Coinbase Prime, the arm of Coinbase dedicated to institutional clients, released its annual summary for 2020 on Friday. Here is a review of the highlights from the report:
Bitcoin Remains the Undisputed King of Crypto
Institutional investors chose to invest their funds into Bitcoin over any other cryptocurrency in 2020. This is to be expected, Bitcoin was the first and original Blockchain, has the largest market cap, and is the most mature of all offerings. Bitcoin breaking its all time high convinced many institutional investors, finally, the Bitcoin was the real deal.
What is very interesting in the report, are the reasons given by institutional investors as to why they are investing in Bitcoin. The answers given line up exactly with the value-proposition of Bitcoin:
- Store of Value: The store of value has been a mainstay for Bitcoins value-proposition since the early days. Only 21 million Bitcoins will ever be printed. To put this into perspective, there is not enough Bitcoin for every millionaire on Earth to own 1 whole Bitcoin.
- Hedge against inflation: Hedge against inflation is an issue that is coming to the forefront with covid-19 and the need for governments around the world to inject stimulus into their economies. In the report, mentioned along with hedging against inflation, was to protect value against new monetary policies. In 2020 our world changed, and institutional investors are looking to Bitcoin to prevent Central Banks from affecting their net worth through monetary policy.
- Treasury Reserve Asset: As 2020 came to a close and 2021 started, more and more news started breaking about major companies shifting a percentage of their reserve assets to Bitcoin. In almost all the cases cash was the asset that was transitioned to Bitcoin. This ties into worries about inflation and monetary policy – Huge corporations are protecting the value they have on their books by placing a percentage of that value into Bitcoin
Ethereum solidifies its place as a Blue Chip Crypto
Bitcoin remained the most sought after cryptocurrency by institutional investors, but 2020 marked the year where Ethereum entered the fold. Coinbase reported an increase in the amount of institutions also buying Ethereum – for all the same reasons they were buying Bitcoin. On-chain activity from Ethereum already signals it has a very bright future, and institutional investment serves as further confirmation of a great future for Ethereum
DeFi is a retail only game, for now
One of the most interesting aspects of the report is decentralized finance, which saw a boom in 2020. The majority of activity for DeFi happens on the Ethereum blockchain, and despite institutions investing in Ethereum, the majority opted-out of DeFi.
The report goes on to state that DeFi has a very bright future, and Coinbase expects to see institutional investment into DeFI increase when more maturity comes to the space