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2020 proved to have significantly paved the way for Bitcoin. Though the coin’s price did fall on Black Thursday a year ago, the rest of the year demonstrated BTC’s capacity to survive extreme macroeconomic turbulence. In reality, the cryptocurrency was able to build its credentials as a long-term store of value.
With retail investors increasingly being a core demographic in Bitcoin’s investor circles, the digital assets industry is becoming ever more reliant on BTC’s performance. This is particularly relevant for new investors and those moving from conventional finance and turning to BTC and digital assets to diversify their portfolios.
And there’s every reason to do so. Consider this: according to Skew sector results, BTC’s YTD in 2021 outperforms any of the other highlighted investments except one – the world’s biggest altcoin, Ethereum.
Arca reached the same conclusion in a recent study. According to the same, the financial assets business is aligned with Bitcoin and only Bitcoin among several potential buyers.
However, although this strategy has its advantages in the past, does it really make sense today? That is a more difficult question to address, particularly since the report noted how numerous sub-sectors of the digital assets market have increased by greater margins YTD.
The report also pointed out that a “rotation” is happening within digital assets and every single “unique sector of digital assets” has outperformed Bitcoin and cryptocurrencies’ YTD. It went on to note that,
“These other sectors have nothing to do with “purchasing power” or “inflation protection” or “digital money”, and instead are equity-like investments in companies and projects that are utilizing blockchain technology in completely different forms.”
This also makes the changing of the old guard a promising opportunity for spaces like DeFi in the coming years.
According to DeFiPulse, the overall amount trapped in DeFi is on the brink of registering a new ATH, at about $44 billion. Since the digital assets industry, unlike the walls of Wall Street, is meant to bring more clarity to customers, one might argue that DeFi is well suited to do so and make tremendous improvements in the field of finance in the coming years.
For example, Glassnode data showed that in the case of DeFi tokens such as Aave, not only have their values increased dramatically, but receiving addresses have recently reached multiple-month lows on the charts.
This is an indication that buyers are looking at these unconventional investments as a long-term bet, which adds credence to DeFi’s overall equity strategy and reputation.
While many investors are still wary of younger markets, Arca points out that the openness of the DeFi room is the most important differentiator. In terms of the DeFi ecosystem’s security, it added,
“Do hacks happen in DeFi? Sure, sometimes (though Aave itself has not been hacked). But when they do happen, you know immediately.”
While the digital assets market has been synonymous with Bitcoin, going forward, it is no longer going to be a one-horse race from an investors’ point of view. One can argue that we are still in an early era with regard to crypto and as the infrastructure builds, investors will have quite a host of offerings to choose from in the near future.