If the 2020 Q1 was the quarter of market turmoil, Q2 the bitcoin halving and Q3 the explosion of stablecoins and decentralized finance applications, Q4 was the quarter of institutional FOMO for bitcoin and of Ethereum launching the first phase of its ambitious migration to a proof-of-stake (PoS) blockchain.

The latest CoinDesk Quarterly Review looks at the data and timelines behind these two strong narratives, and what they mean for asset prices.

Bitcoin goes institutional

While the 2017 bitcoin (BTC, +9.21%) rally was largely driven by retail frenzy, the 2020 rally was driven mainly by institutions. The accelerating rhythm of large institutional investors publicly talking about and investing in bitcoin as a portfolio asset has not only lent validation to bitcoin’s role in portfolios, it has also attracted the attention of other investors. This self-reinforcing loop is likely to continue into 2021, especially given the mounting uncertainty around currencies and inflation.

Source: CoinDesk Research

Bitcoin’s strong rally in the last few days of December crowned an already strong year and produced an annual performance of 300%, way ahead of most macro assets, although behind ETH’s spectacular 470%.

Source: CoinDesk Research, St. Louis Fed, Yahoo Finance

One metric that hints at growing institutional involvement is the number of addresses that hold large balances. The number of addresses with over 1000 BTC, known as “whales,” is over 30% higher than at the end of 2017, the height of the last crypto bull run, indicating the growing presence of deeper pockets in the market.

Source: Coin Metrics

Another indicator that institutional involvement in the bitcoin markets is growing is the volumes on the Chicago Mercantile Exchange (CME), an institution-focused derivatives exchange that offers bitcoin futures and options. The CME’s bitcoin futures open interest in U.S. dollars grew almost 300% over the quarter to become the largest in the industry (as of Dec. 30), having started the quarter in fifth position.