The rally of bitcoin, whose price has renewed its all-time high, is driving the growth of the entire cryptocurrency market. During the last three months of 2020, its capitalization more than doubled. 4th quarter main event overview – in traditional Bloomchain research.
Read or download Bloomchain Study “Cryptocurrency Market in Q4 2020”
The cryptocurrency market is in the green for the third straight quarter. During the period from October to December 2020, its capitalization more than doubled – from $342 to $720 billion.
The main driver of market growth is bitcoin, whose value at the end of 2020 updated its historical maximum. During the reporting period, the share of the world’s largest cryptocurrency in total capitalization increased from 58% to 67%. The second and third places are held by Ethereum and Tether, their shares are 10.7% and 2.9% respectively.
At the end of the quarter, the top 10 cryptocurrencies left EOS, Stellar and Monero, followed by Bitcoin Cash, Chainlink, and Polkadot.
Choosing a buy and hold strategy when buying the five largest cryptocurrencies in general can be beneficial for investors. By the end of the 4th quarter of 2020, only XRP will be bringing in losses – every $100 invested can bring in a loss of $12.5.
Read also: Ripple Receives Lawsuit From US Securities and Exchange Commission
The most profitable is the investment in Litecoin – $100, invested in this token in early October, at the end of December, gave a net profit of $ 179.
In general, at the end of the fourth quarter, the average return on investment (ROI) in the top 5 cryptocurrencies was 100%. At the same time, it turned out to be four times less compared to the end of 2017, when bitcoin reached its previous maximum value.
Bitcoin: spread and earn
At the end of 2020, the spread between the maximum and minimum bitcoin prices ($29,245 and $4,107) exceeded $25,000 and became its historical maximum. This is almost a third more than 2017, which was also marked by a rally in the world’s largest cryptocurrency.
Read also: how the bitcoin rally in 2020 is different from the previous ones
Due to the rapid growth in value at the end of the year, the Sharpe ratio of bitcoin is significantly higher than traditional market benchmarks. The Sharpe ratio is calculated as the ratio of the average risk premium to the average deviation of assets: conventionally, an investment is effective if the unit of risk accounts for more than one unit of return.
At the end of 2020, Sharpe’s ratio for bitcoin was 2.11. Similar indicators for gold, the S&P500 index and oil are 1.35, 0.69 and 0.52, respectively.
At the end of the 4th quarter of 2020, the correlation between bitcoin one-day returns and traditional assets turned out to be close to zero (the indicator for eight assets out of 11 turned out to be below 0.1), indicating that there is no relationship between bitcoin movements and traditional market benchmarks. .
At the same time, the correlation between quotes of the same asset at the end of the quarter is significantly higher (the indicator for nine of the 11 assets is higher than 0.7). There is no economic justification for such a relationship, so an incorrect correlation can be assumed. You can read more about the relationship between these indicators in our research.
The average daily earnings of miners on the bitcoin network in the fourth quarter of 2020 ranged from $10 to $30 million. These figures are significantly higher than the previous quarter indicators, where from $ 7 to $ 12 million.
The average commission per transaction on the bitcoin network for the period October to December increased from $3.06 to $5.9. A similar figure for the Ethereum network for the same period fell from $3.03 to $2.2.
The share of commission earnings of miners on the bitcoin network at the end of 2020 amounted to 7% of their total remuneration, the amount of which for the reporting period was $ 5 billion, this is 4 percentage points. higher than the end of 2019. At the same time, the same indicator on the Ethereum network is 28% at once – compared to the previous year, it grew by 24 pp at once.
Read also: Ethereum Generous Commissions – Bug or Scam?
At the end of the quarter, the average number of active wallets where the supply of bitcoin cash is stored increased from 980K to 1.06M per month.
Slightly more than 70% of the total value of bitcoins falls on wallets with balances from 10 to 10,000 BTC. Moreover, the number of wallets of this size is almost 151 thousand, which is less than 1% of the total.
Between July and September, the number of largest BTC wallets owned by cryptocurrency exchanges fell from 12 to 9. Two of them are owned by Binance and Kraken, one is owned by Huobi, Bitfinex, Bittrex, CoinCheck, and BITMEX. The largest wallet belongs to Huobi – at the time of publication of the material, its balance is $ 5.1 billion.
At the end of 2020, the volume of funds blocked in decentralized financial markets (DeFi) was $15.34 billion, between October and December, this figure increased by 37% compared to the previous quarter.
The landing platform Maker is again the market leader – on January 13, 2021, the volume of blocked funds on it amounted to $3.93 billion. Its competitor Aave is in second place, and the decentralized exchange Uniswap has dropped to third.
The largest share of funds in DeFi services falls on loans – accounting for 46% of the total market. Decentralized exchanges (32%) and derivatives (12%) followed.
Read also: Credit Bubbles and Multiple Profits: What’s Happening in the DeFi Market
ICOs and IEOs
In the period October to December 2020, the volume of funds raised through ICOs and IEOs amounted to $220 million, which is 30% lower than the previous quarter. One third of this amount is accounted for by blockchain projects. However, if we take into account the number of projects, and not the amount of funds raised, then the vast majority – 26% – will fall into the DeFi category.
In total, in the period 2013 to 2020, $33.6 billion was raised through ICOs and IEOs. In recent years, the volume of these funds has decreased significantly – for the whole of 2020 it amounted to only $0.7 billion, which is only 2% of the total amount raised over the last eight years.