The twists and turns of 2020 made it arguably the best year on record to be a trader, especially if you were involved in cryptocurrencies. May’s third Bitcoin halving, coupled with the euphoric market volatility that swept global markets, made 2020 a year of gains and opportunities for crypto traders.
By November, it was already clear Bitcoin (BTC) and other major cryptocurrencies had cemented their status as a recognized asset class among retail and institutional traders alike, having outshined all other major asset classes in the world. Bitcoin’s renewed bull run deservedly grabbed the headlines across mainstream finance and made the global retail crypto trader the champion of 2020 in the investment world.
Related: Did Bitcoin prove itself to be a reliable store of value in 2020? Experts answer
Unlike the gains in mainstream financial markets, crypto’s bull run did not evolve from the massive stimulus packages unleashed by governments and central banks that helped prop up equity and bond valuations. Bitcoin increased organically thanks to a growing global retail base, compelled by the asset’s growing allure as a store of value.
Above all, crypto’s global accessibility meant retail traders across the world were able to have their voices heard beyond the crypto ecosystem. Crypto’s universality provided a growing pool of traders with the means to express their market positions and uncover newfound market opportunities. It is no coincidence then that Bitcoin finished as the best performing asset class of 2020 — in no small part, due to the newfound aspirations, entrepreneurialism and risk-taking of the global retail crypto trader.
The 24/7 nature of crypto plays into traders’ hands
The evolving 24/7 nature of the crypto market allowed traders from anywhere in the world, at any time, to capitalize on the increase in market volatility throughout 2020. In this way, the year’s energetic markets created a unique backdrop to play the markets, assisted by the growing sophistication of new trading products and services. In this evolving market landscape, global crypto retail traders began to capture the headlines in mainstream investment circles once again.
With Bitcoin’s market capitalization surpassing over $350 billion in November, crypto captured volatility better than many had anticipated. As a result, crypto proved to be a hugely efficient asset for global retail traders to successfully navigate the economic and political uncertainties of 2020 — a trend that should continue into 2021.
U.S. presidential election personifies 2020’s Bitcoin bull run
This year’s global market volatility arose largely from the macroeconomic and political decisions that unfolded in the wake of the COVID-19 pandemic. Perhaps 2020’s market volatility culminated with the U.S. presidential election. The election caused not only a stir in markets but also produced a surge in options contracts tied to the U.S. election.
Crypto played a core role in this development, with decentralized and crypto exchanges offering a plethora of prediction-based futures markets tied to the election. The surge in open interest in Bitcoin futures following President-elect Joe Biden’s nomination reflected the widening appeal of crypto as a tradable asset class. Crypto options can capitalize on that demand even further by leveraging the appeal and ease of prediction markets, with simple, engaging and intuitive products that reflect the market’s instincts and desires of a rapidly growing user base. The 24/7/365 makeup of the crypto market makes this all the more possible.
Bitcoin’s ability to withstand major macro events, such as back-to-back U.S. presidential elections, Brexit and, of course, COVID-19 are proof of its status as a more mature asset class. As John Authers recently pointed out in an opinion piece in Bloomberg:
“For the time being Bitcoin is showing some signs of growing maturity as an asset class — and it has endured far longer now than the average tulip.”
It is fair to say that cryptocurrencies have lost much of their negative associations of being referred to as “a craze” or more famously by Warren Buffet as “rat poison squared.” Larger industry players are buying Bitcoin and other cryptocurrencies because they are an alternative store of value and gaining recognition as the most complex yet desirable currency to ever exist.
As 2020 drew to a close and traditional markets were looking far more stable than witnessed earlier in the year, investors weren’t necessarily choosing between traditional investing and crypto trading, but rather recognizing how they could co-exist.
As we have entered 2021 with positivity and hope that the global COVID-19 pandemic will be neutralized, it’s safe to say that traders and investors at all levels, from retail to large corporates, will be keeping a close eye on Bitcoin and other cryptocurrencies this year.