Let’s talk about something really interesting – the shape of cryptocurrencies in the near future. Of course, no one can predict the future with much accuracy, and we cannot be sure what exactly will happen. However, we can build our outlook on the trends of the past and set our expectations based on what events are set to happen in 2020. Cryptocurrency is already a decade old, crypto adoption is growing and more people are starting to notice it. Things change fast in crypto it’s worth to note all important events and possible issues that will happen in the near future.
So without further ado, let’s check what will happen to cryptocurrency in 2020.
- Bitcoin halving
We are less than six months before planned Bitcoin halving of the block reward. Bitcoin incentive granted to the miners who maintain the bitcoin network will be lowered from 12.5 to 6.25 BTC Every four years Bitcoin is undergoing planned halving this means miners who contribute their processing power to keep the Bitcoin network running will receive only half the number of bitcoins for each block of data they successfully validate/mine. Historically every Bitcoin halving pushed the price higher due to the fact that BTC is driven by supply and demand economics model. Are we able to predict the price of BTC and measure a true level of hype around the event itself? We will see about that – as this event have the potential to be the biggest game-changer of 2020.
- Facebook Libra
Facebook entered the cryptocurrency scene with a huge announcement in 2019. Mark Zuckerberg is promising that their stable cryptocurrency - Libra is the best way to bank the unbanked people. If Facebook will deliver Libra project according to their plans and launch its wallet – Calibra by June 2020 it will be huge news. So far the future of this stablecoin it’s not that certain as Libra has been encountering regulatory resistance. Governments want to make sure that private Facebook’s crypto won’t be jeopardizing monetary policies of the nationwide economy.
- Central bank digital currencies
China changed its stance towards blockchain in 2019. Beijing is aspiring to be the leading player in the distributed ledger revolution. It’s not surprising that Chinese officials recently mentioned that they are working on digital yuan. It made China the first major economy openly admitting a will to issue their own digital currency. So far very little is known about this digital yuan other than it will borrow some properties from existing cryptos. The situation is interesting because it is might change the balance of economic power and diminish the dollar’s status as a global reserve currency. China is the first country to talk about crypto-version of the national currency – but it’s almost certain that other countries will follow. And while central bank digital cryptocurrencies remain mostly conceptual at the current stage we will see significant developments in 2021 and beyond.
- Impending recession and early signs of economy crisis
It’s unwise to think that the last global economic crisis from 10 years ago was the last one and the global economy is all sunshine and rainbows since then. The truth is that the real causes of the economic crisis haven’t been fixed. We are starting to experience stagnation and lack of economic stimulus. And the idea of fixing the economy through monetary policy (i.e. money printing) seems to be really not the ideal way of fixing things. Another argument of stagnation is a fact that interest rates are going negative, it’s not really worth to keep your fiat money on saving accounts anymore. What is more, economic uncertainty and rapid geopolitical shifts are causing people to seek alternatives and cryptocurrency seems to be a good bet. Bitcoin is viewed as a store of value and safe haven asset and other altcoins can bring even more utility to the table. Therefore, it’s only natural for people to be a part of this innovation.
- Increased cryptocurrency institutional interest
Business is becoming more and more interested in cryptocurrency. So far companies couldn’t directly deal with cryptocurrency because this niche is not yet fully regulated. We are still waiting to see the approval for a regulated bitcoin exchange-traded fund in the U.S. as SEC is constantly postponing and delaying their final decision. However, institutional investors already have access to other cryptocurrency derivatives such as bitcoin futures. It’s only a matter of time when we will see a regulated Ethereum futures market in the U.S. – it may be approved sooner than we think. It’s still too soon to evaluate a full scope of an impact that crypto investments might have on institutional participants. But we can tell that from the numbers of the trading volume of Bakkt futures reaching higher levels almost every week, it is well worth watching for signs of significant growth in 2020 as there is high a breakthrough potential.
- Ethereum 2.0 and Proof of Stake protocol
Currently, Ethereum operates under Proof of Work consensus model – the same as the world’s first cryptocurrency Bitcoin use. So it’s mean that since its inception in 2015 ETH has been mined and computing power was needed to validate blocks and keep the network running. This soon will change as Proof of Work will be updated to Proof of Stake. If everything will go as planned we might see Ethereum 2.0 based on PoS consensus introduced in 2020. If the PoS update will go live then Ethereum will be by far the largest cryptocurrency by market capitalization to experiment with Proof of Stake
- China blockchain strategy and cryptocurrency engagement
In October world was electrified by Xi Jinping gave a speech saying China will compete to be the most advanced country in the world in terms of technological advances and the Chinese nation is ready to seize the opportunities presented by blockchain technology. Xi’s speech was one of the first instances of a major world leader seeing the bigger picture and true power of blockchain tech. Considering China's potential for fast advancements – they could become the global leader of blockchain technology very fast.
- Cryptocurrency regulations
More and more countries are aware that cryptocurrency is our future and instead of hindering crypto adoption by enacting restrictive laws – policymakers started to support it. Switzerland (especially region od Zug), Germany (where banks will be able to deal with cryptocurrency), Ukraine (positive tax legislation), France (crypto companies can register activities) and certain U.S. states (Wyoming which is known for crypto-friendliness) not to mention Japan or Korea – all are working, or already introduced regulations that are digital-banking-friendly. We can anticipate other regulators to do the same in the upcoming year.
- Crypto derivates
The introduction of crypto passive income in the form of staking and other kinds of crypto derivatives is becoming a reality. In the last year, we have seen that crypto derivates market substantially grown in size and accessibility. We can observe that more and more major business players are offering automated staking – the biggest exchanges such as Binance, Coinbase and recently Kraken which is the latest exchange to enter the staking-as-a-service scene. Development in this field will make the market more competitive in 2020 as we may be sure that even more exchanges and crypto-related businesses will enter the staking niche.
- Emerging markets adoption
Cryptocurrency is already over 10 years old. We’ve seen some great improvements over the last decade and it’s rather certain that it’s only a beginning for cryptocurrency. The adoption of crypto assets will only continue, and if we add network effect and mix it with the potential problem of some countries with a weak economy. It’s only natural that cryptocurrencies will found a fair userbase there. We can already see increased Bitcoin and cryptocurrency usage in Venezuela, Argentina or certain African countries. Cryptocurrency can be an amazing tool to battle the galloping inflation rate and weak national fiat currencies. The interesting question will be what cryptocurrency will win the battle of adoption in these countries the two main options are either Bitcoin or some kind of stable coin.
To sum things up, crypto adoption is happening both in emerging markets and among average Joes who noticed what power cryptocurrency can bring power to the people. It’s more than certain that by the end of the decade, most tech startups will be related to cryptocurrency or blockchain in one way or another. Just as almost every tech company is related to the internet in some way today. Governments and institutions might be skeptical about cryptocurrency now but eventually will move into the digital blockchain-powered space in a big way as well. Digital assets have already become a force to reckon with and it will be interesting to observe global economy trends and cryptocurrency impact on our lives in the years to come.
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