently of digital transaction registers, blockchains. The cryptocurrency market is attracting the attention of investors, promising excellent performance assets.
Why are cryptocurrencies the best assets of 2020?
The Bloomberg Galaxy Crypto index of digital currencies jumped about 65% in 2020, outpacing that of gold by more than 20% and the returns of global stocks, bonds and commodities.
This increase was mainly driven by Ethereum, which accounts for more than a third of the weight of the entire benchmark index.
As explained by Mike McGlone, Bloomberg Intelligence strategist:
"The increased adoption of decentralized finance, or DeFi, has spearheaded the rise of Ethereum, which appears to maintain its leadership status as a platform."
Specifically, DeFi transfers financial functions to digital ledgers called blockchains. Doing so allows people to lend or borrow funds and earn interest in a savings account, without the need for traditional intermediaries such as banks.
Its growing popularity is part of a broader trend of more blockchain usage. Many DeFi applications run right on the Ethereum blockchain.
According to some analysts, cryptocurrencies such as Bitcoin represent a reliable store of value in the midst of the crisis triggered by the pandemic.
Marc Marc Fleury, CEO of Two Prime company, stressed that digital currencies performed well during the epidemic, so much so that Bitcoin has become as safe as gold.
"A purely ethereal tool works well when the real economy is failing"
Digital currencies: really safe assets?
The cryptocurrency market is not exempt from more skeptical valuations.
In fact, some analysts argue that digital currencies actually have a history of fluctuations.
The Bloomberg Galaxy Crypto Index plummeted 6.4% on Monday 22 September as the pandemic trend impacted the sentiment of a number of assets. The indicator recorded a drop of more than 20% from the highs of August.
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