Cryptocurrencies – The Year in Review

Posted on December 30, 2019

By Natalie Lord

As the year comes to a close we review how the cryptocurrency industry has fared and look ahead to 2020 to ascertain what we can expect going forward. We look at how the key currencies have performed and consider the role they now play in our lives compared to previously.

Over the year, we’ve seen continued price fluctuation and volatility in the cryptocurrency markets, although most key cryptocurrencies have maintained an upward trajectory. In spite of some naysayers remaining hesitant to invest in cryptocurrencies, they have outperformed other major asset classes, and not for the first time.

It’s true that they’re trading down significantly from the record highs of December two years ago, but large-cap cryptocurrencies have nonetheless had a phenomenal 12 months and remain one of the strongest success stories of the decade.

Comparatively, they have increased far above annualised returns of US equities, commodities and bond markets this year. That’s in spite of a rocky start to the year when the leading cryptocurrencies had a disappointing run, underperforming all other traditional asset classes in terms of return of investment numbers. However, the slow jog soon turned into a sprint, with cryptocurrencies well ahead of the other asset classes just four short months later, managing to retain their lead for the remainder of the year.

Not ten years ago, the world was in the midst of a financial crisis. Since then, stocks have recovered, the S&P 500 has gained 369% and the Dow Jones Industrial Average is up 326% over the same time period. That all seems good until you compare it to the performance of Bitcoin. Bitcoin has risen an exponential 12 million per cent over the same time frame minus one year. In March 2010, 1 BTC was trading at US$0.05.

Its success is, in the most part, due to high volatility and liquidity which enables investors to trade between digital and fiat currencies quickly and easily to maximise returns.

This year alone, Bitcoin is up 100% since the start of the year. Ether is also up, but by a slimmer margin of 35% year-on-year. Not all coins remain ahead of the game though. XRP is down 25% from its high in January.

What has been of significance in the cryptocurrency industry this year is the change of attitude towards the medium. There have been a number of key announcements that indicate cryptocurrency is becoming more mainstream.

The Central Banks of the US, Europe, China and Ghana announced that they’re looking at creating their own central bank digital currencies.

The owners of the New York Stock Exchange launched Bakkt, a platform that enables Bitcoin to integrated with much greater efficacy into mainstream markets by offering physically settled Bitcoin futures contracts.

Fidelity Investments began cryptocurrency custody and trade execution operations, becoming the first major institutional player to do so.

And Facebook’s announcement of Libra, an asset-backed stablecoin, propelled cryptocurrencies into the social media sphere. With access to an immense user base, Libra has the potential to bring cryptocurrencies into everyday lives with great success.

With so much going on in the space, 2020 is going to be an interesting year for cryptocurrencies and certainly a sector to watch.

 

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Singapore Cryptocurrency and Blockchain Industry Association

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