What does cryptocurrency give us?

All calculations are given in accordance with the statistics published at the time of 2019, because only after the close of the 4th quarter, you can conduct a comparative analysis. In 2019, despite the unstable market situation, BTC significantly outperformed other cryptocurrencies. Performance indicators emphasize the nature of BTC as an effective means of hedging global risks and stagnation, as well as a highly profitable asset. With a simple buying and holding strategy, BTC could give investors 90% of its annual return in 2019. By comparison, the Nasdaq, one of the world’s most popular market indices, rose 38%, while the SPX grew about 30% a year. Despite the rather outstanding figures, these figures look small, compared to the profitability of BTC.

It was also possible to observe a similar story in the commodity space. WTI and gold showed good results in 2019, especially in 2Q 2019. Yields on the two leading commodities were 38% and 21% per year, respectively. However, these figures are much lower than provided by BTC.

By the way, the bonds did not even come one step closer in terms of yield. Yields for 10 years closed at around 1.9% at the end of the year, after reaching a historic low of 1.4% in September 2019. Growing geopolitical tensions, disputes in world trade, political unrest and uncertainty – these are some of the main topics that dominated on the world market in 2019.


Trade talks between the United States and China

That stimulated investors’ expectations between a deal and a full-scale trade war. The Brexit saga has generated skepticism about future growth. In addition to the unrest around the world, investors could hardly find a decent profitable asset in such a complex investment landscape. However, these phenomena became part of the reasons that supported the prices of BTC in 2019.

In 2019, more than 20 central banks around the world lowered their base interest rates due to a slowdown in economic expansion and lower inflation expectations. Fed, RBA, RBNZ – they all reduced their interest rates in 2019 by 75 bp. each. While the ECB cut only 10 bp, it resumed its asset purchase program.

Price volatility remains one of the priority ways for crypto-investors to earn money, and data suggest that BTC has been less volatile on average over the month. The BTC / USD Volatility Index in December averaged 1,342.61 per month, making the 2019 average monthly range equal to 2,653,183. This number is slightly lower than the average in 2018, but higher than in 2017. From this point of view, BTC prices in 2019 were less dynamic, although BTC generally remained highly speculative.

Despite speculative demand, the predictability of BTC prices in 2019 has improved somewhat, due to the rapid expansion of trade in derivatives. The rapid development of futures, options and perpetual swap markets has significantly improved the process of opening BTC prices, especially with the increasing participation of institutional investors. The participation of institutional investors continues to stimulate the development of crypto-derivative markets in 2020. At the same time, retail investors have also benefited from increased availability and transparency of trading data and improved quality of market information.

Historically, relative changes in cryptocurrency markets have been closely linked to three-month cycles. These quarterly cycles are often characterized by a sharp rise or fall in prices, and not all quarters end with less than 10% change in prices. The second and fourth quarters of any year were historically the most positive periods, while the first and third quarters were the most negative periods. As a rule, the 2nd quarter is the best quarter for all cryptocurrencies.