The cryptocurrency market is off to a roaring start so far this year, recording strong gains after a six-month downtrend in the second half of 2019. As the digital asset class continues to mature and attract more retail and institutional investors, it’s poised to experience significant growth in 2020. Here are three critical triggers to watch out for later this year, creating a “Crypto Trifecta.”
1. Bitcoin’s Next ‘Halvening’
The target inflation rate of the U.S. dollar is around 2%. And bitcoin’s inflation rate is around 3.7%. However, every four years, bitcoin experiences an event called “the halvening,” which causes its cost of production to double and its inflation rate to drop in half. (Full disclosure: Author holds bitcoin and other leading coins.)
This rare event makes bitcoin more valuable because:
• Bitcoin’s inflation rate will drop lower than the U.S. dollar’s rate.
• Bitcoin’s supply is reduced, which causes buying pressure.
• While the U.S. dollar can inflate higher in times of need, such as for the pending U.S. debt crisis, bitcoin cannot.
Bitcoin seeks to address the faults of traditional fiat currencies, such as inflation, while offering benefits physical assets cannot. Gold, for example, has defended itself as an international store of value and medium of exchange for thousands of years. However, unlike gold, bitcoin can be exchanged with minimal effort and doesn’t impose much of a physical burden to transport or store.
Historically, the halvening has triggered a bull run by reducing supply and occurring at a point where bitcoin is further in the public eye, meaning a higher overall demand for the digital asset. According to BitcoinBlockHalf.com, the halvening will occur around May 12.
2. Bakkt’s Payment App And Starbucks Partnership
Bakkt, the crypto exchange owned by the Intercontinental Exchange, which also owns the New York Stock Exchange, announced in October that it is planning to launch a consumer payment app. Starbucks was listed as their initial launch partner, and many were quick to report that this new partnership would let customers pay for items with bitcoin, which is a massive move in itself.
In January, Bakkt’s president Adam White shared additional developments of its upcoming crypto app, suggesting it could include trading of equities, as well. Reuters reported that the app is expected to be out in the first half of the year, which will likely fall into the second quarter Crypto Trifecta.
3. China’s Digital Yuan
The People’s Bank of China announced in 2019 that it was almost ready with its cryptocurrency backed by the yuan, and that the currency was inspired by Facebook’s Libra, according to reports by Reuters. China is poised to not only create a digital currency that will be likely used by a large chunk of the population within China, but also to become a de facto global digital currency in emerging economies. Since the cryptocurrency can be used without access to the internet, it offers significant value to the world’s unbanked people who lack access to adequate technological infrastructure.
As of last month, China had completed “top level” design of its digital currency. China’s central bank plans to launch the cryptocurrency and issue it to seven state-owned institutions, including the Industrial and Commercial Bank of China (the largest bank in the world by total assets) and the Bank of China.
When launched, its full integration with WeChat and Alipay will likely be immediate or soon after, but its implications are far more impactful than simply offering consumers another payment alternative due to the massive user bases of those two payment systems.
Bonus: Facebook’s Libra
The road map for Libra, Facebook’s first cryptocurrency, says it’s set for a public launch toward the end of the first half of 2020, which aligns in the Crypto Trifecta window. However, its launch date is likely to be delayed due to the large level of regulatory backlash. Despite this, it’s important to note the Libra is still moving full speed ahead. In November, the project announced it had over 30 projects built on the Libra network and had logged 51,000 transactions on its testnet. It’s definitely a project worth watching because its success or failure could have major implications on the future of digital assets, international money transfers and the lives of unbanked people around the world.
Cryptocurrency is positioned for major growth in 2020, and crypto investors should go into the year with optimism and open eyes. This year’s trifecta will only be part of what’s ahead.
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