The cryptocurrency market is still considered to be in its infant stage. As such, we can expect several significant developments to come in the form of key events that would give rise to price speculations. The cryptocurrency market is no stranger to price speculations — in fact, most cryptocurrencies that are still thriving in the market have mainly survived thanks to speculations.
As mentioned in the previous article, the halving event is probably the highlight for 2020. The economic concept of halving applied to bitcoin would mean that miners are getting much smaller blocks of rewards for each halving cycle. This likely means that we are expected to see a rise in the prices of bitcoins.
Facebook launched Libra
In June 2019, Facebook announced a digital currency called Libra that will roll out for use in 2020 and allow the platform’s billions of users across the globe to make financial transactions online. The new technology threatens to change the landscape of banking and is already the subject of scrutiny, as Facebook faces increasing calls for regulation and antitrust measures.
What is Libra?
Facebook says Libra is a “global currency and financial infrastructure”. In other words, it is a digital asset built by Facebook and powered by a new Facebook-created version of blockchain, the encrypted technology used by bitcoin and other cryptocurrencies.
Why is it called Libra?
The name Libra comes from the basic Roman measurement of weight. The abbreviation lb for pound is derived from Libra, and the £ symbol originally comes from an ornate L in Libra.
Facebook claims it wants to reach out to the 1.7billion people around the world who do not have access to banking services. The currency will be serviced by a collective of companies called the “Libra Association”. To control the effects of speculation on the price of Libra, the coin aims to function following what is known as a “stable coin,” where Libra shall be pegged to a Fiat currency like the Euro or the Dollars. By doing so, it will subject Libra to less price volatility as compared to other cryptocurrencies. Facebook will launch Calibra, the Libra digital wallet, to allow users to send Libra to and from each other. Besides transactions on the app, users will be able to use Libra at various vendors for day to day transactions, effectively replacing Fiat.
Libra faces hurdles
Facebook announced that Libra would not be available until at least the summer of 2020, if and when it clears regulatory hurdles. This announcement has caused numerous uncertainties regarding the new stable coin, which results in other interested parties such as Mastercard and PayPal to reject partnerships with Libra. Regardless, the creation of Libra could well mark the point at which cryptocurrency goes mainstream.
Regulations, regulations, and more regulations
The growth of cryptocurrencies has become so widespread that the Feds can hardly ignore it. The Federal Reserve revealed that the US central bank is mulling over a potential digital analog for the US dollars. The Internal Revenue Service (IRS) has firmed up its guidance on reporting cryptocurrency transactions for the coming tax season with Facebook getting involved in cryptocurrencies; this will no doubt bring about close attention to them.
The future of cryptocurrencies though uncertain remains optimistic as current legislations have been somewhat supportive. Supportive regulations will foster growth and increase transparency throughout the industry, while highly restrictive rules could mean increased turmoil for cryptocurrencies on the road to widespread adoption.
Weeding out of the rotten apples
As of present, the number of cryptocurrencies has since surged to more than 2000 different coins, despite the drastic market conditions during 2018. However, albeit a large number of coins in the market, only a third of them experience a daily volume of more than $100,000. Additionally, more than a third of the coins in the market is valued at less than a tenth of a penny. As such, while there are more coins than before in the market, the market capitalization of the cryptocurrency market has not changed drastically over time.
However, the coming of Libra and a potential upswing in interest from mainstream finance might contribute to a subsequent increase of capital in the crypto market. It is worth noting that we should expect capital to be allocated only to the coins with “potential”. As a result, a large number of coins in the market will start to disappear and eventually die off.
2020 will be a giant leap forward for cryptocurrencies, and we can expect many new opportunities to arise as the market garners greater interest in the use of cryptocurrencies. With Facebook’s Libra at the helm of oncoming developments to become the leading cryptocurrency for transactional use, the move would prove to be one that would bring about serious discussions about the current regulations surrounding the cryptocurrency market. We can certainly expect the market to experience an increase in price volatilities in the near future as discussions that guide the economics of cryptocurrency unfold.