The mid-term results for the cryptographic industry in 2019 still remain uncertain. On one hand, market capitalization increased by 125 per cent in the second quarter alone.On the other, users have already lost more than $4 billion this year due to the actions of hackers and scammers, which is more than the entire year of 2018. It is unlikely that 2019 will meet the original expectations. Yet, experts predict a lot of interesting happenings for crypto exchanges in 2020.
The share of institutional investors in the cryptographic market will grow
Fidelity, one of the largest investment companies (operating $2.5 trillion) has recently conducted a survey on 441 institutional investors regarding cryptographic assets. It turned out that 22 percent of them already own digital assets, while another 40 percent are planning to introduce digital assets into their portfolio sometime in the near future. Additionally, 72 percent claimed that they prefer derivative assets.
Tom Jessop, head of the Fidelity Digital Assets department, stated:
“We are witnessing the process of market aging: while previously, digital assets were mainly crypto funds, now traditional investors such as family offices and endowment funds are also entering the market. As institutional investors realize the potential of blockchain for the financial market, they tend to include digital assets in their portfolio more often, either directly or through intermediaries”.
Exchanges are adapting procedures to the needs of institutional clients
Many institutional investors who are ready to enter the crypto market will not be able to do so until the exchanges start working in the legal field. Vlad Smirnov, the founder of Velvet.Exchange, explains:
“Any income from the sale of cryptocurrency, any profit from investing in the PTS should be reflected in the client’s financial statements. To do this, the exchange should be ready to provide all closing documents on transactions. Another important thing is to check the cryptocurrency’s cleanliness. No institutional investor can afford to be caught buying Bitcoins that were involved in money laundering or supporting terrorism. We are already getting ready to launch a service to make sure the coins are clean. Other platforms are most likely to catch up with us in 2020”.
Halving will put a positive pressure on BTC price
All the crypto leaders in the bull camp are convinced that in 2020, Bitcoin will easily achieve the benchmark of $20,000. Naturally, for exchanges, this will mean huge trading volumes and significant revenue from commissions. However, the experts’ opinions here differ in specifics.
Dan Morehead, CEO of Pantera Capital, believes that by the end of 2019, the BTC price will reach $42,000:
“According to the model, we get $42000 – I understand how it sounds, but (…) this value is on the trend line, and it is quite probable that by the end of the year, we will get there. If you extrapolate for another year, you get $122,000 price for one bitcoin”.
One of the objective factors that can boost the price is the so-called halving: in May 2020, the miners’ reward for blocking will be halved – from 12.5 to 6.25 BTC. Since it is miners who bring new bitcoins to the market, the supply growth will be halved, therefore, in the likely event, increasing the price.
During the survey conducted by Finder.com, 50 per cent of experts named halving among the key drivers of price growth. Jesse Powell, CEO of the exchange, was even more vocal:
“When I hear people talking about the “correction,” I think about $100k or maybe $1 million. This is what I call a correct price”.
The trade war between China and the US will cause an inflow of liquidity
After Donald Trump announced a 25 percent surcharge on a number of Chinese goods in May, the Bitcoin price went up 20 percent. Experts claim that the rationale behind the sanctions is purely political: the next U.S. presidential election is to be held in 2020. The trade war is a good way to please Trump’s electorate, which is inclined to be for the US and against the rest of the world.
The Chinese yuan has suffered greatly from the introduction of new charges, so it is not surprising for investors to look for other opportunities to hedge their risks. Although trading in cryptocurrency is officially prohibited in China, the transactions are carried out mainly on OTC platforms and via VPN, which makes it difficult to estimate their precise volume.
The well-known Australian crypto entrepreneur and CEO of DigitalX, Lee Travers, stated:
“Chinese residents and the Chinese diaspora all around the world play an important role in the growth of Bitcoin prices. They see it as a defense mechanism against the fall of the yuan”.
Andy Brenner, the department head at National Alliance Securities, is echoing Travers:
“If you lived in China and wanted to diversify your portfolio, Bitcoin would be a reasonable short-term alternative”.
Libra is to enter the market
At the end of May, Facebook announced that it would launch Libra, its own payment system based on the new cryptocurrency, in 2020. The service will allow users to pay for goods and services, as well as make money transfers directly via social networks – similar to WeChat. Facebook is already negotiating with potential partners, including Coinbase and Gemini exchanges (owned by old Zuckerberg’s enemies, the Winklevoss twins), as well as Visa, Mastercard, and Western Union.
Experts’ reaction to Facebook’s plans is extremely mixed. Thus, CEO of Ripple Brad Garlinghouse expressed his concern about the increased attention of regulators towards Libra to have a bad impact on the market as a whole:
“Above all, we must not get caught at a bad time. The most important thing for me is to make sure the regulator does not start throwing us all into one big trash can”.
Changpeng Zhao, CEO of Binance, is a little more optimistic:
“Being a crypto exchange obliges us to remain neutral in this respect. We do not make comments on the coins or divide them into the ones we like or dislike. All we do is provide liquidity. Libra is very likely to have a large number of users. (…) If the currency coverage keeps growing, we have nothing to complain about.
Consequently, 2020 is going to be a hot year for crypto exchanges. From a possible escalation of a trade war and inflow of Chinese capital to the potential Libra revolution and the BTC price skyrocketing: anything could happen. Will the experts’ forecasts come true? We’ll find out very soon, there are only four months left until 2020.
By George Mordwell