Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from

Crypto Valley Live (ID: cryptovalley)

Crypto Valley Live (ID: cryptovalley)

, Author: Peter Johnson, translation: Zoe Zhou, reproduced by Odaily with authorization.

Peter Johnson is the principal of Jump Capital, responsible for the firm's investments in fintech and crypto. Since joining Jump Capital in 2013 as its first employee, he has invested in over 50 companies, including many leading crypto firms. Jump Capital, part of the Jump Trading Group, is one of the largest proprietary trading firms in both traditional and crypto markets.

I expect 2020 to be a year of rapid adoption and adoption of digital assets, with the key components of encryption in place to realize the long-term potential of digital assets. This will revolutionize the way value is stored and transmitted around the world.

institutional investment

In this article, I will highlight 15 developments that I believe will be most influential in 2020.

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institutional investment

1. Global macro investors join

Ray Dali clearly stated the global macro proposition of encryption technology:

“One of the great questions right now is which investments have good returns in a deflationary environment, with huge debt maturities and huge internal and external conflicts between capitalists and socialists. When most reserve currencies When central bankers want to devalue their currencies in a fiat currency system, we can ask ourselves what the next best currency or storehold of wealth would be.”

Ray's conclusion is to buy gold. If you agree with this statement, I believe that by 2020, large hedge fund investors across the country (even Ray himself) will publicly say that BTC is a logical asset.

2. Traditional asset management companies will continue to pour in

I expect traditional asset managers to continue to have a strong interest in crypto business in 2020, but I do not expect them to put a lot of money into the crypto industry.

The main reason for this is that the incentives for portfolio managers are not conducive to encouraging the allocation of large amounts of digital currency. Currently, digital assets are still a non-consensus investment. Portfolio managers may receive a nice bonus if they approve of a crypto investment and the return on investment is satisfactory. Portfolio managers, however, can be fired for losing client funds in "magic internet money" if they underperform in crypto investments (or if they suffer losses due to operational issues such as hackers while trading).

Portfolio managers are firm and unified in their stance against making meaningful bets on digital assets. In this way, their work is much easier. Ultimately, I believe the consensus will shift to the role digital assets play in diversifying portfolios. But consensus won't happen this year.

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retail investment

3. BTC derivatives trading volume increased, altcoin trading volume decreased

For retail investors looking for a quick profit, trading altcoins used to be where they looked for volatility and potential.

Today, with altcoins down more than 90% from their highs, active traders are increasingly turning to leveraged BTC derivatives trading. This kind of trading gives them the volatility they want, and the derivatives don't go to zero.

I expect significant volume growth on US regulated crypto derivatives exchanges (e.g. CME, Bakkt, etc.), but the center of activity in this space will continue to come from exchanges outside the US (e.g. BitMEX, etc.)

4. Statistics pile up (and earn interest)

While derivatives are great for active traders, it is even more important for those accumulating digital currencies to have the tools that allow them to easily build their holdings.

Crypto tax policy is a disaster. Not only because of the disconcerting reports from many exchanges, but also because investors are missing out on greatly reduced taxes through automatic tax credits.

market structure

Personal capital and robo-advisors made tax deductions mainstream for traditional assets, and by 2020, digital currencies (and better tax reporting) will be mainstream.

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market structure

6. There are fewer exchanges and more brokerages

The number of crypto exchanges has exploded in the past few years. In 2020, I hope to maintain a reasonable growth figure. Exchanges are essentially businesses with network effects (liquidity begets liquidity), and smaller players will be eliminated, either being acquired, closing down, or changing their business models.

I expect that firms that are good at acquiring and serving clients will become brokerages and source liquidity from other exchanges or large liquidity providers.

7. Increasing use of third-party escrow

As exchanges and brokerages focus on their core competencies, they will increasingly use third-party custodians. This will make the market safer (since assets are in custody with top-notch custodians) and ultimately increase capital efficiency. Because assets held by mainstream custodians will provide purchasing power across multiple exchanges.

The emergence of instant crypto settlement solutions for large crypto custodians, such as the Silvergate Exchange Network, will also be a major development in 2020 and will further increase the utility of market participants for holding assets with custodians.

8. Encryption can help scale banks

Access to fiat bank accounts and payment services has been, and will continue to be, one of the biggest problems facing crypto companies. Globally, large banks with a negative attitude toward risk will continue to shy away from the crypto industry, presenting an opportunity for new entrants and smaller players to fill the void left by technology-driven intermediaries or full-stack neobanks.

In 2020, I expect some new entrants to face significant challenges from regulators, and those new entrants that can handle regulatory pressure will scale rapidly.

9. Lending market growth

The crypto lending market has boomed in 2019, with companies like Genesis, BlockFi, and Celsius all getting involved.

I expect the volume of the crypto lending market to continue to expand significantly in 2020 along the following dimensions:

1) Traders borrow digital currency to go short to overcome capital inefficiency;

2) Investors use digital currency as collateral to borrow dollars;

3) Encryption companies become substantial banks through stablecoin deposits and providing stablecoin loans.

This year, if we see significant downside volatility, default risks from unsecured digital currency borrowers, as well as risks from direct counterparties (such as Herstatt Risk) in unfulfilled transactions, may follow.

stable currency

These are likely to be small-scale outbursts rather than systemic ones and will help the market mature. Market participants will be more discerning when it comes to selecting counterparties and using solutions to minimize these risks.

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stable currency

11. USD stablecoin market capitalization and trading volume will increase

Tether's extraordinary resilience demonstrates the insatiable need of market participants not directly served by Bank of America to have dollar-denominated accounts to settle transactions and store value. Despite the apparent regulatory uncertainty, I expect Tether's market capitalization to continue growing in 2020.

The market for regulated fiat-backed USD stablecoins (e.g. USDC, TUSD, PAX, etc.) will grow rapidly (with a relatively small economic base). Because they become a money transfer rail, a solution that is both custodial and works on an open network (any crypto wallet can send/receive).

This will be a much-watched position between the Silvergate Exchange Network (regulated + closed network) and Tether (unregulated + open network).

12. International stablecoins will keep growing

I expect stablecoins in many other major currencies to gain traction as well. These stablecoins will be regulated and open channels for the movement of funds.

13. Central Bank Digital Currencies (CBDC) will remain conceptual

Most anticipated central bank digital currencies differ significantly from stablecoins like USDC. In a central bank digital currency, the record of value owned by individuals and businesses is kept centrally by the central bank. Only in rare cases is it possible for the central bank/government to take over this bookkeeping function.

I don't expect any major central bank digital currencies to launch in 2020 (besides small scale PoCs), but I do expect central bank digital currencies to make significant inroads in 2021 and beyond.

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14. Digital currency usage continues to grow in emerging markets

Defi

In a hyperinflationary market, the usage of digital assets has grown significantly and will continue to do so. The interesting question is, will BTC or stablecoins be the major winners in these regions?

I hope in my heart that BTC will be the main winner, but my rational judgment will be stable coins.

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15. Impressive innovations that are rarely adopted