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Bitcoin, the king of cryptocurrencies, and equity funding to the rescue

Bitcoin is the cryptocurrencies king that wavered with coronavirus. However, by 2019, the value of the cryptocurrency had almost doubled, to the point where Goldman Sachs hailed it as the top-performing asset. 2019 was also the year of equity funds, substitutes for ICOs.These funds have indeed taken over, according to CB Insights, with $2.79 billion raised from these investors.

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Will 2020 look like the year before? The current global crisis complicates any prediction. What is certain, however, is the strong performance of Bitcoin in 2019. For CB Insights, “Bitcoin was king” until the coronavirus and the movement of liquidation of crypto assets by investors.

In its study Blockchain Report 2020, the research firm pointed out that the value of this cryptocurrency has almost doubled in the last year. However, it pointed out that media coverage was much less than in the past.

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2020, the first major crisis and test year for Bitcoin?

However, for financial players, including traditional ones, Bitcoin’s top quality is its performance in terms of yield. In fact, Goldman Sachs has identified Bitcoin as the best performing asset in 2019.

Like the traditional financial market, the prices of crypto-currencies collapsed in the wake of the coronavirus crisis, shattering the concept of safe havens in the process. At least that is the short-term analysis.

However, 2020 might not be such a catastrophic year, since, after the plunge, Bitcoin’s value returned to growth and stabilized at around $6,000. On March, 13th, at its lowest observed price ($3,932), Bitcoin was showing losses of about 49% compared to its price of ~$7,700 at the beginning of the day. The digital coin was also trading at its lowest level in almost a year.

The crisis could be an opportunity for Bitcoin (and crypto-currency supporters) to demonstrate its value as a safe haven. The performance of this asset was not the only noteworthy element of 2019 for CB Insights, which is observing a clear change in the methods of financing companies in the sector.

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Two years earlier, ICOs had enabled players to raise $7.8 billion. However, the boom has now passed. In 2019, their amount fell by 95% to $371 million. However, to raise funding, companies have been able to rely on more traditional methods, such as private equity.

$2.7 billion in equity financing

These funds have indeed taken over, the study noted, with $2.79 billion raised from these investors. However, it was not enough to compensate for the collapse of financing (-30% over one year). A return of ICOs, including in France, would not be totally outlawed.

CB Insights noted a certain openness on the part of regulators, but within a stricter framework and under the supervision of the competent authorities, such as the SEC in the United States. This favorable outcome could be explained by the availability of more efficient tools for monitoring crypto networks, including those of Chainalysis, Elliptic or CypherTrace.

Nevertheless, “although the United States has shown openness in some areas of cryptography, it represses others,” the firm pointed out in its annual study.

Finally, regulation may not be the main challenge for crypto players. The Blockchain Report reminded that the low use of dApps, the lack of network interoperability and the high volatility are “still obstacles to the massive adoption of crypto tools.”

However, 2020 is expected to be marked by the “explosion of blockchain service providers”, in particular exchanges and depositories. The objective for businesses is to be competitive by offering value-added and high-margin services.

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(Featured image by EivindPedersen via Pixabay)

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First published in CRYPTONAUTE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Michael Jermaine Cards is a business executive and a financial journalist, with a focus on IT, innovation and transportation, as well as crypto and AI. He writes about robotics, automation, deep learning, multimodal transit, among others. He updates his readers on the latest market developments, tech and CBD stocks, and even the commodities industry. He does management consulting parallel to his writing, and has been based in Singapore for the past 15 years.