A new decade begins. The crypto community is eager to know what the first year of the decade has in store for the market. Will the bitcoin halving lead the crypto trend for 2020? Will something new and unexpected guide the industry into a new bull or bear market?
The cryptocurrency industry is a young market. The factors that drove it a few years ago have changed. Often times the past has the ability to predict the future but we cannot guarantee that will happen this time around. Bitcoin is now considered a store of value, ICO regulation has taken control, blockchain technology has gained popularity, and many more narrative changes have occurred.
One thing for sure is that developers will continue to push updates for their respective blockchains. Critics will have something negative to say, especially on Twitter. Others will continue to work on adoption while researchers bring new innovative ideas to the table.
The second half of 2019 focused on Facebook’s regulatory fight to go ahead with its Libra project. The giant social media network seems to have little energy in the tank. Then again, this could change as they have huge capital reserves to back their ambitious crypto project.
In this article, we look at the top influencers to watch in 2020, bitcoin halving event, stablecoins, decentralized finance (DeFi), market trends, and Web3/IoT/Dapps.
Top Influencers To Watch In 2020
The crypto industry has its list of influencers who are loved (and hated) within the community, and their words are regarded as sacred laws or eagerly disputed.
It is surprising what it takes for one to be a crypto influencer and the amount of daily interaction and conflict that comes with the role. Some have built valuable companies like Changpeng Zhao, the CEO of the billion dollar Binance exchange or the infamous Ethereum founder, Vitalik Buterin who has a lot of pressure on him to make Ethereum 2.0 work.
Another entrepreneur/influencer to keep an eye on in 2020 is the TRON founder Justin Sun. Justin has recently purchased crypto exchange Poloniex and is now eyeing blockchain based blogging platform Steemit. Many people counted him out after his Warren Buffet debacle but after a short-term silence, Justin has come ready to take over.
Can’t forget John McAfee who predicted that Bitcoin would hit $1 million by the end of 2020 or he would eat his own dick. He has recently come out to brush off that statement and turn his back against Bitcoin at the same time. Realistically, you don’t have to pay too much attention to him unless you want a good laugh.
Brian Armstrong and the Winklevoss Twins continue to push the pace in the USA with new innovations to bring crypto into the traditional markets.
Someone not talked about as much but who has been one of the pioneers of latest crypto trend is Rune Christensen. Rune has been at the forefront of the DeFi movement which has been one of the most talked about categories in crypto in 2019. The future is bright for DeFi which we will talk more about later in this article.
Cryptocurrencies such as bitcoin have largely derived much of their popularity from their volatility. This has also been their Achilles heel as many people do not see them as a stable stores of value or reliable mediums of exchange.
This view gave rise to stablecoins, a new class of cryptocurrencies known for their non-volatile nature.
There are various types of stablecoins on the market, but the most common are pegged to the U.S. dollar and a few other leading fiat currencies.
The next logical question that this above statement begs is the relevance of the multiple dollar-pegged stablecoins when they all serve the same purpose.
What is the difference between them and why can’t they all merge into one?
The long list of stablecoins is a true reflection of the broader cryptocurrency market in which there are more than 3,000 digital coins.
Some of them serve the same purpose while others do not seem to make any sense at all. Since the barrier to entry is low, anyone can issue their own cryptocurrency or stablecoin.
How will stablecoins affect the entire crypto market, policymakers, and industry players?
The natural cycle of growth is like a race. Many competitors will be there at the beginning but some will fall along the way. This is also what Circle co-founder and CEO Jeremy Allaire thinks. He believes that some stablecoins will fall on the wayside as they make way for those with better business models and usability.
His statement can be contested as his company issued the USDC stablecoin.
Tether, despite the controversy and transparency issues surrounding it, will continue to be a dominant force in this market segment.
Perhaps, the foundation of stablecoins in 2020 was set out in June this year when Facebook announced its Libra project. Libra, according to Facebook, is a stablecoin tied to a basket of currencies.
While policymakers spoke passionately against Libra, they have also engaged in a rat race to expedite or develop from the ground up digital versions of fiat currencies.
2020 will likely see many central banks developing, piloting, and launching Central Bank Digital Currencies (CBDCs).
China, which spent the last five years working at a slow pace to develop a state digital currency, has upped its tempo in response to Libra.
Other central banks from Japan, France, Singapore, South Korea, Sweden, Canada, and Thailand are following China’s lead in developing CBDCs.
The state-sponsored digital currencies initially look like a threat to stablecoins, but in the end, it is a big win for the entire crypto industry in general.
Speaking in December 2019, Canada’s central bank Governor Stephen Poloz said: “It is an open question whether the Bank of Canada would ever see the need to issue a currency in digital form as a substitute for cash.”
This statement may not be answered right away, but somehow, it shows that the stablecoin market has the potential to force central banks into the digital currency industry.
Market trends for 2020 will potentially set the tone for what this decade will be about.
Bitcoin is enjoying a good start to the year, with its price spiking from $7,176 per coin to its current price above $8500. Bitcoin’s price will likely receive a boost from the halving event expected to happen in May.
There is more to bitcoin than its price.
More institutional investors are expected to join the market and increase the overall trading volume in the derivatives market.
The market trend will also be affected by the impact of regulation by lawmakers. One of the most important pieces of legislation is the one introduced by the Financial Action Task Force (FATF) last year.
It requires cryptocurrency exchanges to collect information about their users and their transactions. This will have a negative impact on privacy coins and some of them have already been purged from a number of cryptocurrency exchanges.
This new rule is expected to come into effect June 2020 and will likely have an impact – direct or indirect – on the broader cryptocurrency market.
Governments and lawmakers have gained knowledge about cryptocurrencies. This could result in favorable regulations, which would lead to a boom and price spikes.
An important matter is the fate of Facebook Libra, a stablecoin proposed by one of the largest companies in the world.
Libra may or may not see the light of day as policymakers navigate through the regulatory landscape and try to stop its progress.
Bitcoin Halving and Stock-to-flow
Perhaps one of the most highly anticipated events of 2020 in the bitcoin community is the halving or halvening, as some would like to call it.
It has drawn a thin line between those who think that it will be a catalyst for a bull run while conservatives believe that the next bull run will require more than the halving event.
The previous halving events have always been followed by a major bull run, but not right after the event.
The last halving event took place in 2016 and more than a year later, bitcoin’s price skyrocketed to its all-time high of nearly $20,000 in December 2017.
Was the halving the only factor leading to that massive price increase? At the time, bitcoin was largely driven by speculative retail investors.
The ICO industry was booming, investors were throwing money around like Santa on Christmas morning, and startup founders did not have to do anything beyond using the buzzword ‘blockchain’ to sell their business idea.
It was an unsustainable model, albeit an important one that taught the world many lessons about the dangers of blindly investing in new financial products.
Yet, here in 2020, bitcoin is still standing. But the fundamentals then and now are different.
Many new Bitcoin investors in 2017 who bought the top got burned by the sudden fall and have exited the industry.
But the prospects of another bull run are high, thanks to the upcoming bitcoin halving.
Bitcoin halving is an event where the block reward for miners is cut in half every four years or every 210,000 blocks to be exact. Miners are currently getting 12.5 BTC for verifying transactions and after the halving in May, the reward will be slashed to 6.25.
Bitcoin is intended to be a currency, but not one issued, governed, or controlled by a central authority like a central bank. It is governed by computer code and maintained by miners and nodes all over the world.
Bitcoin halving is meant to control inflation and the number of bitcoins produced every day.
Bitcoin is a finite source with a capped supply of 21 million. It falls in the realm of oil and gold.
Bitcoin derives its value from being a scarce commodity. The simple laws of supply and demand are at play.
source: https://plot.ly/~BashCo/5.embed via Plan B
This brings us to stock-to-flow (S2F), a model that evaluates the ratio of the stock of a commodity to its flow and has been popularized by crypto influencers Plan B and Saifedean Ammous.
There are currently 18 million bitcoins in circulation (not counting the lost coins). At the current block reward, about 657,000 bitcoins are produced per year.
The stock-to-flow ratio is calculated as current reserve / yearly production.
Bitcoin’s S2F is 25. Gold has the highest S2F of 62 while silver is at 22. This makes bitcoin as valuable as these precious metals.
After the halving, bitcoin’s yearly production falls by half and its stock-to-flow ratio will go up to 50.
Bitcoin should be more valuable. However, some analysts have argued that bitcoin’s stock-to-flow ratio is flawed.
You can make up your own mind by reading Plan B’s full description of stock-to-flow and Bitcoin here.
Bitcoin halving will have an effect on traders, HODLers, miners, and institutional investors.
Bitcoin holders will not sell their digital tokens as they believe that the value will rise after the halving event.
Miners will be hit hard as their reward will be halved while their expenses to mine bitcoins remain the same. Bitcoin’s price has to go up or their expenses have to go down in order to counteract the change.
Some miners may be forced out of the game while others will hold onto their newly minted coins and sell them at a later date when its profitable to do so.
Decentralized Finance (DeFi) in 2020
2019 is behind us and will be remembered as the year of resurgence after a brutal winter in 2018. At the same time, decentralized finance, aka DeFi, rose silently to become a force to be reckoned with, or at least in the near future.
Decentralized finance is a movement in the cryptocurrency sector aiming to automate and cut out the middlemen in financial services such as insurance, borrowing, lending, and trading.
DeFi is implemented through decentralized applications (Dapps), which are mainly built on smart contract-supporting blockchains such as Ethereum.
Bitcoin is the perfect example of DeFi. The majority, if not all, of the other cryptocurrencies, have a central authority for either issuance or organization.
According to a research report published by Binance cryptocurrency exchange, DeFi played a crucial role in the growth of Ethereum since 2019.
Other blockchains have not yet managed to catch up with Ethereum when it comes to the building of DeFi products. However, the report warned that Ethereum’s competitors such as EOS, Binance Chain, Tezos, Algorand, and Tron will play a significant role in shaping the future of DeFi.
DeFi Pulse data shows that a total of $50.86 million in value was locked up in DeFi utilities at the start of 2019, and this figure rose 1,240 percent at the end of the year to $680.98 million. The current DeFi market is mainly dominated by MakerDao.
It comes as no surprise that the DeFi is expected to grow in 2020. And it will build on the progress made in 2019.
For example, lending and trading were the ring leaders in leading the DeFi movement in 2019. Cryptocurrency holders have been tempted by the prospects of earning interest on their digital currency holdings, and this will drive a surge in crypto-backed loans in 2020.
As the year progresses, we will likely see more investors locking their money in lending protocols to diversify their portfolios through interest earnings.
Active crypto traders have shown an interest in decentralized trading offerings as centralized crypto exchanges face increased threats from hackers and cybercriminals.
Stablecoins will continue to be an important part of the open finance ecosystem as they offer an easy gateway to the crypto market.
New products are also expected to be launched in fields such as insurance, asset tokenization, and investing.
2020 will not see the world migrate outright to open finance, but the progress expected to be made will likely have a big impact on the future of decentralized finance and finance in general.
Since the majority of DeFi applications are built on the Ethereum blockchain, the success of open finance will also depend on the technical developments of the smart-contract blockchain platform and to a certain extent, the price of Ether.
Decentralized apps are seen as the future of the internet by the proponents of blockchains. This does not come as a surprise, because blockchains, by nature, are decentralized ledgers.
However, Dapps are losing steam to those outside the crypto sphere.
Dapps cost a lot of money to build yet they have poor user interfaces, and as a result, attract a few users.
Dapps run on the nascent blockchain technology, which is still in the experimental phase.
As for 2020, more Dapps are expected to be released to lead the revolution against web censorship. At the same time, Dapps with improved user interfaces should be created.
We are living in a world in which devices are connected. This has given rise to the Internet of Things (IoT). There are already projects that bring IoT and blockchain under one roof. Examples include IOTA, IoT Chain, Modum, Factom, VeChain, Power Ledger, Helium, Waltcoinchain, and more.
Blockchain and IoT projects will likely find more useful use cases in 2020. Blockchain lead at accounting firm KPMG predicted that blockchain technology and IoT will play a huge role in managing climate change.
Blockchain will have a big role to play in the next generation web or Web 3.0. Web2.0 and its predecessor gave too much power to a few entities such as Facebook, Google, Twitter, YouTube, and more.
A company such as Facebook has a large amount of personal data at its disposal, which it could sell to third-parties for profit. The social media giant has been involved in data scandals.
The Facebook-Cambridge Analytica data scandal is still fresh in the minds of many. The political scandal came to light in early 2018 after the now-defunct political firm harvested data of roughly 87 million users and used the data to sway votes in favor of its political clients.
The video-sharing platform YouTube recently censored a large number of crypto-focused channels among a much larger campaign to remove videos, sparking anger across the community.
These two examples, although there are plenty more, show that there is a need for the internet to be fully decentralized to minimize or totally eliminate censorship and data breaches.
Crypto enthusiasts will tell you that blockchain is the solution. The solution will not likely come in 2020, but the foundation to do should start this year.