A Q1 market report from social trading platform eToro, gives insight into the crazy 2020 crypto market so far. It looks at Bitcoin’s digital gold reputation, and Ethereum’s DeFi sector, examining the tests that they’re currently under. This eToro report sheds light on the wild 2020 crypto market, so let’s take a look.
Bitcoin has been dubbed “digital gold” but it’s not behaving like gold
The eToro report starts off with their own Bitcoin market. eToro discovered that 35% of users hold BTC, and 97% of them are long on the coin. The Tie, an eToro partner, compiled Twitter data that shows there’s some positive investor sentiment: Tweets mentioning Bitcoin are up by 47% in Q1, and 60% of those tweets are positive. This is in spite of the fact that we have a global COVID-19 pandemic going on.
Bitcoin’s reputation as “digital gold” is being tested in the virus-fueled global economic crisis, so how is it holding up? According to social media, the perception that Bitcoin is “digital gold” is still going strong. According to TheTie’s data, comparisons between gold and Bitcoin have grown significantly since December 2019. This is as Bitcoin’s comparisons to the S&P 500 have shrunk.
However, the data tells a different story. Bitcoin’s similarity to the S&P 500 has just reached an all-time high. Bitcoin and gold’s correlation is solid but not as good as its correlation to the S&P 500.
Still, eToro US’ managing director believes that Bitcoin will eventually reach the digital gold status (more on that later). If you want to trade crypto, why not trade on the platform writing the reports?
Bitcoin Hits All-Time High Correlation with the S&P 500. What Does It Mean?
— CryptoElite v3.1 (@CryptoEliteNews) April 14, 2020
DeFi took a hard hit on Black Thursday
Ethereum’s decentralized finance (DeFI) sector, took a major hit on Black Thursday – which is what the market crash that occurred last month is being called. The crash took out over half of the value that was locked in DeFi, which peaked at $1.24 billion in February 2020. March’s market crash sent it plummeting towards a close of $552 million at the end of Q1.
(Total Value Locked (USD) in DeFi. Image: DeFi Pulse)
Pivoting to Ethereum, eToro’s report showed how the March market crash impacted MakerDAO, which is the blockchain’s most popular dApp. MakerDAO accounts for 50% of the value in the DeFi landscape on Ethereum.
Now, eToro has shown that MakerDAO isn’t actually really decentralized. The Foundation had to step in to stop its smart contracts from going down the drain amid the crash.
What does eToro have to say about all of this?
Guy Hirsch, MD of eToro US, told Decrypt that he believes that Bitcoin’s “digital gold” narrative will still happen. He said that while Bitcoin’s price may have taken a turn for the worse, it’s still performing better than the S&P 500.
“Bitcoin did perform better than the S&P 500, down 10.45% in Q1 vs. the S&P 500 which was down -19.92% at the same time period,” he said.
“We think that Bitcoin’s high volatility might explain some of these price movements in the short term but over the course of the next few years believe that the fact it is decentralized sound money will reveal itself to many new potential investors, and they will diversify their portfolio to include Bitcoin as a hedge against government failure.”
As the eToro report sheds light on the wild 2020 crypto market, we can see exactly how Q1 played out – and it’s not too pretty. On the flip side, often unpretty times are a good time to enter the market.
Traders should stay informed, as Crypto market goes through tumultuous first quarter
If one thing’s evident from this report, it’s that the cryptocurrency market went through one hell of an interesting time during the first quarter of 2020. Even as the eToro report sheds light on the wild 2020 crypto market, many things remain unanswered.
When will Bitcoin fall into the patterns of the “digital gold” narrative, and how did MakerDAO get its decentralized reputation when it had to be bailed out by its Foundation? Yikes. Things are looking interesting.