Last week I dust off my winter coat, with the persistent cold. In the crypto scene, however, it was one big “winter” all year round, after the Bitcoin’s price dropped to $ 3,000 in December 2018, after having peaked at $ 20,000 in December 2017. In the months that followed, the price rose again until nearly $ 14,000 in July, but in the meantime, only half of that has been left by a pike dive off the course. Unfortunately, the predictions by self-proclaimed experts that the price would rise again to the old record or even higher to $ 50,000, $ 100,000 or even $ 1,000,000 did not come true. Whether that is due to the disappointing launch of BAKKT, the absence of a first ETF or institutional glow wave is difficult to say.

A harsh winter is always good for dying pests, just like in the crypto scene. Over 80% of the projects that did an Initial Coin Offering (method of raising money through crypto-currency) turned out to be an outright scam and research of the most popular crypto-currency website Coinmarketcap shows that of the top 2000 crypto projects, a quarter hasn’t posted an update on code platform Github for more than a year and even a third didn’t do this in the past 5 years.

“Winter is a season to struggle through, to endure, and the price we pay for the brilliant and beautiful spring that follows.”

Erik Voorhees

Na een strenge winter komt altijd de lente en zoals ik al in mijn vorige blog schreef, hebben de projecten die de winter hebben overleefd, allerlei prachtige vorderingen gecommuniceerd en ligt er veel moois in het verschiet voor 2020. Bijna 20% van de wereldbevolking heeft inmiddels wel eens cryptovaluta gekocht volgens Kaspersky en worden volgens Deloitte bedrijven ook steeds positiever.

After a harsh winter, spring always follows and, as I wrote in my previous blog, the projects that survived the winter have communicated all kinds of wonderful progress and there are many beautiful prospects for 2020. Nearly 20% of the world’s population bought cryptocurrencies according to Kaspersky and according to Deloitte, companies are also becoming more positive about using them.

Source: Statista
Source: Statista

The crypto scene is one of the few environments I know, that is changing so rapidly at the moment. Prices, new technological developments, actions taken by governments, from one day to the next, have a major impact on issues such as price levels, use and further development of cryptocurrency. Nevertheless, a number of major developments are expected in 2020, which will certainly have a great impact on cryptocurrency.

1) Bitcoin’s Halving

Analyzing the crypto news from the past months, it is mainly about just 1 event that will take place; the ‘halving’ of Bitcoin, which is expected in May 2020. The reward for the ‘miners’ of the Bitcoin blockchain network will then be halved and historically this has always led to a price increase of a few hundred percents, due to, among other things, the decreasing available number of Bitcoins. However, the opinions are divided, because there are also experts who mark the price increase of last year (from $ 3000 to $ 13000) as the corresponding price increase as a “halving effect”. Some even see the declining reward as something that will actually negatively influence the price, because it is no longer interesting for many small miners to switch on their computers and maintain the Bitcoin blockchain network. With earlier ‘halvings’ the price always increased towards the beginning of the month, so in the first quarter, we will immediately see if it will be the long-awaited catalyst, which not only increases the value of the Bitcoin, but also the strongly connected altcoins, which almost always rise exponentially. Are we going to see a new “all-time high”? Or will it be the biggest deception of cryptocurrency owners in two years? The first months of 2020 will tell!

2) Libra

Recently, at the European Commission’s annual blockchain event in Malaga, I heard the head of Facebook’s Libra talking about their plans for 2020. The company has recently been overwhelmed by loads of negative responses from governments to its latest project and it’s not even certain whether the project will be launched at all. In Europe, Germany, France, and Italy are working on measures to ban the project and the launch in the United States is not yet certain, even though CEO Zuckerberg recently announced that they will only launch if the regulators are fully in line with that. He also warned his investors that the project may not be launched at all. Other top management of the social network published criticism about the project and a number of important shareholders from the first hour; Paypal, Visa, and Mastercard declined their participation, probably under high pressure from the American regulators.

In my earlier blog about Libra, I already indicated that I have mixed feelings about the new project. The cesspool with affairs around Facebook seems to be drying up, and the question is whether we want to entrust something so precarious like our financial data (according to Dutch National Bank research, the most privacy-sensitive data for consumers) to the social media company. On the other hand, we still have 1.7 billion (!) people without bank accounts, of which 1 billion 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 and therefore cannot save money. Something that the economic growth of a country can contribute significantly to achieving various Social Development Goals of the United Nations. McKinsey even calculated that this $ 3.7 trillion can contribute to the GNP of developing countries in the next 10 years.

Central banks, such as our Dutch National Bank, all point to two major concerns; the stability of the financial system; what will happen when Libra is so large, that it will have an impact on the monetary policy of the banks? And the question of how the company counteracts money laundering (AML) and identifies all actors on the network (KYC) to combat terrorism financing, for example, have both not made clear yet.

Next year will, therefore, be an interesting year, not just for Libra. Other large companies, such as Wallmart, are also working on their own digital currencies and various governments are now also accelerating their efforts to look seriously at their own digital currencies, such as the European Union and China. There are also companies that stand behind the governments and indicate that the money system should remain in the hands of governments, as Apple’s CEO Tim Cook recently indicated. However, the business case remains very interesting; various studies have shown that consumers spend much more with digital forms of money than with cash, also known as the “house money effect”. The adoption of such a system, even according to the developers of Libra, will take many, many years to come.

3) Big money

I think it has been one of the biggest deceptions last year in the cryptocurrency scene; the introduction of BAKKT. The platform would, on the one hand, allow efficient buying, selling, issuing and storing of cryptocurrencies and, on the other hand, the use of large parties such as Starbucks (with 30,000 branches) which had until recently, more digital payments made than with Apple Pay (in the United States). This was supposed to cause a huge demand for Bitcoin, which would, of course, have a positive effect on the price. Unfortunately, the enthusiasm for the platform was disappointing and the price of Bitcoin fell 19%.

As the parent company owns the largest stock exchanges such as the New York Stock Exchange and cooperates with established names such as Microsoft and BCG, the platform must primarily inspire institutional investors, such as pension funds, to invest large sums of money in cryptocurrency. That did not happen before, because the infrastructure simply lacked and the coins are too volatile in value. Both things that BAKKT eliminates with its platform.

It is no secret that large investors are eager to enter the cryptocurrency market. In the corridors of a number of large Dutch banks, it is indicated that their private bankers will advise rich clients to invest 5–10% in cryptocurrency in 2020 and many managers of ‘family offices’ (management offices of very wealthy individuals/families) who I speak, are also working on this. Crypto-currency 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, so also the transactions and size of digital wallets. A recent analysis of all Bitcoin wallets here shows a very strong increase in wallets of large size.

Because only 21 million Bitcoins can be made and 4 million are lost, the number of scarcity is increasing and that is increasing, which of course is good for the price.

The big money is visible and invisible already busy entering the market, I am curious what effect this will have in 2020 on the prices of the various cryptocurrencies and of course further development of the whole.

4) Further development of projects

Shrew mice live on average only 1–1.5 years and are therefore the shortest living animals on earth. In that respect, they resemble blockchain projects, which also have an average lifespan of 1.12 years, Chinese research among all 80,000 projects revealed.

With Bitcoin’s insane price increase, which is $ 7,500 at the time of writing, many fortune seekers are looking for a cryptocurrency that also has the potential to “moon” (crypto language for a price increase of hundreds of percent). Because of the short lifespan of most projects, a few people have become very wealthy due to the right investment, but the large masses have simply lost a lot of money by selling or selling them too late. In the Netherlands alone, about half a million consumers invested nearly a billion euros in cryptocurrencies, and because most of them bought them at the top of the market, most people are still overdrawn with their investment.

In my earlier blog I already wrote several tips when looking for the “new Apple” and indicated here that it is especially very important to thoroughly screen the projects on different points; “Do Your Own Research”. You are not just going to send money to a company where you are not even sure where they are located, whose team does not have the knowledge to set up such a project or where little information can be found on the internet? In the madness at the end of 2017, many people haphazardly put money into projects without sorting out these kinds of things, leaving many billions of euros in the pockets of fraudsters setting up fake projects or simply a handful of people who sold on time to a large group of people, who subsequently saw their investments fall in value rapidly.

Many greats in cryptocurrency continue to designate Bitcoin as sole ruler and expect all other cryptocurrencies to quickly take a seat on the “Crypto Graveyard.” I myself still believe in several other projects that have already moved away from large user groups, published several major updates and are still going through many great developments in 2020.

In addition to Bitcoin, Ethereum is often mentioned as the “Microsoft” of cryptocurrency but has received serious competition from, among others, EOS and TRON. If we look for example at the number of Decentralized Apps (DAPPS) on Dappradar, we see that of the top 50, only 3 on the Ethereum network and the rest on that of the two competitors. It is the project, which enjoys a lot of respect in the cryptocurrency and blockchain community because it brought a major step forward in the development of technology by not only facilitating payments but also introducing “smart contracts” and “dapps”. In 2020, the major (2.0) update of its network is on the “Serenity” program, with which Ethereum makes a supercomputer by introducing a different and much more energy-efficient “consensus method” for validating the transactions; “Proof of Stake” and implemented various solutions to make the network scalable, such as Sharding, Plasma, and Raiden. With the rapidly increasing trend around DAPPS and possible approval of regulated futures, this can all be very positive for the exchange rate of the currency.

Other projects that are taking major steps are Ripple, which has already connected 200 banks to its network and which could replace SWIFT (the organization that now controls the global financial system), Vechain, BAT, EOS, IOTA and TRON.

5) Regulation

Governments worldwide work overtime to regulate the rapid emergence of cryptocurrencies and companies in the industry. As long as it does not (very much) hinder its innovation, I am very much in favor of it, since it not only reduces the chance that cryptocurrencies are used for criminal activities such as money laundering, but it also gives greater certainty to the large investors and therefore makes them faster let enter the market.

One of the core tasks of governments is to protect their citizens. After the many scandals surrounding cryptocurrencies in recent years, where consumers lost a lot of money by investing in ‘fake projects’ and / or entrusting them to trade fairs that went bankrupt for mysterious reasons, such as QuadrigaCX, the Dutch government also takes this task dead serious. It even wants to take the lead in the European field, with its laws and regulations. The AMLD5 legislation will come into effect immediately in January, in which crypto-currency exchanges and custodians (wallets) will be required to register with the Dutch National Bank, receive a review of the suitability of directors and shareholders and must demonstrate that their business processes are designed for money laundering ( AML) and counter-terrorism financing.

According to Minister Hoekstra of finance, the main objective is to combat money laundering.

All Dutch companies that I know that have to comply with this legislation are now proactively working on the implementation of the DNB and most of them are already compliant.

With the above-mentioned expectations for 2020 in the crypto-currency area, I am extremely curious as to what is going to happen; what all will actually happen and what effect it will have on the industry. According to many experts, Bitcoin is going to “go on or under”, I think it will mainly be a year of rapidly increasing maturity and further technological development of the industry.

Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.