The year 2020 was particularly rich. Events have followed one another at an astonishing speed.
The pandemic has intruded into our daily lives and brought the world to a standstill. However, this period was not a restful one for cryptos, but their dematerialized nature allowed them to make the most of it. As the end of the year approaches, I offer you a retrospective of the Financial Peak year in 5 highlights.
Thursday, March 12, 2020
The beginning of the year seems far away to me, so many twists and turns we have experienced. The month of January was relatively calm, with some worries about a mysterious illness in China. Then, in February, we were all sucked in by the events in China. Deserted streets and highways, teams in hazmat suits, the announcement of the first deaths, … The world held its breath for almost 2 weeks, then panic took over. Governments resorted to strict but necessary measures and markets started to fall.
The various stock indexes were at their all-time highs, and Bitcoin was at around $10,000. The rest happened very quickly. The market contained large leveraged orders that were gradually liquidated, causing a crash. The sudden drop was fueled by BitMEX, an exchange on which it is possible to have up to x100 leverage. At the time of the fall, thousands of traders were caught short, causing cascading liquidations. On that day, the price of Bitcoin fell to $3,600, before the exchange was closed for „maintenance“.
On Thursday, March 12, 2020, Ethereum had its worst day ever, falling from $194.97 to $95.87 (-51%) just 24 hours later. This sudden drop caused significant liquidations within DeFi, closely linked to the performance of the ether.
The flow from institutional to the crypto market
We’ve seen so many announcements of interest in Bitcoin that I can’t list them all here. For me, it was MicroStrategy that led the way in announcing that it had allocated $250 million to Bitcoin as a result of the halving.
After MicroStrategy, it was Square’s turn to reveal his position. Finally, PayPal announced the opening of its payment network to cryptographic transactions. Since then, announcements have been made, and institutions are rushing to use Bitcoin. The arrival of institutional and financial professionals allows to structure the Bitcoin ecosystem, making it more accessible.
The ETH 2.0 update
Since its launch, Ethereum has been based on the Proof of work consensus mechanism. In 2015, this choice was perfectly logical, the Proof of work being a proven and secure system. However, this mechanism lacks speed and efficiency for a blockchain that intends to be a global computer.
The current model has repeatedly shown its limitations. During periods of extreme feeling – euphoria as well as despair – the network is congested, not all transactions are completed and some transactions are charged several tens of dollars to the user.
The advent of Ethereum 2.0 thus materializes this passage towards the Proof of stake, which will be accompanied by several technical improvements, including sharding. Phase 0 of the Ethereum 2.0 project began on November 4, 2020.
The year of stablecoins and DeFi
The ether has recovered well from March 12, 2020, even if it is still far from its ATH. Ethereum’s good year has benefited the DeFi and the stablecoins, both running on its blockchain. The mass of the stablecoins exploded this year from 5 billion dollars to more than 25 billion. Tether remains the leader, but the USDC has experienced strong growth.
This craze for stable corners is partly linked to the performance of DeFi this year. We have moved from the era of ICO tokens to DeFi tokens. As a result, more than 10 billion dollars of assets are currently invested in DeFi.
Finally, state stablecoins – or central bank digital currencies – have also received the attention of governments in between stimulus packages. China, the United States, the Bahamas and even the European Union are trying to create digital currencies. The pandemic has been a gas pedal of the transition to digital and central banks have realized that their monetary policy would be even more efficient if they relied on a digital currency.
The new Bitcoin ATHs
Bitcoin’s third halving took place in May 2020. The 2 previous ones resulted in spectacular price increases in the following year. At the first halving in 2012, there were only 25,000 active Bitcoin addresses. During the second one, in 2016, there were