2020 proved to have laid the groundwork for Bitcoin in a significant way. While the coin did see its price collapse on Black Thursday a year back, the remainder of the year was a testament to BTC’s ability to withstand intense macroeconomic turmoil. In fact, the cryptocurrency was also able to establish its long-term store of value credentials.
With institutional investors now becoming a key demographic in Bitcoin’s investor circles, the digital assets market is even more dependent on the success of BTC. This is true, at least for new investors and those who are migrating from traditional finance and looking at BTC and digital assets as a way to diversify their portfolios.
And, there’s good reason to believe so too. Consider this – According to market data provided by Skew, BTC’s YTD in 2021 outmatches all the other highlighted assets except for one – the world’s largest altcoin, Ethereum.
Source: Skew
A recent report by Arca came to the same conclusion. According to the same, for many new investors, the digital assets market is synonymous with Bitcoin and only Bitcoin.
However, while this approach did have its merits in the past, does it make sense anymore? That’s a more difficult question to answer, especially since the report pointed out how various sub-sectors in the digital assets market have hiked by greater margins on a YTD basis.
Source: Arca
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.
Source: DeFiPulse
The total value locked in DeFi, according to DeFiPulse, is once again on the verge of registering a new ATH, at around $44 billion. Since the digital assets market is supposed to provide greater transparency to investors, unlike the corridors of Wall Street, one can argue that DeFi is best equipped to do so and make tremendous changes in the world of finance in the coming years.
For instance, data from Glassnode highlighted that in the case of DeFi tokens like Aave, not only have its values surged substantially but receiving addresses hit multiple-month lows on the charts recently too.
This is a sign of investors looking at these alternative assets as a form of long-term investment, an observation that once again lends credibility to DeFi’s overall market approach and standing.
While many investors still have their reservations about newer sectors, Arca pointed out that the transparency of the DeFi space is the biggest differentiator. With regard to the security of the DeFi ecosystem, 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.
