Throughout the past decade, a lot has been said about Bitcoin (BTC) and the future of cryptocurrencies. However, 2020 has so far been a defining year for the industry as current events bring to life what was predicted in the past.
The world of cryptocurrency has historically been exclusive to Twitter battles and private chats on Telegram. Even when Bitcoin received its brief moment of fame on mainstream media, mentions of the token were mostly in dismissal of its potential, with some prominent individuals calling the entire industry a scam soon to burst.
However, the tide of the turbulent relationship between traditional financial institutions and cryptocurrencies is changing. In 2020, former critics of cryptocurrencies such as JP Morgan have extended their banking services to Bitcoin exchanges as the predominant cryptocurrency’s impressive performance becomes undeniable.
Granted, the opinions of influential leaders in the world of finance hold certain sway over market trends. In 2020, however, it appears that the crypto world has defied most of its critics. Below are the top quotes from 2020 that defined the year’s trend. Some are prophetic, while others highlight the current state of Bitcoin and cryptocurrencies or opine on what will come next.
Crypto is better than cash?
All the way back in 2013 and 2014, Bill Gates, a philanthropist and the co-founder of Microsoft, was quoted saying that “Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”
In 2020, the relevance of Gate’s statement is increasingly magnified as Bitcoin continues to play a larger role in the world’s cashless future. Granted, cold, hard cash is still king, but a glance at global financial trends reveals a change in the tides. According to reports, cash transactions in most countries are disappearing, with cash payments accounting for 20% of all Sweden’s payments and 14% for South Korea’s. Additionally, health concerns about COVID-19 are expected to push the world closer to a cashless society.
However, it’s also evident that the end of cash might come at a cost. While cash is bulky and inconvenient in some ways, it offers the easiest way to transact anonymously. Digital cashless payment alternatives, on the other hand, require a middle man and do not maintain privacy. With more governments pushing for a move toward central bank digital currencies, Bitcoin and other cryptocurrencies are emerging as the best private centric- and censorship-resistant alternative.
Bill Gates’ statements about Bitcoin being better than cash is also seen in Bitcoin’s capped supply. Due to the coronavirus pandemic, which has impacted most of the world in 2020, governments across the globe moved to print more money to curb the economic crisis. Meanwhile, Bitcoin experienced a deflationary event in May. The halving of its mining rewards reduced the coin’s incoming supply by half. With this in mind, Robert Kiyosaki, a prominent investor and author of Rich Dad Poor Dad predicted that Bitcoin’s price will hit a high of $75,000 in the next three years.
All in all, events throughout the year have proven that Bitcoin, altcoins and blockchain technology are, at the very least, viable alternatives to cash, as they can enable faster payment times at higher transaction volumes and lowest costs. As Nasim Taleb, a statistician and former risk analyst, put it many moons ago: “Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.”
Ethereum outperforming Bitcoin
Despite Bitcoin’s price volatility in 2020, significant gains have been made, considering its current price is hovering around $18,000. However, Bitcoin’s success seems meager compared to the milestones Ethereum has achieved in 2020.
Excitement about Bitcoin’s halving event caught the attention of many in the crypto space for the better part of the year. It was a defining moment in 2020, as the price of Bitcoin is historically known to spike after a halving event. However, that talk was soon cut short by a new wave of excitement around the booming decentralized finance sector.
“DeFi” became the crypto space’s new favorite buzzword as developers created financial instruments and institutions that run autonomously on computers and freely accessible to anyone with a smartphone.
DeFi startups such as Compound allow anyone to start earning an estimated interest of about 7% a year in less than 30 minutes. Users on such DeFi platforms can lend and loan money using stablecoins without going through the cumbersome Know Your Customer verification procedures common among traditional financial institutions.
The runaway success of DeFi projects saw the amount of value locked in DeFi applications surpass $1 billion for the first time in 2020. Today, the total value locked in DeFi projects is over $14 billion.
Even the Coinbase crypto exchange injected $2 million worth of liquidity into a couple of DeFi projects, remarking that DeFi is “an essential part of an open financial system. DeFi tools are censorship-resistant, unbiased, programmable, and available to anyone with a smartphone.”
Despite drawbacks experienced by Ethereum’s network in the form of soaring fees resulting from increased demand for block space by DeFi apps, the network still managed to achieve major breakthroughs. In particular, Ethereum has begun Phase 0 of its transition from proof-of-work to a scalable proof-of-stake protocol.
Various market experts agree that Ethereum will mount a challenge over the dominance across the crypto and blockchain sector. The reality of Ethereum as an emerging force to reckon with was best captured by Richard Branson, an entrepreneur and owner of the Virgin empire, who said in 2014 that despite Bitcoin’s dominance, “there may be other currencies like it that may be even better.”
In a quote, Eric Schmidt, former Google CEO, once said, “The ability to create something which is not duplicable in the digital world has enormous value,” and that “lots of people will build businesses on top of that.” So far, the reality of this quote has materialized in 2020, with reports of an upsurge in the adoption of blockchain- and DLT-based business solutions.
As the COVID-19 pandemic pushed more institutions and organizations to look for digital workflow alternatives, digitalization across the globe has been particularly accelerated in international trade and other sectors hindered by intensive and inefficient paper workflows.
A report released by Trade Finance Global and World Trade Organization shows an increase in the number of DLT and blockchain-based projects with real-world use cases. According to the report, the push toward DLT and blockchain-based solutions was started in order to achieve increased workflow efficiency, reduce transaction costs and improve collaboration.
The unfortunate events of 2020 have brought out blockchain’s potential as a technology that facilitates collaboration in a digital world, automating trust and enabling digital scarcity for the creation of digital assets.
Crypto value lost to scammers
Another of Richard Branson’s quotes rings true in 2020: “People have made fortunes off Bitcoin, some have lost money.” This year will go down in history as the year of a revival for scammers and thieves in the crypto space. In the first 10 months of 2020 alone, crypto scammers stole over $1.8 billion. A blockchain forensics company reported that the value lost in 2020 as a result of crypto crimes surged by 160%.
In most cases, scammers took advantage of the booming DeFi sector, contributing about 21% of the total crypto value lost in 2020.
Combined with the lack of sufficient crypto education among the masses, increasingly sophisticated and aggressive schemes by scammers and thieves have made easy pickings of even more people. In addition, the frenzied profit-chasing that took place during the DeFi boom has provided crypto con-artists with a much larger capacity to cart away huge sums of value.
In July, the Twitter accounts of prominent public figures like Elon Musk, Bill Gates and Jeff Bezos were hacked to promote a Bitcoin giveaway scam. Other scammers used YouTube live streams with videos of unconsenting individuals such as Apple co-founder Steve Wozniak to scam people out of their Bitcoin. A whale alert report estimates that the scam market has increased by 2,000% since 2017.
Cryptocurrency outperforming gold
Mike Novogratz, CEO and founder of Galaxy digital holdings, said back in 2018 that he believes Bitcoin is digital gold, adding: “That means it’s the only one of the coins out there that gets to be a legal pyramid scheme. Just like gold is.”
Bitcoin has gone as far as outperforming gold in 2020. Returns from global stocks, bonds and gold commodities are up by 20%, while the Bloomberg Galaxy Crypto Index of digital coins has rallied by 65%.
Although one of the main reasons for this surge is attributed to the DeFi boom, market analysts believe crypto markets have also performed well thanks to the strengthening of the narrative that Bitcoin can act as a hedge in times of economic uncertainty.
While skeptics opine that the current surge is nothing more than a wild swing on a tide of DeFi liquidity, Tyler and Cameron Winklevoss, co-founders of the Gemini crypto exchange, have doubled down on their belief that Bitcoin is superior to gold. “Our basic thesis for Bitcoin is that it is better than gold,” said Tyler while speaking to the Financial Times back in 2016.
Even though Bitcoin gets its value from mimicking gold’s natural scarcity, durability and portability, the twin brothers believe that the emergence of asteroid mining technology could potentially reduce the scarcity of gold and dilute its value in the long run. In such a case, the capped supply of Bitcoin will lead to an increase in its value above gold. “Bitcoins are like gold bars with wings, That is why I and so many others, view Bitcoin and its network as gold 2.0,” added Tyler Winklevoss.
A win for decentralization?
As it seems, 2020 will go down as the year that saw Bitcoin and the cryptocurrency industry emerge from operating in strange and obscure lanes to a fully fledged mainstream financial instrument. The willingness of Paypal and Microstrategy in becoming affiliated with crypto is a testament to this.
According to a Harvard Business Review article, the global healthcare upheaval of 2020 has “revealed the weaknesses in our inability to deploy resources where they are mostly needed,” and that “blockchain solutions have been unleashed to address these challenges.”
Even before the pandemic, the world was moving toward a decentralized economic structure with a decline in the stigma attached to remote working. Even though there are inherent limitations in the current state of blockchain technology, development in the DeFi space and around projects like Ethereum are increasingly preparing the sector for a new financial future.
Bitcoin creator Satoshi Nakamoto once highlighted the superiority of decentralization over centralization, and how central banking is part of the problem: “The root problem with conventional currency is all the trust that’s required to make it work.” Well said, Satoshi.