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Exceeding gold, virtual currency is the world's strongest rising asset

The Bloomberg Galaxy Crypto Index tracks digital currencies up 66% this year, tripling gold's gains and outstripping stocks, bonds and other commodities.

The main reason for this increase is the skyrocketing Ethereum price. This is the digital currency that accounts for more than 30% of the Bloomberg Galaxy Crypto index. Currently each dong is priced at 341 USD, up 163% from the beginning of the year. Bitcoin, the world's most popular digital currency, is up 46% this year, currently trading at around $ 10,491 a coin.

The increasing acceptance of decentralized finance (DeFi) has dragged the price of Ethereum to soar. DeFi is based on blockchain technology, allowing people to carry out activities such as lending, borrowing or enjoying interest rates such as savings accounts without the need for a traditional intermediary like a bank. DeFi's popularity also goes hand in hand with blockchain being increasingly used. A lot of DeFi applications run on Ethereum's blockchain platform.

Ethereum price movement since the beginning of this year.

Ethereum price movement since the beginning of this year.

In addition to DeFi, many people buy digital money, like Bitcoin, to store value. They fear that the huge money-pumping policies to deal with the pandemic of many countries will spark inflation and weaken the dollar.

Marc Fleury - CEO of crypto asset management firm Two Prime said that the crypto market had performed very well during the Covid-19 crisis, partly because Bitcoin became "a tool of refuge", like gold, when the risk increases. "Simple investment tools usually do well when the economy actually slows down," he said.

However, those who are skeptical of cryptocurrencies are still not convinced. They claim that this tool has a history of very strong volatility. And the DeFi network has many loopholes, showing that it is not as decentralized as it is advertised.

The Bloomberg Galaxy Crypto Index has lost more than 8% in the past three sessions, due to the pandemic affecting investment sentiment with many types of assets. The index is down more than 20% since the August peak.

Overall, though, investor interest in cryptocurrencies is increasing as there are many derivatives for Bitcoin and Ethereum. DeFi has helped skyrocket demand for Ethereum contracts, said Aziz Zainuddin, Product Manager at Fasset. "Individual users are increasingly turning to crypto derivative contracts to maximize profits," he said.

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