Crypto is beating gold as 2020s top asset so far – Economic Times

By Joanna Ossinger

A cryptocurrency mania known as decentralized finance has helped to turn digital currencies into this years best-performing asset by far.

The Bloomberg Galaxy Crypto Index of digital coins is up about 65% in 2020, exceeding golds jump of more than 20% as well as returns from global stocks, bonds and commodities. A key reason for the move higher is a surge in Ethereum, which accounts for more than a third of the crypto gauges weight.

Increased adoption of decentralized finance, or DeFi, has driven the climb in Ethereum, which appears to be maintaining its platform leadership status in the sector, said Mike McGlone, a strategist at Bloomberg Intelligence.

DeFi ports financial functions onto digital ledgers called blockchains, allowing people to do things like lend or borrow funds and earn interest in a savings-like account without the need for traditional intermediaries such as banks. Its growing popularity is part of a wider trend of increased blockchain usage. Many DeFi applications are run on the Ethereum blockchain.

Crypto markets have done well during the Covid-19 crisis partly because Bitcoin becomes a refuge, like gold, when risks multiply, according to Marc Fleury, chief executive officer of crypto asset management and financial technology firm Two Prime.

A purely ethereal instrument performs well when the real economy is on pause, he said.

The Bloomberg Galaxy Crypto Index tumbled 6.4% on Monday as the pandemic hurt sentiment across a number of assets, highlighting the risk of sharp moves. The gauge has retreated more than 20% from an August high.

Overall, investor interest in cryptocurrencies is broadening as derivatives markets for Bitcoin and Ethereum expand.

DeFi led to a surge of interest in Ethereum contracts, said Aziz Zainuddin, chief product officer of Fasset, adding retail cryptocurrency users have increasingly turned to derivatives to maximize their returns.

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Crypto is beating gold as 2020s top asset so far - Economic Times