Speculation fuels cryptocurrency market trends and 2020 is not expected to be different. 2019 has come and gone. But it was not detached from what happened in the previous year, and the year before that, etc.
In short, the cryptocurrency market is a progressive one. Therefore, the outcomes could be much different from projections and expectations.
To have a glimpse of what to expect in 2020, let’s take a short trip down memory lane.
A Very Brief History
A few people still remember 2017 as vividly as if it were yesterday. Bitcoin went to the moon. Some literary bought Lamborghinis with Bitcoin. They partied hard. Who would blame them? Bitcoin’s price increased from $1,000 to $20,000 in one year.
Which other financial asset does that?
And wild projections followed. Unrealistic. Too optimistic. Detached from reality. Some said Bitcoin was going to hit $1 million. It was hard to think otherwise. The evidence was there.
But Bitcoin – at least at the time – was not interested in pleasing people’s financial fantasies. It was only there to maintain its notoriety for volatility.
So, it did what it does best. Its price corrected itself. From $19,000+ to $14,000 in less than a week. It was supposed to be a minor correction en route to the moon, some people thought.
But it had its plans. What followed was a brutal winter in the whole of 2018. Many heads rolled. Startups closed shop. Retail investors shied away from the industry.
It was chaotic at best. But it was not the end. Neither was it the first time. The winter had happened before. Only that this one was too severe.
But even the one-year-long winter was not brutal enough to see the end of crypto. If anything, it strengthened the whole industry. And by the end of the year, Bitcoin bottomed at $3,200.
Yet 2019 was different. Bitcoin reached its highest figures in 17 months after topping $13,000. But as the year inches closer to an end, Bitcoin is trading slightly less than 50 percent of its 2019 all-time-high.
The little history is far from the true picture of the cryptocurrency market.
This article will look at the likely trends of 2020 based on what happened in 2019. And how the industry has evolved over the decade.
Security
We live in a cynical world and the crypto market is not any different. Apart from hype, buzzwords, FOMO, and FUD; security is one of the cornerstones of the nascent industry.
Security is an umbrella term when it comes to crypto. It could refer to the security of cryptocurrency exchanges. Or that of digital wallets.
Sometimes, it refers to how users are aware of safeguarding their digital assets. Or their ability to spot scams from afar.
The crypto industry is a true wild west.
According to CipherTrace, more than $1.7 billion was stolen in the crypto industry in 2018. Through theft, hacks, and outright scams among others.
And if you think that was bad enough, think again. Crypto intelligence firm CipherTrace claims that $1.3 billion was stolen in Q1 2019 alone. Compared to $1.7 billion in the whole of 2018.
In total – even before the year-end – more than $4 billion was stolen through various crimes.
So yes, 2020 will focus on security or these numbers will continue climbing up. And it is a task reserved for every stakeholder. From exchanges to investors to regulators.
Hackers and criminals were the winners in 2019. This has to change. By focusing on security
Investors need to learn how to take care of their cryptocurrencies. They should know about the different types of wallets including the Trezor, Nano, and Cold Card. When and how to choose them. Using BIP39 passphrase to add extra security to your holdings.
Secondly, they have to know about identifying scams. As for exchanges and trading platforms, the ball is in their court to beef up their security.
Crypto exchanges are always targeted by hackers because of the vast amount of digital assets in their custody. They need to innovate. Think outside the box.
Custody solutions that are backed by large insurance organizations or a one to one backed fund will be mandatory as more and more coins disappear due to hacks. Japan will put this law into effect in 2020.
Importantly, law enforcement agencies need to train on how to fight and identify cybercrimes.
A new breed of criminals is emerging. Thanks to crypto. And some of them are teenagers.
Bitcoin Halving
Everyone in the crypto industry knows about Bitcoin halving. This is an event that slashes Bitcoin supply by half. It happens roughly every four years.
Previous halving events took place in 2016 and 2012.
The halving process is controlled by computer code written in Bitcoin’s blockchain. It serves two purposes. To enforce scarcity and keep an eye on Bitcoin’s inflation.
But Bitcoin halving is more than just a process. It’s an event eagerly awaited because of its impact on the entire industry.
The next halving is expected to happen in May. It will slash the block reward from 12.5 BTC to 6.25 BTC.
The two halvings were preceded by a similar pattern of a bear market followed by bullish sentiments. In the case of the 2016 halving, it led to the meteoric rise of December 2017 prices coupled with other factors
It is an understatement to say that investors have similar sentiments. But what we know for sure is that there will be winners and losers.
At the moment, players such as traders and miners are trying to figure out what will happen. The event has a direct impact on miners.
Their rewards will be slashed in half while their expenses to mine Bitcoin remain the same. Only a price increase would offset the imbalance.
But they have already survived two halvings. They should, at least, know what to do.
While many have predicted a surge in prices, some experts are exercising caution. They believe there will be no wild price swings.
Circumstances between the 2020 halving and the previous two are completely different. The industry has matured. New players came on board. Regulators have flexed their muscles as well.
Things will not be the same. But the optimism in stakeholders will stick for a while. For now, the halving event is assumed to be the catalyst for the next bull run. It likely will not be immediate, but the decrease in supply can have major impacts on the price longer-term as long as demand remains.
It is also worth noting that Bitcoin pricing and volatility has mainly been driven by derivatives trading, specifically with high leverage perpetual swaps contracts. As this trend is increasing, it is likely the halving won’t have as much of an impact on price.
Traditional Giants Moving into Crypto
The giants see Bitcoin as an experiment for nerds, cypherpunks, retail investors, etc. At first, legacy tech and financial institutions shunned the industry. But that’s no longer the case.
2019 was a big year for crypto. The industry scored major points when Facebook – the largest social media platform with nearly 2.7 billion users – gatecrashed the crypto party in June with a white paper.
At the heart of it is a stablecoin – tied to a basket of currencies – called Libra. The project faced a backlash from international lawmakers who saw it as a “threat to financial stability.”
Facebook’s Libra project received initial backing from major companies such as Uber Technologies, PayPal, Stripe, Visa, etc. While the majority have pulled out now, leaving the project’s future in jeopardy – at least we know where Facebook is heading.
And we would be fooling ourselves to think that other major tech companies will fold their hands and do nothing. They will take action. They have to.
The Libra project prompted even the Chinese government to accelerate the development of the nation’s proposed digital currency.
Bakkt – a crypto project of Intercontinental Exchange – got the approval from the New York State Department of Financial Services to offer services delivering physically-settled BTC futures contracts.
This development will likely lure more institutional investors to crypto in 2020.
More legacy companies are expected to start entering into crypto. They may not all rush in. But at least, they will lay down the foundations.
They have learned from the past that survival is about adapting to a new reality. A reality in which cryptocurrencies and blockchain will likely play an important role.
It is no longer a matter of ‘if.’ But a matter of ‘who’ and ‘when’. Libra is the tip of the iceberg.
Cashless Trends Impact on Crypto
The world is fast moving towards a cashless society. This idea is no longer a concept but a reality many of you are already a part of.
Many people already favor carrying credit/debit cards or using mobile payments for their payment options. A cashless society is upon us.
Digital payment options are on the rise every day. The idea of going to an ATM to withdraw money might soon be a relic of the past, though it will not go away easily because many people believe that ‘cash is king’.
Despite the ‘resistance,’ the road to a cashless society has been cleared. It is even supported by governments. Japan, a cash focused country has committed its efforts to adopt cashless payments despite having a large elderly population.
There is no doubt that in 2020, more people will resort to carrying cards and using their phones for transactions.
Digital currencies such as Bitcoin improve speed and security in certain instances.
Think of what people have to go through when they want to send money from one country to another. The fees are high while the transactions take days to settle.
Cryptocurrencies – by being stateless – allow people to send money across borders instantly and cheaply.
Knowledge
Cryptocurrency is a tough nut to crack. It is not easy to explain to people what cryptocurrencies are. However, those in the industry are already doing their best to spread the message about it.
After all, the adoption and success of cryptocurrencies depend on sharing information with those who need it.
Misinformation and lack of knowledge have led to people losing their money through hacks and scams. Retail investors have lost millions in exit scams, forcing many to shun the industry.
On the same token, leading players in the industry have taken it upon themselves to inform and educate the public about cryptocurrencies and blockchain technology.
With the recent YouTube de-platforming of many crypto content creators, 2020 is looking like a year decentralized video streaming services like D.Tube could increase in popularity.
Earning Money in Crypto
Bitcoin is one of the most volatile trading assets in the world. As investors anticipate the next bull run, the industry is starting to see more institutions enter the space as they educate themselves on blockchain technology and crypto.
Aside from trading, there are new ways to earn crypto to enter the market.
Staking, allows investors to accumulate more crypto by using their holdings to secure the network of the particular coin they have invested in. Tezos is a popular example of this new concept. As more projects come out, staking is likely to be a popular type of blockchain to govern the network.
In addition, investors can also use Celsius Network or BlockFi to earn interest on their holdings by allowing them to loan it out to other consumers. “Crypto banks” are likely to see new improvements going forward in 2020.
Getting paid in crypto is going to become a lot easier. As technology develops, it’s likely that employees will be able to request their pay in crypto and get paid more frequently, per day for example. However, in developed countries taxation is still a barrier to employees getting paid in crypto.
Crypto Trading Scene
The rise of bitcoin derivatives platforms has meant traders are more inclined to trade derivatives than spot trading. This is having several impacts on small exchanges, leaving some to close down.
At Overbit, we’re seeing traditional token HODLERS getting tired of the low prices. The liquidity on the cryptocurrency alts market has been dying, as most ICO tokens have dropped 95% in price in 2019. This has meant that crypto trading veterans are either leaving altogether or moving to trade Bitcoin only.
Platforms such as Binance, Bitmex, and Overbit have fueled high leverage futures and perpetual swap trading and this is only set to increase. CoinGecko’s 2019 Q3 Report identified strong growth in crypto derivative offerings by various exchanges and indicated a boom in the crypto derivatives sector. Bitmex is the long-standing champion of this space however we’ve seen a rise of other competing exchanges with improvement and innovation in this derivative space. The question is, will Bitmex finally be challenged by these up-and-coming exchange players?
The clear winner at the end, is the trader who is spoiled with choices. It is now up to the trader to choose a trusted exchange that provides security and a seamless user interface as they venture trading into derivatives.
Crypto and Mainstream Finance
When Bitcoin arrived on the scene, there was an excitement that it could kill banks. Well, that won’t happen any time soon.
But it will make in-roads in areas that have previously been monopolized by banks. Cryptocurrencies, particularly Bitcoin, have made tremendous improvements too great to ignore.
The face of the financial sector is changing thanks to Bitcoin. The current banking system excludes about 1.7 billion people. Cryptocurrencies target these people.
Banks and payments companies have opposed cryptocurrencies for some time. Things are changing. It could be one of the reasons why PayPal, Stripe, Visa, Mastercard, etc. joined Facebook’s Libra despite backing out. They have shown acknowledgment that crypto is part of the future.
There are two reasons for doing this. They know that digital currencies have the power to disrupt the financial system and they want to be prepared for it.
Or they do not yet understand its true impact and want to see what it can do.
Cryptocurrencies became a favorite of countries undergoing hyperinflation or going through turmoil. Venezuelans used Dash after the collapse of the national currency, the Bolivar.
Protesters in Hong Kong turned to Bitcoin to evade financial surveillance.
At the state level, we will see countries turning to Bitcoin to evade sanctions. North Korea has been accused of doing so.
Perhaps what will be more interesting is how countries such as China, Iran, Russia, and North Korea will work together to create a new financial system that does not fall under the U.S. radar.
Regulation
The US government is considering new regulations to come into play in 2020. 2019 showed that government agencies are no longer interested in observing the industry from afar.
They want to influence the direction it takes, and at the same time, safeguard the existence of the current financial system which increasingly seems to be under threat from crypto.
The regulation of the industry will be more important as tech companies enter the digital payments space.
It will also be interesting to see how different countries will regulate cryptocurrencies. Stakeholders in the U.S. believe that the country is not doing enough to be a leader in this space.
China will likely continue to shun cryptocurrency activities while it explores the potential of blockchain technology.
Privacy coins will battle for their existence as several were recently delisted from exchanges. The privacy coins, which are hard to track, have made it difficult for crypto exchanges to comply with international Anti-Money Laundering (AML) laws.
Scalability and Real-World Use Cases
Critics have argued that it is impossible for blockchains to be secure, scalable, and decentralized at the same. A compromise has to be reached, the critics argue.
In 2020, the major focus for Ethereum blockchain – whose native currency ETH is the second-largest by market cap – will be Serenity or Ethereum 2.0.
Serenity will see Ethereum integrate Proof-of-Stake among other improvements. The result is a scalable and sustainable blockchain.
Serenity update is expected to commence in early 2020 until its completion in 2022. Vitalik Buterin has proposed publicly that Ethereum developers launch the next edition earlier.
The update will see other crypto blockchains working on scalability and making major improvements to stay relevant.
Political Unrest – is Bitcoin doomed?
The recent geopolitical turbulence between U.S and Iran, has seen a trend of people turning away from fiat and placing their hope into oil, gold, and digital currencies. Brent crude has jumped to $70 and gold hit its highest level in seven years.
What’s more interesting is, digital currencies advanced as risk-off sentiment continued to permeate following an escalation of tensions between these two countries. More traders will decide to turn to crypto trading, widely known for its decentralized natured – such as Bitcoin, to hedge themselves from the risks and political unrest.
We saw a price spike of Bitcoin spike 5% from the past week’s low of around $6,850 after the news broke because with Iranians paying higher premiums to buy BTC and we also saw other cryptocurrencies enjoying a price boost.
Bitcoin was one of the best-performing assets of 2019 and has risen more than 9,000,000% over the past 10 years which has left skeptics speechless and we can expect to see further strengthening of its digital currency status especially in tension geopolitical environments. Cryptocurrency will continue to show its usefulness in the retail financial sector as a means of exchange and store of value and not just speculation.
Entering the Next Decade
Bitcoin is entering the second decade much stronger than it was when it first appeared on the scene.
The crypto industry will start its second decade on a high note. France is planning to trial a digital currency as early as next year.
New Balance – one of the largest sportswear companies – is using Cardano’s blockchain for its supply chain management. Malta, the first country to pass comprehensive blockchain bills – will test the use of cryptocurrencies in its gambling industry.
The crypto derivatives market is expected to boom alongside decentralized finance.
Many mergers and acquisitions deals will be closed as the year progresses.
Bitcoin will not likely reach the highs of 2017, but there is solid ground to see more development coupled with adoption.
Bitcoin, in the same fashion as money, needs to be accepted as a means of payment before it can be widely used.
The regulation of the market will bring more clarity to allow stakeholders to operate freely and legitimately in this growing space.
New cryptocurrencies will be introduced into the market. Others will pass into obscurity. And Satoshi Nakamoto will remain anonymous.
