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2019 was a positive year for the Bitcoin price, with the crypto asset’s valuation roughly doubling itself over the course of twelve months. Although Bitcoin declined heavily over the second half of 2019, it has started off 2020 with a bang.
So, what’s to be expected in 2020? Here are five major trends to watch for in Bitcoin this year.
Bitcoin Halving 2020
The Bitcoin halving coming up in May is a key aspect of the bull case for Bitcoin in 2020. This is a scheduled occurrence that takes place roughly every four years where the number of new Bitcoin generated around every ten minutes is cut in half. Instead of 12.5 Bitcoin being included as a subsidy for miners in every block, 6.25 Bitcoin will now be generated instead.
Opinions are split in terms of thoughts on how this event will affect the Bitcoin price and whether it’s already priced into the market. Either way, it should be noted that the only two previous halvings in Bitcoin’s history led to significant appreciations in the crypto asset’s price in the months that followed.
The excitement around “The Halveninig” led to one industry executive to predict a $50,000 Bitcoin price by the end of 2020.
Bitcoin’s Transition to Digital Gold
Bitcoin has been referred to as digital gold for a number of years, but 2019 was the year when that meme became much more realistic, according to data from the last six months of the year. In fact, the idea of Bitcoin as digital gold became so prevalent in 2019 that U.S. Congressman Brad Sherman (D-CA) claimed the crypto asset may be a threat to the U.S. dollar’s dominance in the global economy.
At the start of 2020, the similarities between Bitcoin’s and gold’s price movements around increased tensions between the United States and Iran did not no unnoticed. However, longer-term measurements of the correlation between Bitcoin and gold still indicate there is a very weak correlation between these two assets.
The digital gold use case is often referred to as Bitcoin’s core value proposition, so a closer correlation with physical gold could indicate a greater level of understanding and acceptance of this point from market participants. Additionally, the introduction of central bank-issued digital currencies could clarify the value proposition of something like Bitcoin in the minds of the general public.
Schnorr, Taproot, and Tapscript
Unlike some of the smaller cryptocurrencies out there, Bitcoin does not see serious upgrades happen very often (and for good reason). That said, a major change could take place in 2020.
Schnorr, Taproot, and Tapscript are all expected to be included in the same soft-forking upgrade of the Bitcoin network. A finalized proposal for the activation of these improvements by Bitcoin nodes could be ready as early as this year. Currently, developers are reviewing code related to these potential changes, which are expected to improve privacy, smart contract functionality, and general scalability of the Bitcoin network.
Lightning Network and Liquid Sidechain Adoption
Developments are also taking place on layers above the base Bitcoin protocol. The Lightning Network has been hyped as a solution for faster, cheaper Bitcoin micropayments for a number of years now, and Blockstream’s Liquid sidechain has seen growth in terms of the amount of Bitcoin and Tether US available on the platform over the past few months.
Although the Lightning Network has enjoyed a greater level of attention up to this point, it may be Liquid that takes the spotlight in 2020. Due to the large amount of centralization of Bitcoin transactions around exchanges, Liquid could be helpful in lowering congestion on the base Bitcoin blockchain in a situation where there is a large amount of speculation around the Bitcoin price, possibly due to the halving.
In a scenario where demand for block space stays relatively stagnant, it’s possible that neither of these secondary Bitcoin protocol layers will see much growth this year, as the incentive to change old habits is much weaker.
There is a belief among many Bitcoin technologists that innovations like sidechains and the Lightning Network will eventually send the price of alternative crypto assets to zero. Notably, the altcoin market as a whole is down quite substantially against Bitcoin over the past two years.
Institutional Money
And, of course, the final Bitcoin trend to watch in 2020 is adoption by institutional investors. Adoption from institutions has been hyped for many years, but this is not something that happens overnight.
2019 saw the SEC approval of the first ‘40 Act-regulated Bitcoin fund, which has led one analyst to believe that a Bitcoin ETF approval could be right around the corner. Additionally, Grayscale recently announced inflows of $600 million in new money from investors, mostly from hedge funds. Last week, a survey also found that that financial advisors may be increasing the exposure of their clients’ assets to Bitcoin and other cryptocurrencies this year.
