Despite significant volatility of the crypto market amidst COVID-19’s economic impacts, 2020 has shown significant progress regarding the crypto ecosystem and its infrastructure and regulation. When it comes to investing in crypto in 2020, there is a lot to consider.
The Crypto Market as a Whole
Firstly, a quick overview: Cryptocurrency is a digital asset that is used as an investment and for online purchases – being decentralised, their value is determined by supply and demand. Crypto operates on blockchain technology, which allows data to be stored globally across a huge number of servers – entries can be seen by anyone on the network, thus making it secure. Whilst the most well-known forms of cryptocurrency are Bitcoin and Ether, there are a wide range of alternatives; Libra is an example, created by Facebook. Having existed for around a decade, crypto now forms a notable percentage of many investor’s portfolios – nonetheless, it is a risky investment, as it is volatile, unregulated, and does not generate income.
In 2020, various changes have occurred within the crypto market. Stablecoins (aiming to be a hybrid of ‘normal’ currency and crypto tech) have made an appearance, Bitcoin alternatives are seeing increasing success, and investment methods are becoming more varied.
Regarding COVID-19, digital assets were impacted. Bitcoin’s value was more than halved throughout February and March, whilst Ether fell more than 66% in the same period. However, crypto currencies such as these and others are unstable in nature and have continued a volatile trend.
Where you should consider investing
In deciding where you want to focus your efforts, there are a wide range of options to choose from. Two significant forms of crypto that have seen significant success in recent years are Ethereum and Bitcoin. Often traded on a short-term basis, success in these forms of crypto will rely on experience, risk management, and a level head. There are a number of reasons as to why Ether and Bitcoin provide good investment opportunities; for example, the main focus of financial reporting tools continues to be on Ethereum and Bitcoin, providing an indication of their confidence in these financial assets retaining their importance and growing with an increase in publicity. Whilst there are several other options available when it comes to crypto, many of these chains have thus far provided less meaningful economic value, and therefore show fewer signs of success.
Ethereum looks to gain against the liquidity and volume advantages of Bitcoin as financial products continue to expand to Eretheum.
For a brief overview, Ether acts as part of the Ethereum blockchain network, an open source distributed ledger technology. This allows business to operate without a central authority, and new distributed applications can be created for the Ethereum network relatively easily.
Eretheum has notable advantages over other forms of cryptocurrency – namely, it is diverse, trust-minimised, and has non-financial use. It is used to interact with a range of financial assets, in a way that would otherwise not be possible. It allows for decentralised finance – on the other hand, Bitcoin cannot benefit from assets that would otherwise increase bitcoin economic activity.
Finally, Ethereum has been ruled to be a non-security by the US Securities and Exchange Commission, a factor that may encourage its use as a public blockchain platform – the announcement of this ruling in 2018 caused the price of ether to rise immediately.
Recently, Ether has reached a high in its dominance of the broader crypto market, of over 14%. Trading Ethereum can provide a great investment opportunity – if you are using an online exchange, be sure to use a secure, authorised trading platform with benefits like low fees and immediate deposits.
Bitcoin is the oldest form of cryptocurrency, established in 2009. Regarding the future of this cryptocurrency, the final Bitcoin is expected to be mined around the year 2140, indicating a long future.
Given recent market events and the crypto market in 2020, bitcoin has had an interesting time – although 2020 saw prices surge from $4000 to $12000 USD, this bull market may be showing signs of coming to an end. Many experts expect any drops below $10000 to be bought quickly.
Other experts are hopeful that Bitcoin will continue into six-digit values, including Theta Seek, Simon Dedic, and Mark Yusko. This would be a result of consistent buying of Bitcoin on a regular basis, however it is also possible this will not happen – with Bitcoin’s performance struggling throughout COVID-19, many others believe an upward trend to this extent is less likely.
Ultimately, many investors believe that Bitcoin is the cryptocurrency with a high probability of inclusion within mainstream portfolios and is of a more conservative nature within the crypto market. Over time, as crypto grows as an investment opportunity, its volatile nature will likely lessen – with this being said, it is a high-risk investment, and investing in it is something that you will have to decide for yourself.