2019 was an incredible year for crypto currencies. We saw a dramatic rise in the number of currencies available and a number of blockchain technologies are coming to the fore. That’s not to mention the ongoing ups and downs of Bitcoin.
With global players such as China entering the market, the trend looks set to continue for the next few years.
Here’s an analysis of what to look out for over the next 12 months or so.
Crypto-friendly regulations
In Wyoming, USA, the local government has introduced 13 new blockchain/crypto laws in the last two years.
The result? The state’s own crypto Silicon Valley; a hub of crypto companies who have flocked to the region as a result, enticed by the digital-banking-friendly regulations.
Of course, it means other states have copied this success, and it’s about to extend around the world over the coming year.
It’s likely to have a knock-on effect on associated crypto ventures, too. Initial Coin Offerings (ICOs) are a new way for startups to raise capital by giving investors a digital token in exchange for crypto investment. The token’s value then fluctuates according to the success of the business and can be traded accordingly. Increased regulation would boost investment in an expanding market.
Another popular venture is crypto gambling. With it being more heavily regulated, this area will see a big boost to consumer confidence, with safe crypto gambling sites easier to find than ever.
More DeFi
The theme of freedom will continue in the crypto world with more decentralized finance – commonly known as DeFi – becoming available.
Currently believed to be valued around $650 million, this will bring traders many advantages, such as raising capital and the ability to switch between different debt positions.
We have already seen firms such as Binance Chain and Huobi announce plans to build their own decentralized exchanges, with the latter earmarking $100 million for the project.
This will drive innovation and further investment, as exchanges will be smoother and more intuitive. Problems such as bugs and slow speeds are about to become a thing of the past.
Central bank backed digital currencies
As well as a more regulated sector, we’re about to see digital currencies introduced with the blessing of national governments.
Countries have woken up to the huge potential benefits of crypto transactions and many, such as China and Venezuela, are now working with their central banks to launch their own national digital currencies.
The one major drawback to this is concern over its effect on citizens. Petro, Venezuela’s proposed coin, made the news recently by revealing plans to sell oil and gold in order to fund its project. China’s ‘digital yuan’ has sparked concerns that the government will use it to exercise more control over its people, as well as being a big threat to some people’s beloved Bitcoin.
The result of all this could well be a type of ‘space race’ with various countries competing to create the best coin. Not to mention the added competition of private companies such as Facebook, with their Libra coin, and JPMorgan Chase thrown into the mix.
The halving of Bitcoin
Due to take place in May 2020, this will probably be the biggest crypto event of the year.
To sum up, the halving is so-called because the number of Bitcoins given to successful miners will be cut to half, from 12.5 to 6.25. This might push up price growth by increasing scarcity in the market.
It’s worked twice before and has boosted the market on each occasion: both the 2012 and 2016 events triggered huge price rises afterwards.
However, the danger is there will be many people put off from trading, lessening demand and possibly reducing the value. Also, in previous years Bitcoin’s competitors were nowhere near as strong as they are now, and they could capitalise on any show of weakness.
Traders will be hoping that it’s not a case of ‘third time unlucky’.
So, while the outlook is generally positive for crypto currencies with more freedom to trade and speculate and potentially an even stronger Bitcoin, it always pays to exercise caution. Double check any information that you come across before investing and remember: currencies rise and fall – don’t put all your eggs in one basket!
