5 min read
Our 2020 crypto predictions
TL;DR: More closures are coming, Libra probably isn’t launching in 2020 (at least not in its current form) and blockchain’s next sleeper hit is already here.
Given that I don’t have a crystal ball at my disposal, I don’t know if 2020 has anything as disruptive and headline-grabbing as last year’s Libra announcement.
Regardless, this year is bound to have both new surprises and continuing trends in store. Enter my 2020 crypto predictions...
Prediction 1: More M&A activity and businesses close their doors
The crypto winter is long and deep, and many companies don’t have the resources to weather it. More than 70 crypto-focused hedge funds have closed this year, while half as many funds launched this year than in 2018.
But even as the monetary value and trading volume of cryptocurrencies has fallen by 80 to 90% since early 2018, one area has thrived in 2019: M&A.
Crypto spring isn’t on the horizon just yet
Token Data estimates that there will be between 90 and 100 acquisitions in 2019. That’s a drop from 162 the previous year, but strategic acquisitions – deals made to gain talent, consolidate or achieve vertical integration – remained relatively steady. Coinbase has been especially busy, snapping up 16 companies to overcome regulatory hurdles and access new talent and technology.
Expect each trend to continue next year. More businesses will close, more acquisitions will happen and the war for institutional money will continue into 2020. Crypto spring isn’t on the horizon just yet.
Prediction 2: Libra won’t launch, but it will start to look a lot more like e-money
Don’t be surprised if Libra starts to look more like WeChat over the course of 2020
But Libra still has plenty of regulatory hurdles to clear, and it’s doubtful it’ll leap and bound over all of them in 2020.
Basically, David Marcus and company have to figure out how to get it from being really scary to being something that can be contained. So don’t be surprised if Libra starts to look more like WeChat over the course of 2020. In order to open its front doors to the market, it may have to open a back door to regulators.
Prediction 3: Central bank digital currencies start to look a lot more like digital cash than anything crypto
Everyone’s talking about central bank digital currencies, but nobody seems to be on the exact same page.
So far, the tone of the conversation ranges from vague and non-committal (India and the European Central Bank) to practical and relatively committed (France and China). The buzz is palpable, but what’s going to come of it?
Just what [CBDCs] will look like remains to be seen
I wouldn’t be surprised if many CBDCs start to look more like what the Bank of England is doing with its real-time gross settlement (RTGS) renewal. Instead of developing a brand new and wholly digital currency, many central banks may just upgrade their technology in a more modern manner. Just what these solutions will look like remains to be seen.
Prediction 4: DLT networks become significant projects of the big investment banks
In 2019, I predicted DLT would make a comeback. But even though these networks are getting big and meaty and ready to go live, the market still feels very “meh” about them.
That will change in 2020. Investment banks have been developing DLT for half a decade, and this year they will be taken much more seriously.
If banks can answer [key] questions, their DLT projects should flourish
What’s missing right now is the marketing. Banks still need to articulate that they’ve solved their prospective customers’ problems and bring central banks into the conversation.
Other questions still hang in the air, too: will these networks only work in Switzerland or will we see it in the rest of Europe? Why should CSDs any interest in something that could make them irrelevant? If banks can answer these questions, their DLT projects should flourish.
Prediction 5: Bakkt becomes a bit of a sleeper hit
This one’s a bit of a gut feeling, but there are several reasons to keep an eye on Bakkt this year.
The first is its BTC futures contracts: while companies like CME Group and Cboe Global Markets have been doing options and futures for awhile now, they were cash-settled. Bakkt, on the other hand, physically delivers bitcoin on the requisite day.
The question remains whether Bakkt can actually built a market
In other words, if I’m buying Bitcoin (but in the future), I want to get Bitcoin, not US dollars that are equivalent to the price movement in Bitcoin. That’s valuable for emerging actors in the hedge fund and family office spaces.
Bakkt also benefits from the company it keeps: it’s backed by ICE, and has partnerships with Microsoft and Starbucks. The former lends it credibility, while the latter shows it already has consumer-facing applications in mind.
The question remains whether Bakkt can actually built a market. Based on what my gut’s telling me, I believe it can.
So there you have it. A year ago I was fairly on the money, but Libra definitely came out of left field to really grab headlines. Never say never when it comes to market-altering announcements.
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