In just a month since 2020 began, the global coin markets have increased in market capitalization by about 40%. Already, this is a sign that crypto markets are in for a ride this year and we’re just getting started. Whether you are a trader, investor or just an enthusiast, you need to know what’s coming ahead. In this post, we are going to highlight the top 5 events in 2020 that are bound to shake up the crypto markets.
Changing regulations in Europe
After several years of keeping crypto regulations ambiguous, ESMA finally implemented regulations specific to the treatment of digital assets. In the directive termed AMLD5, digital assets are now considered to be ‘financial instruments’ that need to be monitored by financial regulators in all 28 EU member states. (Crypto Brokers: Evolution of Forex Brokers in 2020)
What it was like before
Prior to the most recent directive, the attitude toward cryptocurrencies was usually ambiguous with coins being regarded as ‘units of account’. Without any specific guidance, regulators in EU nations could only issue warnings about dealing with coins, but they could not restrict or penalize their use. Like the rest of the world, countries in the EU gradually embraced coins and some businesses even started accepting these digital currencies as a method of payment. (Do you know: What Would Happen To BTC Price When It Is All Mined?)
Seeing the increasingly positive attitude toward coins and the need to safeguard its citizens, ESMA released the fifth amendment to the Anti Money Laundering Directive (AMLD). These new regulations were first published by ESMA in June 2018 and countries had until the start of 2020 to enact these laws through their fiscal regulators. Now regulators had specific laws on which to govern digital transactions while also ensuring the safety of citizens’ funds.
What it is like now
For many countries, the regulations came into place on January 10, 2020, but some were eager to enact the regulations as early as 2019. Regardless of when the laws were implemented, the EU can now claim to regulate cryptocurrencies. We now know that Brexit has finally been achieved and that the UK is no longer part of the EU. However, the FCA had already previously signed on to the ESMA directive while it was still part of the EU and we expect that the regulator will still maintain the same regulations. (To The Moon: Most Promising Asian Crypto Companies 2020)
According to the regulations by ESMA, companies offering crypto services will from now on need to be licensed by the financial regulator in the country they operate. This also applies to foreign companies wishing to work with EU residents. While many EU countries only require a license to operate, a few like Lithuania require a foreign company to also set up physical offices before operating in the country. (Ask yourself: Will Crypto Trading Become Popular in Islamic Countries?)
In addition, AML/KYC directives will need to be adhered to. This means that clients signing up with licensed companies will have to reveal their actual identities. Financial regulators will also be free to request individuals’ information for any reason and get it from the licensed companies. The information will include the individual’s identity as well as wallet addresses, effectively linking every individual to all their digital crypto transactions.
Weirdly though, companies will not be able to operate across borders even though they are within the EU. This means that, say, a crypto exchange based in Germany cannot sign up clients from Italy. For that, the company would have to get an additional license from Italy’s regulators. New Rules and Crypto Regulations in Germany As Of 2020
While ESMA only provided regulation for companies operating strictly in the crypto space, Germany took this a step further to include all financial companies such as banks. This means that from now on, German banks will be able to buy, sell and store coins just as they do with other financial instruments like bonds and stocks. This is not completely out of the ordinary since we saw Swiss banks do the same in 2019, but it is a first in the EU. (Investors can now enjoy safe coin trading as: Swiss Banks Start Offering Crypto Trading To Their Clients)
How does this change things?
The obvious change following these new regulations is the clear lack of anonymity in cryptocurrency trading. Since regulators collect user information from crypto companies and hand all this to the financial investigators, EU residents can consider all their trades the same as bank transfers. Although you may think this is not a bad thing necessarily, some people do.
Several coin companies in the EU have noticed an outpouring of client funds as their clients flee and sign up with offshore companies. Clearly, there are some people who value their anonymity and prefer to keep it that way. Companies operating in the crypto-sphere now have a choice - follow the new rules or pack their bags and restart somewhere else. As you might expect, most companies are taking the second option by opening subsidiaries in other countries. For the users, there are also choices to make regarding your personal privacy. (For the savvy investor: OmiseGo (OMG) Coin and Price Prediction for 2020)
On the other hand, there are some who welcome the regulations completely citing the dangers of deregulation. Crypto scams are very common since most people are interested in making quick profits in crypto, and some scammers have taken advantage of them. Proponents of this school of thought also think that regulation will attract more professional investors who care more about security compared to anonymity. (As you consider divesting, consider these: Most Secure and Regulated Stablecoins of 2020)
Whatever the case may be, we shall certainly see the results unfold in 2020 and really change the shape of regulations around the world.
Launch of Ethereum 2.0
For years, Ethereum developers have been discussing a shift from a PoW system to a PoS system. PoW (Proof of Work) is a system where a transaction is validated through brute processing power. Computers and ASICs perform complex algorithm functions using sheer processing power to validate transactions. Meanwhile, the PoS (Proof of Stake) system relies on a user committing a number of coins to the network in order to get a ‘vote’. The latter is obviously more energy efficient but also allows for faster validation of blocks and consequently, faster processing of transactions.
It may seem like a simple task, but when a network as large as Ethereum with $19 billion in market capitalization and numerous smart contracts operating on the blockchain, the process has to be executed perfectly. To achieve this lofty goal, gradual changes have been made over the years in the form of updates. The most recent update occurred on the 7th of December 2019 called Istanbul, but the final update is called Serenity. (Before you commit any money to the project: Find Out More About Tezos and Its Price Prediction For 2020)
We are still a long way before the ETH network completely shifts to a PoS system. What we expect to see in 2020 is the testnet coming online and developers working on it. Over the next few years, both versions of Ethereum will run concurrently until all the kinks are worked out. Nevertheless, 2020 will mark the start of a huge change in the way the world’s largest smart contract platform operates. (Ethereum 2.0 Launch 2020: What’s new?)
Mining reward halving comes around
Every 4 years, the reward for mining Bitcoin is slashed in half. This happens so that the supply of Bitcoin can remain limited and keep up with an increasing number of miners around the world. That halving event is happening this year around May, and it will be one of the biggest events of the year. Not only does the halving happen to Bitcoin, but also to its forked versions Bitcoin Cash (BCH) and Bitcoin SV (BSV). These three coins are all in the top 10 of crypto markets when ranked by market cap and together account for about 70% of the total market cap of crypto markets. This is why halving of rewards in all three coins will definitely have an impact on the crypto markets in 2020.
The previous halving of rewards for Bitcoin mining took place in 2016 when the rewards dropped from 25 BTC to 12.5 BTC. Considering that both BCH and BSV are both offshoots of BTC formed after a hard fork after 2016, none of them has experienced a halving event. This is what makes the halving events of 2020 so exciting because there is a lot of uncertainty among experts and users. (Here is the: 2020 Bitcoin Halving for Mining Rewards Warning Update)
What we do know is that there will be a major shakeup going by previous halvings on the BTC network. When the events took place in 2012 and 2016, the price of Bitcoin increased significantly in the year that followed. If you remember, BTC prices peaked in 2013 right before the Mt Gox hack, then rapidly grew once again in 2017 in an amazing bull run. (Bitcoin SV Genesis Hard Fork 2020: What's New?)
Following the halving of this year, some analysts expect BTC prices to soar beyond the previous all-time high just below $20,000 and perhaps even reach $100,000 in 2021. On the other hand, some analysts are sceptical, claiming that the anticipated rise in value has already been priced in by investors. This group of analysts point to the growth of about 40% experienced in the crypto markets in January 2020 alone. (Following in big brother’s footsteps: BTC Cash Halves The Mining Reward 2020)
With just over 2 months left, this is a set of events you don’t want to miss in 2020. It is a unique situation with a lot of unpredictability, so we recommend staying at the edge of your seat and responding appropriately to the news as it happens. Or rather, just sit and watch the show as it unravels.
Governments and central banks integrating blockchain
When China announced that it will be issuing a digital yuan through its Digital Currency/Electronic Payment (DC/EP) initiative, people were not very surprised. Rather, it only confirmed unfolding news that several countries had been contemplating how to use blockchain technology. Already, China and Estonia are using blockchain to healthcare data for its citizens and also to create digital identity systems. Others like the US, Japan and Denmark apply the same technology for certain government agencies. (Here is the: UNUS SED LEO Price Prediction 2020)
It’s not just the governments either, but also central banks and other institutions. Russia’s central bank is one such institute that plans on also issuing a digital ruble sometime in the future. Other notable institutions are the World Bank and the International Monetary Fund (IMF) that both have private blockchains. Many institutions, especially in the financial sector, have already embraced blockchain, although their activities take place on private blockchains.
Given the increasing acceptance of crypto around the world, we expect to see many more similar developments in 2020. Who knows, your country may even be brewing up a digital local currency as you’re reading this, or maybe your information is floating around in your government’s private blockchain. (Find out: What is Huobi Coin and its Price Prediction for 2020?)
Brexit just happened, US presidential elections are around the corner, the tension of actual and trade war continues, negative interest rates continue all the while people are just waiting for a recession to hit. All these are scary factors for investors around the world, and scary makes people look for a safe haven. Now that cryptocurrencies are being regulated in some parts of the world and more people are accepting them, they may become the new top choice for a safe haven. (Here is the: THETA Coin Investment and Price Prediction 2020)
2020 may just be the year for coins to prove they’re worth their salt by becoming a go-to for investors around the world. Fortunately, there isn’t a lack of avenues to allow for such investments considering that the US has got Bitcoin futures and Ethereum futures about to become a reality. (Learn more about: Trade War and How It Affects Forex Markets)
To see more about what to expect from the crypto markets this year, here is a short video: