5 Key 2020 Cryptosphere Trends and Updates Every Investor Should Know
From the launch of Ethereum 2.0 to the growing involvement of institutional investors, 2020 is slated to be a breakthrough year for cryptocurrencies and the blockchain industry.
With tons of important events happening in the coming months, here are some of the most noteworthy trends and updates every cryptoasset investor should be aware of in 2020 and beyond.
1. The Arrival of the Ethereum 2.0 Upgrade
Ethereum has long been the second-largest cryptocurrency in terms of market cap (over $16 billion at the time of writing). Many experts believe it’s only a matter of time before it overtakes Bitcoin as the industry leader thanks to Ethereum’s potentially revolutionary technology.
Unfortunately, the cryptocurrency is still affected by scalability and performance issues that have been going on for years. The current network can only manage a meager 15 transactions per second (TPS), which is nowhere near acceptable for real-world use cases.
Fortunately, these challenges will no longer be an issue soon as the long-anticipated Ethereum 2.0 launch date edges closer. If all goes according to plan, in a few months Ethereum will undergo a major transformation — arguably the most important change in its history — that promises to bring massive improvements in scalability, security, and blockchain interoperability.
Ethereum 2.0 will see the release of the proof-of-stake consensus model, the system responsible for validating transactions and adding new blocks to the Ethereum 2.0 chain. This replaces the resource-intensive mining model of Ethereum 1.0, while also allowing token holders to stake their ETH and earn annualized yields of up to 10.3%.
Ethereum 2.0 will be deployed in phases over a 3-year period:
- Phase 0: Beacon Chain
- Phase 1: Basic Sharding
- Phase 2: EWASM (Ethereum Flavored WebAssembly)
To deem the improvements brought by Ethereum 2.0 as groundbreaking is an understatement. If the team manages to deliver its roadmap successfully, Ethereum 2.0 may pave the way for mainstream adoption of the blockchain. Theoretically, the network will be able to rival or even outperform traditional payment systems like Visa and PayPal, but with much cheaper fees, along with the benefits of decentralization.
2. A Make or Break Year for Proof-Of-Stake Coins
Contrary to common belief, proof-of-stake networks have already been deployed with varying degrees of success. 2020, however, will be the year that decides whether proof-of-stake is the right step forward for blockchains.
Proof-of-stake has long been a key competitor of proof-of-work cryptocurrencies like Bitcoin, as it overcomes the two main problems that exist in the proof-of-work model: increasing complexity and intensive resource requirements.
Mining takes a lot of computing power and electricity due to its complexity, making it expensive and unsustainable to maintain in the long run. 22TWh of energy is consumed every year just for bitcoin mining — a figure that is close to Ireland’s yearly power consumption and four times the total of Google’s.
Proof-of-stake is more scalable, sustainable, and by some accounts, more secure than proof-of-work.
That said, there are still concerns over the viability of proof-of-stake, particularly in token governance and meeting regulations. With industry leaders like Ethereum and Cardano taking charge in the proof-of-stake race and introducing innovative technologies, these challenges seem to be nothing but a minor bump in the road to mainstream blockchain adoption.
3. Bitcoin’s Block Halving May Increase Its Value
Bitcoin is set to cut its mining rewards in half in May 2020. Why does this matter? First, some background:
Miners are rewarded with BTC for every block mined (i.e. verifying transactions in the Bitcoin network). Every four years, the reward given for each block mined is reduced by 50% to prevent inflation.
At the time of writing, miners receive 12.5 BTC for every block mined, which will drop to 6.25 BTC when the halving process happens. This could lead to a spike in bitcoin prices as the supply of BTC entering the market drops.
Previous halving events have shown that the value of BTC always picks up before and after halving dates. While there is no guarantee that the price of BTC will rise by May 2020, historical price data and the basic theory of supply and demand suggest there’s a real possibility it could.
4. The Year of the Institutional Investor
Institutional investors are gradually involving themselves in the crypto space as the blockchain industry matures and enterprise adoption picks up steam. What makes 2020 different, however, is the rapid speed at which investors are putting funds into cryptoassets.
The rate of institutional growth in the blockchain industry today is unprecedented and shows no signs of slowing down. Case in point: an extensive survey conducted by Fidelity discovered that 50% of institutional investors would consider including cryptoassets in their portfolios. In fact, over $1 billion in cryptoassets is currently managed by hedge funds worldwide according to a PwC study.
With key events like Bakkt’s bitcoin futures launch and national digital currency deployments (e.g. China’s DCEP) on the horizon, expect more institutional involvement as firms and investors rush to strike gold in the crypto space.
5. Regulators Will Be More Accepting of Cryptoassets
For the first time since cryptocurrency’s inception, regulators are starting to accept cryptoassets, as proven by the emergence of blockchain-friendly legislation in various countries.
One example is the Chinese government’s passing of a cryptography law that encourages the “development of cryptography business” in the country. This law change could see the country lift its ban on cryptocurrencies, which seems more likely by the day after China’s President Xi Jinping advocated for blockchain technologies last October.
Similarly, the Swiss Parliament has also drawn up plans to introduce new laws for cryptocurrencies. This change will incorporate exchanges, digital currencies, and blockchain platforms within existing Swiss financial rules to treat cryptoassets as an actual financial instrument.
Expect more of the same to happen in 2020 as governments look to propose and implement crypto legislation and policies. All these positive regulation efforts help foster the adoption of digital currencies, leading to the growth of the industry and subsequently, the value of cryptoassets.
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