2019 has been an interesting year for crypto – not quite as exciting as the 2017 Bitcoin bull run. It wasn’t as nerve-wracking as the ICO era that came crashing down in spectacular fashion during 2018 either. However, it is arguably the year where crypto has become mainstream, with businesses and governments becoming increasingly involved in the sector – from launching their own digital currencies to regulating crypto trading; from partnering with crypto projects to outright banning certain types of crypto activities. Although it is impossible to predict where the space will go, we are confident that these are some of the major forces and tendencies that will shape crypto in 2020
Crypto vs Pseudo-Crypto
Although technically all digital currencies/tokens that are built on cryptography can be considered crypto, we will draw a distinction between those that follow the ethos of creating a new financial and monetary system (call those crypto) versus those that seek to apply cryptography and DLT technologies in the existing one (call those pseudo-crypto). With countries pursuing their own “blockchain-based” digital coins – China, Turkey, Ghana, among other – and banning and/or heavily regulating decentralized crypto, 2020 is sure to see the rise of central bank digital currencies (CBDCs) and increased tension between pseudo-crypto and crypto. More pseudo-crypto is sure to come from the private sector, with Facebook still trying to rescue Libra and other companies likely to join in on centralized token opportunities for their profit. Financial institutions like CME and ICE offering derivatives related to crypto yet not actually backed in crypto are also part of this movement and we expect them to offer more traditional financial products in crypto clothing.
Crypto in 2020: The Battle Between Centralization vs Decentralizaiton
The rise of pseudo-crypto will inevitably drive centralization. Most if not all those projects will be centralized by nature. However, centralization forces are also coming form within the crypto space – from projects like XRP or Bitcoin forks and other coins with larger block sizes, there will be a trend towards some levels of centralization. On the other hand the core crypto community is likely to continue to work on technical ways to ensure democratization and decentralization (some of this work may come from new proof-of-X models that make it easier for a distributed network to exist).
Bitcoin in 2020 vs Others
The death of Bitcoin has been announced plenty times and yet it still remains king in crypto. That said, other cryptocurrencies have gained significant percentages of the market, and some in the space (obviously not HODLers) believe that some new coin will be the iteration that finally brings crypto to everyone. On the Bitcoin side, implementation of the lightning network could be what makes Bitcoin more effective as an everyday means of exchange. Bitcoin has also remained at a somewhat stable price. Despite a decrease in market cap, it has also seen higher daily transaction volumes than in previous years. If this continues, it may attract risk averse users to participate in the market.
Privacy vs Compliance
This year saw the delisting of privacy coins like Monero, Dash, and Zcash from exchanges seeking to comply with regulations. As crypto integrates to traditional markets there is a push to abide by financial regulations, AML and KYC requirements. Integration will come at the expense of privacy, while coins and projects seeking privacy will face an uphill battle for adoption.
The Death of Altcoins in 2020?
Not all altcoins. Many have already failed and are functionally dead. Yet several “altcoins” are actually becoming strong enough to carry their own name. Litecoin and Ethereum – difficulties with the implementation of PoS notwithstanding – and others have reached a relatively big market cap and relatively stable price. The year 2020 may be the year when these assets become more prominent. Bitcoin dominance nevertheless, is more likely to remain strong, clearly above 50%. There will be no flippening in 2020.