Where are cryptocurrencies heading in 2020?

Last year I wrote a KeyNote about how Bitcoin, Ethereum and other major cryptocurrencies had nosedived in price, with some analysts warning that the market has descended into “panic mode”. Fast-forward 12 months and cryptocurrencies in commercial terms is still juvenile.

After the hype of 2017 into 2018 with cryptocurrencies and initial coin offering fundraises hitting record highs, the “Crypto Winter” that followed seems to have cleared out the majority of scams, over-hyped projects without substance and excessive risk.
It is always difficult to predict where immature technology and economic activity might go. However, there are signs that we are entering a “Crypto Spring” with well-funded projects, blockchain patents and a maturing of the crypto space.

I think it’s likely that there will be two main developments:

Cryptocurrencies

Bitcoin, as a deflationary currency, will continue to appreciate in value longer term and other cryptocurrencies that seek to act as a store of value will follow this path. There will also be a clearer distinction between forms of cryptocurrencies as payment tokens, utility tokens, asset tokens and security tokens. The market will become increasingly sophisticated to understand the differences, assisted by greater regulatory scrutiny and clarification.

Blockchain

This and other forms of distributed ledger technology will start to be applied as solutions to genuine problems, albeit in a more limited form than prophesised by blockchain evangelists rather than as solutions looking for a problem to solve (or worse, fabricating a problem to which someone’s blockchain was the magic solution).

Will there be a crypto crash?

There will continue to be bull and bear runs as the crypto ecosystem matures. However, at the same time, the magnitude of the runs will tend to settle down as the market becomes more sophisticated and regulatory oversight starts to increasingly bite.

Will crypto replace centralised financial systems?

Not anytime soon. Governments and incumbent financial institutions have taken the momentum out of the original drive that built up between 2009 and 2017. These large actors have ingested that same momentum and are now looking at how they use crypto technology to augment (if not entrench) existing financial systems.

Going into 2020

The appetite for cryptocurrency and fintech innovation has increased again this year. Bitcoin reached $1bn in cumulative transaction fees on the eleventh anniversary of the world’s first cryptocurrency and according to a study by job site Indeed.com the share of cryptocurrency jobs per million has risen 1,457% over the past four years.
Add to this mix that China has announced it is ready to roll out the world’s first digitised domestic currency, attracting the attention of financial service industries across the globe, and it is clear that this is an industry that will only continue to grow. The big challenge for regulators will be to keep pace with such financial innovations.

If you have any questions about virtual and cryptocurrencies arising out of this KeyNote, please do not hesitate to contact Adrian Shedden using the details below.