Bitcoin: current state and forecast for the 2020. What to expect?
Since 2009 Bitcoin has worked its way up from being a sort of virtual currency, thousands of which were barely enough to buy a couple of pizzas, to a mature currency that has formed a completely new industry of cryptocurrencies with a market cap totalling to millions of dollars now.
Bitcoin has also triggered the implementation of the underlying blockchain mechanism into different spheres: taxi services, insurance companies, health services, etc (the list is almost endless). Now bitcoin is on a very important stage of its existence. Since it has already shown its efficiency to a huge amount of people, it’s time to use it on a regular basis for transmitting money. Will it happen?
How will it be conducted? How will it affect the price? And what are the forecasts? To answer these topical questions we have invited Oleksandr Lutskevych, CEO of a leading bitcoin exchange - CEX.IO.
After a recent Bitcoin price surge various experts expect 1 Bitcoin will cost between $5-11K, what do you think – is this realistic?
I don’t think it’s absolutely correct to say: “After a recent Bitcoin price surge various experts expect…” Bitcoin price expectations are based on the promotion and adoption of cryptocurrency. To clarify, Bitcoin emission is limited to 21 million. This means, the wider the popularity and greater customization of surrounding technology – the higher the demand. Now, imagine if every tenth person on the planet would like to buy 1BTC. The demand would exceed the supply, and consequently, the price would shoot up.
Now, I’ll get to a question: “Is $5-11K per Bitcoin realistic?”. Yes, it is – even if we are talking about a two-year perspective. If we look at the unique addresses growth chart, we can clearly see the expansion of Bitcoin blockchain use – highlighting the growth of Bitcoin popularity.
We should also consider the fact that the Bitcoin blockchain is the most secure public ledger, and it’s likely to become the security model for private blockchains. Thus, the number of transactions will increase alongside the demand for security.
Considering the emission model and the consensus concept of Bitcoin blockchain (Proof-Of-Work), in terms of fiat currency network security maintenance, costs will remain at the same level, or can even rise eventually. It’s important to consider that most of the expenses related to network reliability and security are on miners’ shoulders. In return, they receive a reward for block generation and transaction management.
Let’s make a VERY rough calculation: the current reward for block generation is 13.25BTC (~15k$) where 12.5BTC is the actual reward and the rest (0.75BTC) minus the transaction fee. Following the increase in the number of blockchain transactions, and the demand for advanced security, as well as the fact that in four years block validation reward will be reduced from 12.5BTC to 6.25BTC – the Bitcoin price may become eight times higher: twice as high through the mining reward halving (6.25BTC should bring a miner at least 15k$, like it does now with the reward of 12.5BTC).
Also, relying on the historical demand growth we can add fourfold growth. So, in total we have 9600$ (1200*2*4). This seems quite a realistic price for 1BTC, assuming there won’t be a major crisis towards the cryptocurrency itself, or the technology that underlies it.
How do you think Bitcoin Exchanges market will look in 2020? Do you think top players, like CEX.IO, will acquire small niche platforms?
The market itself will be developed technologically, and will bring a lot of innovative solutions into the spheres like FinTech, security, and Big Data. As for the exchanges, we’ll see a significant leap in their development too – most financial tools will be implemented. In addition, the methods of regulation will be noticeably modified.
The regulation requires implementation of stringent standards for not only KYC/AML platform processes but also reporting mechanisms, data storage, and auditing. In this regard, minor players won’t be able to survive in the market due to high expenses related to the implementation of the regulator’s requirements. We will actually see a scenario that is very similar to FX market development, but it will be more rapid, because regulators have an extremely powerful tool that controls cryptocurrency – blockchain (technology that can definitely trace the movement of all funds and identify every transaction participant).
Obviously, cryptocurrencies based on principles of anonymity will face many issues. I think such cryptocurrencies will be blacklisted and won’t be quoted by the regulator.
Anyway, I think that in 2020 we’ll see a precise regulation scheme in the industry and most niche platforms will be acquired by the larger ones.
Recently, several projects, like an Italian garlic farm, have introduced Bitcoin donations to recover after disasters or other unexpected losses. What do you think the future is for a Bitcoin donation market?
I think that cryptocurrency is well suited for international payments, specifically as it appears to be a perfect tool for donations. Unfortunately, global disasters occur often, and that’s when people around the world try to help those who are in trouble.
Currently, there are many third-parties, who take part in money transactions for those who are in need. Frequently, due to high transaction expenses, disaster victims receive only a small part of the donated sum. I believe that blockchain technology and cryptocurrency is the future for donations. We just need to help people get easy, clear and transparent access to cryptocurrencies (that’s what our team is currently working on).
We also shouldn’t forget about the risks hidden in these good intentions. These risks are related to cross border movement of cryptocurrency funds. I strongly believe that all companies involved in donations should strictly adhere to the international standards of anti-money laundering or terrorism financing.
USA and other countries are currently trying to regulate the Bitcoin market or invoke local laws against Bitcoins. How does it affect Bitcoin exchanges now?
As I mentioned earlier, the regulation toughens risk assessment measures for businesses working with cryptocurrencies. Financial institutions that serve, or might serve, cryptocurrency businesses face a very complex situation now and it impacts crypto-exchanges a lot. For instance, it’s hard to be served by any bank if your business is related to cryptocurrencies.
It’s primarily associated with weak cryptocurrency regulation and high outcoming risks. I think that the processes aiming to regulate cryptocurrencies will positively affect market development. First, this will lead to financial stability, market confidence and a higher security level, thus minimizing the risk of financial crimes. Since cryptocurrency exchanges are at the confluence of financial systems, which involve fiat money and cryptocurrency, the regulator’s requirements will be high. As a result, we’ll get a dynamically growing and efficient financial system of a new generation, which is going to become a global standard.
Do you think future law changes might cause Bitcoin exchanges recession or growth?
We will see strong transformations relating to the regulation of cryptocurrency: exchanges that are unable to comply with the requirements will have to cut fiat trading pairs functionality. After that, cryptocurrency exchanges (including Bitcoin exchanges) will decrease in quantity, but the remaining ones will face continuous development. I am almost certain that after a while every country will have several national cryptocurrency platforms and that there will be a couple of international ones with the most liquidity. OTC markets will keep growing as well.
Mobile technology is still a trend now, CEX.io is among top exchanges that have already introduced mobile apps for their users. How does this help Bitcoin exchange markets to grow?
In the current stage of market development, mobile applications are indispensable for trading and managing crypto assets. For those who speculate on volatile and unstable cryptocurrency markets, it is very important to have a possibility to analyze the situation and decide in a split second, no matter whether a person is in the office or travelling. Mobile devices and internet providers have already brought us online, so that we can be always in touch and react quickly to any changes happening in the world. On our side, we aim to create a tool that should help users react efficiently. According to our statistics, many users who have started trading via mobile apps, are accomplishing more orders than those who use web terminals. It positively influences exchange operations.
Who is a typical user of your platform?
Primarily, those who earn money off exchange rate fluctuations, or those who hedge exchange risks. Also, there are a lot of users who are interested in cryptocurrencies, but don’t know where to start, users who see the potential in Bitcoin and are looking for the tool that will help them achieve their financial goals.
What do you think should be the main criteria for those who are choosing among Bitcoin exchanges? Do you think they will somehow change in the future?
User-friendliness, convenience, stability and transparency of all the underlying processes. As for the question: “Do you think they will somehow change in the future?”. I think it’s appropriate to make an analogy with the internet. For the first ten years of its existence, people didn’t get it, because it was inconvenient and even weird for many users. I am sure that after a while, dealing with cryptocurrency will be something every housewife will be able to do, just in the same way as the internet.