In the last few years, we have seen the crypto market go through some tremendous changes. We have lost many useless tokens to the crypto winter of 2018/2019, but this has overall contributed to the market’s maturity.
2020 is expected to bring further development to the market, with more growth for the existing projects, and an increase in crypto-asset adoption.
Below are some of the reasons why 2020 will be a big year for crypto:
The Bitcoin Halvening
This May, the crypto world will see the Bitcoin digital ledger go through its third halvening, which will decrease its block reward from 12.5 to 6.25 BTC. This event occurs every four years, and in its past instances, it has produced interesting price movements prior to and after the halvening.
The halvening is expected to lead to scarcity and drive up the price of Bitcoin on the market. But it is also expected to severely impact the mining ecosystem, as miners will leave the network because of unprofitable rewards. There will be an imbalance in hash rate as well, but it is expected that things will reach an equilibrium after a while.
The purpose of the halving is to stabilize the supply of BTC, as it nears its total supply.
More Scalable Solutions
2020 is expected to bring more layer two solutions, or new blockchains based on this architecture, in which the transaction processing volume is exponentially increased. There will be many blockchains implementing solutions to improve their scalability, such as Ethereum, and as a consequence, we will probably see more applications developing at a faster rate.
Defined Market Structure
It is expected that during 2020 the cryptocurrency market structure will grow to bear more similarities with the traditional financial world, separating legal and regulatory functions.
Coinbase has already launched its own Custody company with its own board and under a different regulation. There will also be segregation between broker and exchange platforms, with the line being more defined between these two types of services.
More Decentralized Applications
As fiat-to-crypto exchanges will continue to play by the rules set by the traditional finance world, things will be different for decentralized crypto-to-crypto platforms.
Decentralized wallets, DEXs, DeFi, and Dapps will see great improvements in their functionality and security, and more new apps of this kind will appear to cater to crypto users.
As decentralization means there will be no funds stored in company wallets, these services will not be regulated as financial companies, but as software companies. This will further accelerate the pace of innovation in the space, as these services will be available on a global scale.
Regulations Will Become Clearer
More and more nations are starting to outline their regulations and tax laws for cryptocurrencies.
There are many countries that have taken positive stances when it comes to crypto usage and taxation, promoting growth and transparency all over the industry. But there are also highly obstructive regulations, such as those in China which could hinder the evolution of digital assets.
As Facebook is ready to launch its crypto this year, it may prompt more governments to draw up clearer guidelines for cryptocurrency use.
In spite of the market losses sustained in 2018 after Bitcoin’s fall, more and more new cryptos have been launched throughout 2019, counting over 2000 coins and tokens.
But less than a third of these assets have a daily trading volume of $100,000. Also, more than a third are valued at fractions of a penny. Even if the number of cryptos is higher than ever before, there has been no increase in market the capital throughout 2019.
While there will be some money flowing from mainstream finance into the crypto market, this capital influx will most likely not be noticed in the thousands of coins at the bottom of the crypto chain.
With the increasing scrutiny from regulators and the community (which has seen its fair share of scams and useless coins), the number of new coins to launch in 2020 will be significantly less than in the previous year.
There are many top projects currently working on innovative protocols, and we will probably see a consolidation of these chains.
Emerging Market Adoption
Countries that are experiencing hyperinflation in their economy have seen a significant rise in crypto usage, and it is expected that more and more people from such nations will turn to digital assets as a financial solution.
Because of its high price and volatility, Bitcoin is not seen as the prime option in this case, with stablecoins presenting more advantages and will probably be the most likely candidate.
Of course, like with any type of prediction, it is impossible to foresee what will happen in the crypto space with accuracy. These are merely speculations, so traders and analysts have their own opinions on what will happen in 2020.
Featured image: bitcoinist.com