Bitcoin outshines major asset classes
With a simple buy-and-hold strategy, bitcoin could give investors a 90% yearly return in 2019. In comparison, the Nasdaq, one of the best performing market indexes globally, surged 38%, while the SPX rose about 30% annually. However, despite the outstanding performances, those numbers look small when compared with bitcoin's return.
We also see a similar story in the commodities space. WTI and gold both were well-performed in 2019, especially in 2H19. The two leading commodities generated 38%, and 21% yearly returns, respectively. Still, the numbers are way below what bitcoin has provided.
Bonds did not even come close. The 10Y yield closed at around 1.9% at the year-end, after touching the historic low of 1.4% area in September.
Figure 1: Bitcoin vs. Macro Assets Yearly Returns (Source: Tradingview)
Moreover, the dovish shift of global central banks could be another piece of the puzzle here. Data shows that there were over 20 central banks around the world had cut their benchmark interest rates in 2019, attributed by the slowing economic expansions and lower inflation expectations. The Fed, the RBA, the RBNZ all had delivered a 75bp-cut each in 2019. While the ECB had only cut 10bps, it restarted its asset purchase program. As the easing and dovish narrative intact, the store of value characteristic in bitcoin could easily be under investors’ spotlight.
Less volatile but still…
Table 1: OKEx BTCUSD Index Monthly Ranges (Source: OKEx)
Altcoin back to where it started
Figure 2: Crypto Total Market Cap Ex-BTC (Source: Tradingview)
In our previous publication <2019: “Alt-Season” has come…and gone>, OKEx Perspectives pointed out that the shift of speculation demand, changes in investment appetite, and lacking institutional interest may have contributed to this altcoin divergence.
Figure 3: LINK beat major altcoins in 2019 (Source: Tradingview)
Moreover, the swift expansion of DeFi is set to be a gamechanger for tokens such as ETH. No doubt that MakerDAO was the cornerstone of the whole DeFi development in 2019, it takes up half of the entire DeFi world in terms of total locked value. However, markets expect other players such as Synthetix and Compound will continue to catch up in the DeFi game. Regardless of who will be catching up faster, the continuing growth of DeFi could further shrink the circulating supply of ETH, which considered as an underlying bullish factor for ETH prices in the long-term.
We believe all these factors will continue to influence the markets. We could see the DeFi system becoming more diversified. The first CBDC could be born in 2020. China could play more proactive in blockchain applications. Libra could still be launched despite global regulatory challenges. Markets may find closer to see a real bitcoin ETF. Besides, bitcoin's halving, the increasingly crowded derivative markets, and the growing institutional interest in crypto, 2020 is set to be an exciting year for all crypto watchers and investors.