2020 predictions for bitcoin, Libra, and the digital yuan – Quartz

As we turn our calendars to 2020, now is an opportune time to reflect on the year ahead. What does our financial future hold in store? With the S&P 500 booming, its difficult to imagine a shift toward alternative finance, but the landscape could change in a hurry.

Geopolitical and corporate forces are on a collision course, and our financial lives might be upended in an instant. From Chinas exploration of a digital yuan to Facebooks insistence on Libra (its own digital money), the worlds powers are gearing up to seize financial control. The question is, will it work? Simultaneously, legacy digital currenciesespecially the hundreds of cryptos that arose in 2017could fall by the wayside.

With that in mind, here are my predictions for digital money in 2020:

After a rejuvenating 2019, it appears bitcoin is on the rise once more. While its underlying market is virtually inscrutablebillions of dollars shuttle between traders in the black marketthere is one fundamental change on the horizon. Sometime in May, the bitcoin network will automatically reduce its block reward, the money paid to miners who secure the network.

While miners currently receive 12.5 bitcoins (market value: $87,000) for adding each new block of transactions, the network will programmatically adjust to provide a smaller payout, a reward of just 6.25 bitcoins. This reduction, which occurs every 210,000 blocks,is called the halving, or sometimes, the halvening.

The last time this happenedin July 2016, when the reward dropped from 25 bitcoins to 12.5 bitcoinsthe crypto market wasnt nearly as popular. Back then, bitcoin traded in the mid-$600s. Now, though, with greater attention on its contracting issuance rate and finite supply, bitcoins price could rocket up the charts. While some argue the halving is priced in (i.e., everybody knows its going to happen), others suspect the shrinking reward will make buying bitcoin more urgent.

Kicking a project while its down isnt my style. But with so little to show over the last three years, its hard say that ethers market cap ($14 billion) is justified. Arguably, if bitcoin ascends, it might take ether with it.

But if theres any rationality to crypto trading (hint: theres not) then ether should rightfully plunge. Perhaps Im locked into an outdated expectation that ether will be more than digital moneyits creators billed ethereum as a decentralized internet, a place where peer-to-peer platforms could flourish without corporations. From file storage to new-age lenders, ethereum was/is supposed to change everything. Maybe my prediction is colored by my disappointment. But, other than currency, there still isnt a provable use case for ethereumand as long as we have bitcoin, who needs another one? Its time for the market to reflect ethers bland reality.

Continuing with my hard-truths tour, I anticipate that Libra will not launch this yearat least not in anything close to the format Facebook initially promised.Can you even imagine Facebook launching a digital currency in a US election year? If Libra launched and was even remotely tied to election interference, there would be hell to pay.

Libra has already stained Facebooks reputation, showing that the company jumped on the blockchain bandwagon without much planning,and it (briefly) made regulators laser their focus on big tech. If Facebook moves forward, Id expect it to make Libra much less crypto and much more conventional financesomething like a Facebook debit card, not full-blown Facebook money. In my view, its much more likely Facebook will focus its effort on WhatsApp Payand hopefully, warding off fake news.

All right, its time to get bold. While theres been a lot of buzz about Chinas digital money experiments (link in Chinese), Id wager that this is the year when the country will actually release something to the public. The digital currency/electronic payments (DC/EP) plan has been years in the making, and I see little reason why China would continue to wait in the wings.

While I dont expect a complete rollout, China might begin limited tests of the DC/EP, perhaps with corporate partners. As the country makes its push onto the world stage and grapples with possible US sanctions, this centrally-planned effortcould shift the balance of financial power. And its something that few othershave the wherewithal to pull off.

Yes, there are challenges to be ironed out with a digital wallet system, but with the increasing desire for insights into citizen/consumer behavior, a digital currencyissued by and linked to the Peoples Bank of Chinawould provide exactly the leverage the country seeks. My guess would be that this happens in the middle of the year.

The quiet collapse of the blockchain industry hasnt made headlines. But projects are absolutely running out of moneyand patience. How long are programmers and community managers willing to work on something that doesnt ship? Or just doesnt make sense?

In 2020, I think lots of blockchain developersand especially researcherswill return to academia. Likewise, the hangers-on in the marketing machine will move on to the next hot thing. Perhaps cannabis or 5G?

Finally, Ill go out on a limb once more to say, I think the US Securities and Exchange Commission will finally approve a bitcoin exchange-traded fund. Realistically, theres little reason for the agency to hold it up any longer. Concerns about bitcoin market manipulation dont relate nearly enough to the financial product itself. Additionally, it seems, the competition from a bitcoin ETF would probably make private investment vehicles lower their fees.

Bits & Pieces

Please send news, tips, and your predictions to privatekey@qz.com. Todays Private Key was written byMatthew De Silvaand edited byKatie Palmer. Only rich people tell you not to talk about money.

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2020 predictions for bitcoin, Libra, and the digital yuan - Quartz