It's that time of year again: announcing the Token Daily Annual Crystal Ball.
Similar to last year's 2019 Crystal Ball, we asked some friends of Token Daily to do a little armchair fortune telling for the new year. Considering what we’ve already seen in industry trends and patterns, here's a compilation of what some of us expect in 2020.
Tyler & Cameron Winklevoss, Winklevoss Capital
The bitcoin halvening should already be priced in but isn't (it never has been) and it therefore will catalyze a large bull run (as it always does). NFT's aka "nifties" will be one of the most exciting areas in crypto and renew excitement for mainstream use-cases. The opportunities for unlicensed exchanges will start to shrink globally whereas they will continue to grow for licensed operators. China will launch their own stablecoin, which will be a boon for the entire crypto industry, even decentralized cryptos like bitcoin.
Sunayna Tuteja, TD Ameritrade
There will be an emergence of startups/ projects that shift the mindset from a tech-first product development to consumer-focused product development. With a keen eye on the voice of the customer, we will see big strides in projects solving for simplicity and seamless user experience.
Balaji Srinivasan, Investor
As the dust settles on the decade, it’s suddenly clear that Bitcoin was the best investment of the 2010s. Not Uber, Airbnb, or Snapchat, worthy as those companies are. In retrospect, the last decade was about building infrastructure. Mining, exchanges, coins, and a community — it’s all there. Not just 0 to 1, but from $0 to $100B. The next decade will be the decade of decentralization. All the technologies the industry is building now — from zero knowledge and defi to new consensus algorithms and scaling technologies — will be put to work to decentralize one major service at a time. Financial services, messaging, and social media are the initial targets. As Twitter and Craigslist are relatively low bandwidth, they may be some of the first targets for decentralization.
Linda Xie, Scalar Capital
I think we will continue to see the expansion of decentralized finance (DeFi) beyond mostly stablecoins and borrowing/lending. There will be more building and use of other financial products like insurance, swaps, options, and bonds. It's essentially recreating additional components of the traditional financial system in a more open and composable manner.
Mohamed Fouda, Token Daily Capital
In Bitcoin, the third halving dynamics will be significantly different from the previous two halvings, LN will continue to grow and we will see a number of UX improvements/abstractions. In Ethereum, 2.0 phase 0 will be delivered some time Q1, Q2 but phase 1 won't happen in 2020. In general crypto land, many of the newly launched smart contracts platforms will struggle to capture any traction and may decide to fold down or pivot.
Yele Bademosi, Binance Labs
There will be a very strong narrative around crypto-use cases in Africa in 2020. A lot more projects both from and outside the continent will be focused on the continent with a decent number having good product-market fit. Price predictions are tough, but I can expect the lowest price of BTC in 2020 will be higher than the yearly low of 2019 (~$3,300).
Meltem Demirors, CoinShares
- Bitcoin continues to dominate.
- This bitcoin halvening won’t look anything like the last two. It’s about to get weird. We didn’t have directionality in the last halvening (meaning it wasn’t easy to go short, most people were fundamentally long).
- Bitcoin looks more and more like banking and traditional finance. Expect more cash settled derivatives. Expect more intermediaries. Put your coins in the vault, we’ll give you a depository receipt, and you can trade all you want on our platform. Just don’t ask for your coins back, ok? We already lent them out and we accidentally got margin called and we’re waiting for bitcoin to dip so we can buy your coins back. Thanks, please come again!
- 2020 is all about transaction fees. If the internet was all about monetizing eyeballs, crypto networks are all about monetizing blockchain activity by charging fees (hi, I’m an intermediary, nice to meet you). This will start to become more apparent in 2020 as we see exchanges and other companies in the business of flow will continue to make 90% of the money in the industry. More companies will pivot to this business model, and add new ways to capture revenue from network flows. Fee compression will start to happen across the board as spreads get tighter and making money gets more challenging for traders and investors alike.
- Businesses catering to “institutional investors” aka crypto funds will need to find new buyers. Crypto funds can only buy so many services when they’re charging a 2% management fee, and companies are charging flat fees and basis points on AUM. As a result, many of these firms will pivot to “digital assets” and other “blockchains” which will be interesting – it does seem many enterprises and investors are flocking to the “digital assets” narrative which feels a bit like the blockchain, not bitcoin narrative of 2017. But like “blockchain” before it, “digital assets” is still a largely incomplete narrative focused on “liquidity” which isn’t as simple as listing an asset, but rather about price discovery, marketability, exchangeability, and other more esoteric factors associated with driving desire (cachet, exclusivity, etc).
- Governments will continue to ratchet up the “CBDC” (central bank issued digital currency) narrative, but we won’t see anything deployed except lots of conferences, roundtables, and private meetings publicized via hot scoops in “The Block.” Also – can someone please figure out if the Petro is actually real or not?
Alexander Leishman, River Financial
I think 2020 will be the year that most Silicon Valley VCs realize they were wrong about "Web 3.0". Some of these hugely hyped blockchain projects will launch, but they will be a far cry from what they promised. The prevailing narrative will continue to converge around Bitcoin, and people will realize that decentralized protocols with small blockchain "footprints" (e.g. Lightning, Discreet Log Contracts, etc.) are far more promising, but more difficult to directly invest in.
Colleen Sullivan, CMT Digital
Silvergate Bank’s Silvergate Exchange Network (SEN) enabled digital asset clients to send U.S. dollars 24/7/365, which essentially provides for the instant settlement of U.S. dollars. Prior to the launch of SEN, trading firms were only able to move U.S. dollars 5 days / week and only during U.S. banking hours, which is obviously problematic when trading takes place 24/7/365 in the crypto markets. The irony, of course, is that we still don't have instant settlement of bitcoin.
Depending on on-chain activity and the number of confirmations an exchange or OTC desk needs in order to settle bitcoin, it can still take an hour for bitcoin settlement, which is inefficient from a trading standpoint. I believe that in 2020, we will see use of the Lightning Network for trading purposes, specifically, where trading firms and OTC desks can establish private channels with each other and/or exchanges in order to instantly settle bitcoin transactions.
Though the primary use case for Lightning will eventually be micro transactions, merchant transactions, and payments between machines, I think it may take some time to get there. In the US, our tax regime presents a friction that will need to be sorted out at some point with respect to bitcoin being deemed “property” for tax purposes. It’s not optimal when a consumer buys a cup of coffee with sats and expects a cash like transaction that incurs sales tax - only to then realize that they have incurred reportable capital gains or losses on that coffee purchase. Those frictions don’t really exist in trading and because proprietary trading firms aren’t managing third party capital, they are in a better position to accept the risks of using a nascent technology like Lightning, especially when there are potentially real PnL benefits in doing so.
I also hope that we will start to see the emergence of derivatives specific to the crypto space including difficulty derivatives, transaction fee derivatives, and staking derivatives.
We continue to learn more about the security model of Bitcoin and other permissionless blockchains. More people get wise to the fact these systems need sufficient block rewards to survive. As a consequence, high transaction fees are increasingly seen as a network's vital sign - similar to a heartbeat.
Nic Carter, Castle Island Ventures
Fiat backed stablecoins face considerable regulatory scrutiny as regulators realize issuers are conducting minimal surveillance within their networks. Binance gets forced out of Malta and is forced to search for a new home base once again. The SEC wins their case against Kik, setting a firm precedent and causing dozens of similar tokens to instantly dissolve and settle. A major US exchange initiates a user-facing proof of reserve protocol.
Jill Carlson, Slow Ventures
2020 will continue to be about developers, developers, developers. We will see a proliferation of newer, better developer tools, protocols, and platforms to build upon — but the big question will remain: who are we building for?
Charlie Noyes, Paradigm
At least one DAO is taken over by overtly malicious colluding voters for >$1mm in profit.
Steve McKeon, Collaborative Fund
Ethereum will continue to be the dominant permissionless smart contract platform but Tezos will gain market share, particularly within STOs. Increased activity in DAOs will motivate development of proxy voting solutions. We'll also get more regulatory clarity in 2020 through settlements and case law.
Johnny Dilley, Mempool Partners
Everyone forgets the halving. As we head into the halving, fomo will kick in.
Dani Grant, USV
- Bitcoin will maintain its lead as the top cryptocurrency by market cap.
- Someone is going to build and launch a breakout crypto consumer product. I predict the first breakout crypto consumer application (besides apps like Binance and Coinbase that help you just get access to crypto) will be something fun, social and game-like, and then DeFi and more serious utility consumer apps will follow.
- New chains that are launching now at the end of 2019 and will launch in 2020 (Polkadot, Algorand, Dfinity, Flow etc) will capture some of hearts and minds of developers currently building on Ethereum and ignite new active ecosystems of developer tools and apps, challenging Ethereum's current lead as the platform to build apps on.
James Prestwich, Summa
My 2020 predictions are pretty simple:
- Cryptocurrencies will continue to pour large amounts of money and time into the Rust ecosystem.
- Wear sunscreen.
Jinglan Wang, Plasma Group
2019 was the year of research. 2020 is the year of dope stuff shipping. We will see more promising testnet releases in 2020 than we have in the past 3 years combined, and integrations between existing projects will proliferate in our twitter news feeds.
Joey Krug, Pantera Capital
We'll see >$2M bet a week on Augur by the end of 2020.
Avichal Garg, Electric Capital
2020 is the year where the first crypto projects demonstrate real product-market fit -- where entrepreneurs and VCs outside of crypto start to take note of retention and engagement -- and where institutional capital actually enters Bitcoin and crypto. However, because so many people are bearish in the short term, few will notice that there is real product-market fit for some applications and institutional capital has finally entered.
Katherine Wu, Notation Capital
- Design! I know that people have been beating this drum for years, but I really do think that 2020 will be a breakout year for better and more human-centric designs. A lot of the clunky parts of interacting with the blockchain will be obfuscated, and as a result actually produce intuitively designed (or less painful) products. One specific way I think this will happen is in the development of better tools (or supplements to current design tools) for non-crypto native designers who may want to build something on a decentralized web alternative.
- On regulatory tensions: I think there have been enough SEC/IRS/CFTC predictions and tensions to properly strike fear in founders/ investors in the US. I think in 2020 we will see more crypto companies/ projects geo-fence U.S. users/customers at launch.
Ari Nazir, Neural Capital
- Exchange tokens will continue to be the strongest performing non-vaporware investments in Crypto. Specifically, FTX will take even more trading volume market share from the current exchanges and move into the Top 5 in total volume.
- Brokerage Services companies become the default way in which non-retail investors & traders interact with Cryptocurrencies. The remaining OTC desks consolidate into a few players and the smaller ones convert to become prop trading firms.
Laolu, Lightning Labs
I Wumbo. You Wumbo. He, she, me Wumbo.
Val Wallace, Square Crypto
More lightning-integrated games, AMP uptake, Schnorr/taproot proposal solidification, and steps made toward streamlining the core review process.
Jeremy Welch, Casa
In 2020, the best developers will ignore price fluctuations and keep building. Same as they did in 2019 and every year before.
Matt Lucas, Collaborative Fund
The most significant crypto-related happenings in 2020 will be not be things that change within our little industry (existing digital assets and the infrastructure that has sprung up to support them) but the effect crypto has on the rest of the economy. Expect to see major moves with respect to open source development, open API access, and "protocolization" (and yes, maybe even some blockchain) from big tech and financial players as they try to adapt to and pre-empt a shifting landscape.
Su Zhu, Three Arrows Capital
Bitcoin breaks ATHs at some point in the year. Transacting BTC on sidechains such as Ethereum, Liquid, etc gains traction as BTC is added to DeFi and as avg tx fees increase. Options trading volumes increase 10x-100x as CME and Bakkt's options products bring in substantial institutional interest and liquidity.
Matt Corallo, Square Crypto
An uptick in regulatory skirmishes - doesn't necessarily mean things will get passed.
Casey Caruso, Bessemer Venture Partners
- The Web 3.0 decentralized hype will continue to weaken as people realize such a massive cultural shift will take years, maybe decades, if it happens at all.
- The community will realize DeFi is a misnomer as most of these “Decentralized Finance” projects are in fact centralized.
- Consolidation of financial offerings (derivatives, lending, etc.). Many projects today that are independent will merge and become features of larger companies.
- Enterprise blockchains will struggle to reach meaningful revenue as the step function in value is not high enough to convert POCs to annual contracts
- BTC will remain as the top cryptocurrency.
Jacob Horne, Coinbase
- If 2018 was the year of stablecoins, and 2019 was the year of DeFi I think that 2020 will be the year of "Crypto-banks" building consumer and institutional products that utilize both.
- We will see major DeFi teams successfully decentralize themselves out of administrating their protocols.
- There will be a DAO that manages more than $10m in capital. There will be over 10k DAOs created.
Personal tokens will have a cumulative marketcap of over $10m.
USDC will cross $1 billion in outstanding supply.
Imran Khan, Token Daily Capital
- Most institutions have already allocated a small position to bitcoin, post halvening, we will see those same institutions doubling down on their position.
- Facebook's Libra will be approved to a limited launch by the US regulators but will have little to no impact on the overall crypto market in the short term.
- Gaming will be one of the winning use cases and will give rise to a smart contract platform that will compete with Ethereum in usage.
Anthony Lusardi, Advisor
The next wave of Bitcoin adoption will come from small US businesses and countries that are excluded from US banking. Ethereum 2.0 will find itself substantially behind due to focusing on the wrong targets sharding vs. smaller state, staking vs keeping PoW, and increasing pressure from large staking exchanges."
Ash Egan, Accomplice
DeFi will continue to surge, and expect total value locked to 5x hitting $3B. Within DeFi Automated Market Makers (AMMs) will shine, and outperform eth2’s phase 0 in terms of Eth locked. In parallel to development in the Ethereum ecosystem, 2020 is the year of Layer 1 launch - the winners here will be those that create new sandboxes and experiences for users; those that don’t do so in adequate time frame will die. I expect growing political tensions will trigger Ray Dalio to announce that he is holding BTC.
Bram Cohen, Chia
My cryptocurrency price prediction for 2020: Tether takes over the #3 position by market cap.