Cryptocurrency in 2020, we all wonder what will happen, but some of us, have only a vague idea, what happened in 2019. In the land of cryptocurrency, it was one big ‘winter’ season all year round. After a peak of $20,000 in December 2017, the price of Bitcoin fell to $ 3000 in December 2018. In July 2019, the price rose again to almost $ 14,000, but in the meantime, due to a pike dive, only half of it is left. Unfortunately, the predictions by self-proclaimed experts – that the price would rise to the old record or even higher – did not come true. Whether that is due to the disappointing launch of Bakkt, the absence of a first ETF or an institutional glow wave? That is difficult to say. What are the developments in the field of cryptocurrencies?
Is spring coming after a severe crypto winter?
A harsh winter is always good for pests to die, including in the cryptocurrency land. More than 80% of the projects that did an Initial Coin Offering (method of raising money through cryptocurrency) turned out to be an outright scam. Research on the most popular cryptocurrency website Coinmarketcap shows that of the top 2000 crypto projects, a quarter has not posted an update on code platform Github for more than a year. A third not even in the last 5 years.
Winter is a season for struggle through, for enduring, and the price we pay for the brilliant and beautiful spring that follows. – Erik Voorhees
After a harsh winter, spring always comes. As I wrote in my trend article about blockchain, the projects that survived the winter have communicated all kinds of wonderful progress. There are many good things in the pipeline for 2020. Nearly 20% of the world’s population has now bought cryptocurrency, according to Kaspersky. According to Deloitte, companies are also becoming more positive.
I know of few environments that are currently changing as quickly as those of cryptocurrency. Prices, new technological developments, reactions from governments and everything else that surrounds it can, from one day to the next, have a major impact on issues such as prices, use and further development of the cryptocurrency. Nevertheless, many major developments are expected in 2020. These will with great certainty have an impact on cryptocurrency. I share the top 5, which I expect a lot from.
1. Bitcoin’s Halving
When I analyze the news of the past months, it is largely about just one event that will take place: the ‘halving’ of Bitcoin. This is expected in May 2020. The reward for the ‘ miners ‘ of the Bitcoin blockchain network will then be halved. Historically, this has always led to a price increase of a few hundred percents, due to, among other things, the decreasing available number of Bitcoins. But the opinions are divided. Some experts mark the price increase of last year (from $ 3000 to $ 13,000) as a ‘halving effect’. Some even see the declining reward as something that will actually have a negative effect on the price, because for many small miners it is no longer interesting to switch on their computers and maintain the blockchain network. With earlier ‘halvings’ the price always rose in the run-up to it. So during the first quarter, we will immediately see if it will be the long-awaited catalyst, which not only increases the value of the Bitcoin, but also the strongly connected altcoins (which almost always increase exponentially). Are we going to see a new all-time high? Or will it be the biggest deception of cryptocurrency owners in two years? The first months of 2020 will tell!
I recently heard the head of Facebook’s Libra speak about their plans for 2020 at the European Commission’s annual blockchain event. The company has recently been overwhelmed by negative reactions from governments. It is not even certain anymore whether the project will be launched at all. In Europe, Germany, France, and Italy are working on measures to ban the arrival. And the arrival in the United States is not yet certain, even though CEO Zuckerberg recently announced that they will only launch if the regulators give full approval. He warned his investors that the currency might not come at all. Other top management of the social network from public criticism of the project. And many important shareholders from the first hour (Paypal, Visa, and Mastercard) have already left. Probably under high pressure from US regulators.
I already indicated on my blog, that I have mixed feelings about the new Libra project. The cesspool with affairs around Facebook just doesn’t seem to dry up. The question is therefore whether we want to entrust something as precarious as our financial data (the most privacy-sensitive data for consumers, according to DNB research to the social media company. On the other hand, we still have 1.7 billion (!) People without bank accounts, of which 1 billion have a mobile phone. According to the World Bank, they now pay high rates (on average 7%) for transferring and receiving money through a third party. So they cannot save money, something that can contribute significantly to achieving various UN Social Development Goals. McKinsey even calculated that this could contribute $ 3.7 billion to the GNP of developing countries in the next 10 years.
Central banks, such as our DNB, all point to 2 major concerns:
- The stability of the financial system. Because what will happen if Libra becomes so large that it will have an impact on the monetary policy of the banks?
- And there is also no answer to the question of how the company counteracts money laundering. And how it identifies all actors on the network ( Know Your Customer ) to combat terrorist financing, for example.
More digital currency
Next year will, therefore, be an interesting year, not just for Libra. Other large companies ( such as Wallmart ) are also working on their own digital currency. Various governments are now looking seriously at their own digital currencies, such as the European Union and China. Some companies support governments and argue that the money system should remain in the hands of governments, as Apple’s CEO Tim Cook recently pointed out.
The business case remains very interesting. Various studies show that consumers spend much more with digital forms of money than with cash. This is also called the ‘house money effect’. The adoption of such a system, even according to the developers of Libra, will take many, many years to come.
3. The big money
I think it has been one of the biggest deceptions: the introduction of Bakkt. The platform would create an insane demand for Bitcoin, which of course would have a positive effect on the price. On the one hand, this would be due to the efficient buying, selling, issuing and storing of cryptocurrency. And on the other hand through the use of large parties such as Starbucks with 30,000 locations. Unfortunately, the enthusiasm for the platform was disappointing and the price of Bitcoin fell 19%. As the parent company owns the largest stock exchanges (such as the New York Stock Exchange) and cooperates with established names such as Microsoft and BCG, the platform must primarily inspire institutional investors (such as pension funds) to invest large sums of money in cryptocurrency. That did not happen before, because the infrastructure simply lacked and the coins are too volatile in value. Bakkt overcomes both of these issues with its platform.
Interest from major investors
It is no secret that large investors are eager to enter the cryptocurrency market. In the corridors of several large Dutch banks, I heard that it is stated that their private bankers are going to advise rich clients to invest 5-10% in cryptocurrency in 2020. Many managers of ‘family offices’ (management offices of very wealthy individuals/families) that I speak with are also working on this. Cryptocurrency companies such as Coinbase indicate that they receive hundreds of millions per week from institutional investors to save or trade in futures. The great thing about blockchain is that everything is transparent, so also the transactions and size of digital wallets. A recent analysis of all Bitcoin wallets here shows a very strong increase in wallets of large size.
The big money is visibly and invisibly busy entering the market. I am curious as to what effect this has on the prices of the various cryptocurrencies and of course the further development of the whole.
4. Further development of individual projects
Shrews live on average only 1 to 1.5 years. They are therefore the shortest living mammals on earth. In that respect, they are very similar to blockchain projects, which also have an average lifespan of 1.12 years. This was shown by Chinese research among all 80,000 projects.
Many fortune seekers are looking for cryptocurrencies that, just like Bitcoin, have the potential to ‘moon’ (crypto language for an exchange rate of hundreds of percent). Due to the short lifespan of most projects, a few people have become wealthy through the right investment. But the large masses have lost a lot of money because of late selling. In the Netherlands alone, about half a million consumers put nearly a billion euros in cryptocurrency. Because most people bought them at the top of the market, they are still deep in the red with their investment.
Do your own research
In my earlier article about ICOs, I already shared several tips for the search for the ‘new Apple’. I indicated here that it is particularly important to thoroughly screen the projects on various points. Do Your Own Research. You are not just going to send money to a company, of which you are not even sure where they are located, of which the team does not have the knowledge to set up such a project or of which little information can be found on the internet? In the madness at the end of 2017, many people have put money into projects at random. As a result, many billions of euros have ended up in the pockets of fraudsters setting up fake projects. Or simply with a handful of people who sold their investments on time to a large group of people, who subsequently saw their investments fall in value rapidly.
Many celebrities in cryptocurrency continue to designate Bitcoin as an exclusive ruler and expect that all other cryptocurrencies will quickly take a place on the ‘ Crypto Graveyard ‘. Personally, I still believe in various other projects that have left large user groups behind and have published several major updates.
In addition to Bitcoin, Ethereum is often referred to as the “Microsoft” of cryptocurrency. But it has received serious competition from, among others, EOS and TRON. If, for example, we look at the number of ‘ Decentralized Apps ‘ (Dapps) on Dappradar, we see that of the top 50 only 3 runs on the Ethereum network and the rest on that of the two competitors. It is a project that enjoys a lot of respect because it brought a major step forward in the development of technology. It was not only going to facilitate payments but also introduced ‘ smart contracts’ and apps. In 2020 the major (2.0) update of its network is on the program, called ‘Serenity’.
Ethereum introduces a different and much more energy-efficient ‘ consensus method ‘ for validating the transactions (‘ Proof of Stake’ ) and implements various solutions for scaling the network, such as Sharding, Plasma, and Raiden. With the rapidly increasing trend around dapps and possible approval of regulated futures, this can all be very positive for the exchange rate of the currency.
Ripple, Vechain, EOS, IOTA and TRON
Other projects that take major steps:
- Ripple already has 200 banks connected to its network. It might replace SWIFT (the organization that now controls the global financial system).
- Vechain puts authentication of products on the blockchain to prevent counterfeits.
- With its browser, BAT allows users to surf faster by blocking advertisements and trackers.
- EOS offers a platform to develop decentralized apps.
- IOTA facilitates the Internet of Things and already has many large companies (such as car builders) as customers.
- Just like EOS, TRON offers a platform for dapps.
Governments worldwide work overtime to regulate the rapid emergence of cryptocurrencies and companies in the industry. As long as it doesn’t (really) hinder innovation, I am very much in favor of it. Not only does it reduce the chance that cryptocurrencies are used for criminal activities, but it also gives larger investors greater certainty and therefore allows them to enter the market faster.
One of the core tasks of governments is to protect their citizens. After the many scandals around cryptocurrency in recent years, where consumers lost a lot of money, the Dutch government takes this task seriously. It even wants to take the lead at the European level with its laws and regulations. The AMLD5 legislation will take effect immediately in January of this year. Cryptocurrency exchanges and depositaries (wallets) are obliged to register with De Nederlandse Bank. They also receive a review of the suitability of directors and shareholders and must demonstrate that their business processes are designed to combat money laundering and terrorist financing. All Dutch companies that I know of which have to comply with this legislation are now proactively working on the implementation of the DNB. Most companies already comply with this.
CryptoCurrency in 2020: Maturity
With the above-mentioned expectations for 2020 in the cryptocurrency area, I am extremely curious as to what will happen next. What will all ultimately actually happen? And what effect will it have on the industry? According to many experts, it will be ‘on or under’ for Bitcoin. I think it will mainly be a year of rapidly increasing maturity and further technological development of the industry.