Cryptocurrency markets have had their share of ups and downs this year, including the sharp sells-offs brought on by “Black Thursday” in March and May’s Bitcoin halving. Despite these swings, cryptocurrencies continue to outperform traditional asset classes and have seen significant gains year over year.

Chart of Bitcoin compared to main indices
Bitcoin performance compared to main indices.

Strong performance has also led to the increased popularity of lesser-known currencies, which are helping traders diversify their crypto portfolios while bringing new traders into the markets. Below, we dive into the top crypto trends of the year and analyze how they can help you to develop your trading strategy.

The Biggest Crypto Trends of the Year

While cryptocurrencies have experienced significant volatility this year, they have also seen strong performance and are enjoying increased popularity as a result.

Chart showing cryptocurrency gains in 2020
Cryptocurrency gains from January to October 2020.

1. Ongoing Growth

The most significant crypto trend of 2020 is undeniably the rate of growth. Compared to traditional asset classes, cryptocurrencies have had much higher returns, with several showing gains above 200%. This is especially notable when compared to asset classes represented by the Nasdaq and S&P 500, which have had more moderate recoveries following the collapse of the markets in March.

2. The Emergence of New Digital Currencies

The growing popularity of crypto is also leading to a proliferation of currencies such as Tezos and Cardano, many of which have been created over the past three years. In fact, there are currently more than 5,000 cryptocurrencies in existence, up from 2,000 just a few years ago. This sharp increase is providing traders with more opportunities to discover new currencies and get comfortable in the world of crypto trading.

3. Diversification of Crypto Portfolios

One of the other key trends of the year has been an increase in portfolio diversification. Traders are increasingly looking at Bitcoin as a safe haven and finding new opportunities in other currencies including Ripple and Ethereum. As outlined in the chart below, both of these currencies have seen significant growth since January, with Ripple having an 18% rate of user growth, while Ethereum has had a 50% rate of user growth. Other coins such as Cardano and Tezos have seen even more significant growth, with increases of 165% and 364% respectively. Although it is important to note that Bitcoin’s safe-haven status exists within the context of Bitcoin volatility, the original cryptocurrency is nevertheless enjoying a much more stable reputation than it had in the past.

Chart showing unique eToro cryptocurrency holders per asset
*Holders per asset represent eToro users.

How Trends Can Inform Your Trading Strategy

While having a keen understanding of crypto trends is important, being able to apply those insights to your trading strategy is crucial. First and foremost, you need to have a clear sense of the changing landscape. As day trading continues to increase, opportunities to invest in new coins are likely to emerge. This is where your risk tolerance comes into play. 

If you are a more risk-averse trader, sticking with established currencies could be a good game plan. If you are more comfortable with risk and are looking for new opportunities, opting for a diversified portfolio could help you boost your returns while giving you exposure to new assets.

How to Trade the Most Popular Cryptocurrencies

Once you have a clear understanding of current trends and how they can impact your trading strategy, it is time to look for a platform that can offer you the tools and features you need to maximize your investment.

Building Your Ultimate Crypto Portfolio

With eToro’s multi-crypto platform, you can access more than a dozen cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. This allows you to build a portfolio based on your specific trading interests and your risk appetite. 

When choosing currencies, it is important to take both your short- and long-term investment goals into account and consider market insights as part of your strategy. For example, if you know that a particular currency has experienced significant volatility in recent weeks, you may want to balance your investment by also investing in another currency with more stable performance.

Optimizing Performance With a Managed Crypto Portfolio

If you are looking for guidance when developing your portfolio, eToro’s CryptoPortfolio™ allows you to manage your assets much like a traditional portfolio and decides the weight of each component proportionally, according to its market cap. 

Because CryptoPortfolio™ offers diversified crypto exposure, it can also help traders significantly increase their rates of return. As highlighted in the chart below, CryptoPortfolio™ provides consistently strong performance and is less volatile than any single coin. Another option is the TIE Partner Portfolio which uses natural language processing to determine market sentiment toward crypto on social networks and then leverages that data to optimize algorithmic trading.

Chart showing cryptocurrency gains 2020

Trade Like the Top Traders

Another unique feature of eToro’s platform is the social trading component that allows users to engage in discussions and learn from their trades. This can be a great way to learn more about trading strategy, or even to replicate the trades of others.  

One of the other key benefits of social trading is that you can potentially increase your returns. In fact, eToro’s top 50 most copied traders of 2019 saw an average yearly profit of more than 29%. Social trading also allows you to leverage the knowledge and insights of these types of traders (such as QE4Everyone) to adjust your crypto trading strategy as well as your overall investment strategy.

Whether you are just getting started with crypto trading, or you are already a pro, navigating the ever-changing markets can feel like a challenge. As cryptocurrencies enter a new phase, staying on top of the latest trends and having the right tools at your fingertips can make a big difference. With eToro’s dynamic platform and portfolio management features, you can continuously improve your skills and your experience.

If you want to learn more about crypto trading, check out eToro’s platform to get started.

eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
This ad promotes crypto investing which is highly volatile and not regulated. No EU investor protection. Your capital is at risk.