Publication date: 20 Jan 2020
Bitcoin’s price dropped to $3,122 in December 2018 after having peaked at $20,000 a year earlier. In the months that followed, the price rose again to nearly $14,000 in July but then fell by half. Predictions by various experts that the price would rise again to the old record or even higher to $50,000, $100,000, or $1,000,000 did not come true.
The crypto market is one of the most rapidly changing. Every day, new technological developments and actions taken by governments have a significant impact on price levels, use, and further development of cryptocurrencies.
How common cryptocurrencies are around the world? Source: Statista
A number of important developments are expected in 2020. They will have a great impact on cryptocurrencies.
- Bitcoin’s halving
Crypto news from the past months is often about halving of Bitcoin, which is expected in May 2020. Reward for miners will then be halved. Historically, this has always led to a price increase of a few hundred percents due to the decreasing available number of Bitcoins.
Other experts see the declining reward as something that will negatively influence the price because many small miners may refuse to switch on their computers and maintain the Bitcoin blockchain network.
- Cryptocurrency-based payment systems
Various studies have shown that consumers spend much more with digital forms of money than with cash. There are now 1.7 billion people without bank accounts, 1 billion of who 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. Instead, this money could contribute significantly to economic growth of countries as well as help achieving United Nations’ sustainable development goals.
Facebook’s Libra has received loads of negative responses. Germany, France, and Italy are working on measures to ban the project. The launch in the United States is not yet certain. Paypal, Visa, and Mastercard have declined their participation.
Other large companies, such as Walmart, are also working on their own digital currencies. Various governments are now taking their own digital currencies seriously. Among them are the European Union and China.
However, there are concerns that cryptocurrencies might negatively affect the stability of the financial system. It also remains unclear how cryptocurrency owners will counteract money laundering and combat terrorism financing.
Therefore, there is still a big question mark over the future of cryptocurrency-based payment systems.
- Big money entering the cryptocurrency market
Large investors are eager to enter the cryptocurrency market. Rumours in a number of large Dutch banks say that bankers advise rich clients to invest 5–10% in cryptocurrency in 2020. Many managers of family offices (management offices of very wealthy families) are also moving in this direction. Cryptocurrency companies like 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, including transactions and the size of digital wallets. A recent analysis of Bitcoin wallets has shown a very strong increase in the number of large-sized wallets.
As long as only 21 million Bitcoins can be made (4 million are lost), the scarcity is increasing. This, of course, is good for the price.
- Due attention should be given to further development of projects
After Bitcoin’s insane price increase, many fortune seekers started looking for a cryptocurrency with huge potential for a price increase. Many crypto projects have a lifespan of only 1.12 years. Therefore, only a few people have become very wealthy due to the right investment; the large masses have simply lost money by buying or selling cryptocurrencies too late.
Many crypto experts continue calling Bitcoin the sole ruler and expect all other cryptocurrencies to quickly take a seat on the “crypto graveyard”.
There are several other projects that have already moved away from large user groups, published several major updates, and are going through many great developments in 2020. For example, Ethereum is a project which enjoys a lot of respect in the cryptocurrency community. It has brought a major step forward in the development of the blockchain technology. 2020 will see Ethereum’s major network update Ethereum 2.0 (also known as Serenity) introducing “Proof of Stake”, a different and much more energy-efficient consensus method for transaction validation. Various scaling solutions will follow shortly as well.
- Regulation
Governments worldwide work hard to regulate rapid emergence of cryptocurrencies and companies in the industry. It not only reduces the chance that cryptocurrencies are used in criminal activities, such as money laundering, but also gives greater certainty to large investors, thus letting them enter the market faster.
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