Making money on the volatile crypto market isn’t just about quickly jumping on the trends of the moment. In fact, it’s crucial to take a long-term view. Top traders plan ahead to predict market movements before they happen.
In 2020, there are several events taking place in the cryptocurrency world that are likely to influence the price of crypto assets. When making your investments, it’s important to keep these in mind. Let’s look ahead to see what the first year of the new decade will bring for crypto enthusiasts.
When it comes to the “old school” cryptocurrency, this is a big deal. In May 2020, the Bitcoin rewards given to the miners whose networks actually ‘make’ Bitcoin, by processing data for the blockchain, will be halved. This is all according to plan – Bitcoin was designed with this limitation in mind in order to mimic precious resources like oil and gold.
What it means is that Bitcoin will become shorter in supply and, in theory, all the more desirable. Some experts even project that Bitcoin will see a sustained rise in value up to a price range of $20,000-$50,000 after the halving.
Will Facebook launch Libra?
In 2019, Facebook rocked the financial world when it announced its own stablecoin, Libra, and a wallet, Calibra. Facebook’s Libra project is scheduled for operation by June 2020, but things are already not quite going to plan for Zuckerberg and co.
Libra’s mission statement is to step in where banks are lacking, especially in developing markets. But as you can imagine, the idea of such a powerful corporation issuing its own currency hasn’t gone down well with national governments, which will be throwing up regulatory obstacles. It remains to be seen whether Facebook can successfully overcome them to deliver by the summer.
Telegram’s tussle with the SEC
Facebook isn’t the only big tech company looking to get into the crypto game. The popular messaging platform Telegram made the second-largest initial coin offering of 2018. The Telegram Open Network (TON) secured 1.7bn USD in funding from private investors. In return, TON promised to issue the first TON tokens, named Grams, by 31st October 2019.
However, the SEC stepped in to block the “unlawfully sold” Gram tokens. Telegram is actively fighting back and we’d be surprised if this struggle is resolved in 2020. Nonetheless, serious crypto investors should monitor the proceedings closely, as it will set a precedent for how developers and investors view their prospects for distribution, and the use of new coins and tokens.
China’s next move
China is one of the most influential countries in the world on the global market, and that goes for cryptocurrencies too. In 2019, Beijing slammed cryptocurrencies and put pressure on traders. However, China isn’t afraid of new technologies, but is rather the party that wants to be in control. With the proposal of a digital yuan modelled on Bitcoin, China is on the path to becoming the first major economy to issue its own digital currency.
The impact of the digital yuan on the crypto scene and the global market is difficult to assess at this stage, but it is likely to be far-ranging. There’s also the possibility that other countries will rush to issue their own ‘national’ crypto coins, either to follow China or to try beat them to the punch.
Once strongly associated with pirates and tech-libertarians, cryptocurrencies have climbed the ladder to legitimacy, and that means that traditional financial institutions are starting to take notice. Naturally, they want a piece of the pie through more established channels. The SEC has yet to approve a regulated Bitcoin exchange, but other cryptocurrency derivatives such as Bitcoin futures have already passed through the scrutiny of regulators.
In a 2019 speech, the Chairman of the Commodity Futures Trading Commission suggested that a regulated Ethereum futures market in the US could soon be approved. How great of an impact might these new financial tools have on the level of institutional participation in crypto come 2020? At the very least, we know that the trading volume of Bakkt futures is reaching higher levels every week, but is yet to significantly shake the market. However, 2020 could be the tipping point, as institutions might become bolder, spurring significant growth.
As crypto permeates the mainstream, financial institutions and countries are staking their claims. Not every nation will be as heavy-handed as China, but traders should take notice of developments in different countries around the world, as the regulations introduced by each can have a big global impact. They could make it easier to buy goods and services with cryptocurrency, and to exchange too, but they could also introduce new restrictions or fees.
That being said, it seems policymakers have started to be more supportive of cryptocurrency adoption. Switzerland, Germany, Ukraine, France and even certain US states are becoming friendlier to cryptocurrencies. In Asia, Japan and Korea are both working to introduce digital banking-friendly regulations. We can anticipate other regulators to do the same in the upcoming year. When the most influential countries move, others are sure to follow.
Feeling nostalgic for the good old days of 2009? A decade after the last big global financial crash, many of its underlying causes have not been fixed, and there are worrying signs of an impending recession. As economies stagnate and interest rates drop negatively, cryptocurrency holders may actually have something to smile about.
Bitcoin was founded with the promise of independence from government monetary policy. Much like gold and traditional precious assets, Bitcoin could well become a treasure during dark economic times. If negative interest rates make fiat money saving accounts useless, many could turn to crypto as an appealing alternative.
The US election
Like it or not, US politics will have a powerful ripple effect on markets around the world, and crypto is no exception. 2019 saw the White House and the US Federal Reserve weigh in on Bitcoin, and Facebook’s involvement in the crypto sphere attracted scrutiny from Congress. As the political landscape in the US becomes even more polarized, it’s likely that the Democrat and Republican parties will stake out radically different outlooks on crypto, and thus potentially set the market on very different courses for the next four years. As the election draws closer, crypto traders should pay attention to politicians on both sides and hedge their bets accordingly.
Off the chain
Last year was a good one for Tether, as increased use of the stablecoin drove transaction volume towards crypto assets backed by off-chain assets (for example, dollars or other fiat currencies), rather than assets that derive their value from on-chain network effects. What’s important going forward is whether this turns out to be a blip or a real turning point. If stablecoins become more popular and influential, the issue of what ‘real’ cryptocurrency actually means, and its role in the economy, will no doubt become a talking point in the crypto community.
In the popular conception of cryptocurrency, Ethereum has been playing second fiddle to Bitcoin for some years now, but that could be set to change. Since its activation in 2015, Ethereum has operated on the traditional “proof-of-work” consensus model. Just like with Bitcoin, this involves rewarding ‘miners’ whose networks perform the cryptographic work.
However, in 2020, a new version of Ethereum is scheduled to hit the market. Developers are working to overhaul the current consensus model with a new one called “proof-of-stake.”. Proof-of-stake is, in theory, more secure and energy-efficient than the older system. Given Ethereum’s size in the market, the new version could well inspire others to imitate it, triggering long-term changes.
Be prepared for 2020
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