Predictions and investment ideas for the year ahead

The final year of the decade has been a volatile one for cryptocurrency and blockchain, encompassing wild swings in the price of the original digital token Bitcoin and the first major step for big tech into the sector with the announcement of ’s () Libra cryptocurrency.

However, the next year and indeed the next decade is likely to bring many more ups and downs for the young industry, as well as for any investors that are considering dipping their toe in.

A US$100,000 Bitcoin?

One of the more outlandish predictions for 2020 circulating among some crypto traders is that the price of Bitcoin could reach as high as US$100,000 by the end of the year.

The sector’s traders see Bitcoin’s current boom and bust cycles, where its price rises and then plunges rapidly, as “over exaggerated due to the scarcity of the asset and the sheer rate of adoption”, says George McDonaugh, managing director of blockchain investment firm ().

“They’re saying that with the previous cycles we’ve seen in the asset class the next ‘top’ would be in the US$100,000 region if Bitcoin continues at the current adoption rate.”

While the idea that Bitcoin could hit US$100,000 seems unlikely on the face of it given the currency is currently trading at around US$6,634, McDonaugh says there is some method to the madness.

“The [Bitcoin processing power] charts, new bitcoin addresses charts and transactions charts are all showing healthy recovery from the 2018 bear market”, he says.

Traditional sectors get in on the act

Going into 2020, blockchain technology is expected to begin spreading beyond its original tech-focused borders and into other, more traditional industries, while what remains behind is expected to continue innovating new uses for blockchain technology.

Health technology and associated uses of blockchain will become “a big area of interest in the next two to three years”, says Wayne Chen, chief executive of Interlapse Technologies Corp (TSXV:INLA), which provides platforms to buy and sell cryptocurrency.

According to a 2016 report from , blockchain technology has the potential to increase the “security, privacy, and interoperability of health data” due to its decentralised nature, as well as providing a new model to exchange health information, making electronic medical records “more efficient, disintermediated, and secure”.

Chen says health joins other sectors, such as natural resources, precious metals and mining, that have also been gaining attention in the last couple of months as getting in on the blockchain act.

Decentralised finance

Other innovations worth keeping an eye on are in the growing area of development in the world of ‘decentralised finance’ (defi), a new monetary system built using blockchain systems.

Defi is the idea that a decentralised blockchain network of borrowers and lenders can effectively operate a financial system with the need for middlemen such as banks, avoiding fees associated with traditional banking as well as allowing those without bank accounts to access loans and other forms of credit.

Defi networks can also promote ‘staking’, says McDonaugh, referring to the practice where investors holding tokens in a blockchain network can commit those tokens to help validate transactions on the network in return for a fee, earning them passive income.

The advent of decentralised finance is also attracting mainstream attention in the form of ‘stablecoins’, cryptocurrency which has a value that is pegged at a set value to a stable asset or basket of assets, frequently the US dollar.

One such stablecoin is Facebook’s Libra, where the social media giant plans to peg its value to a collection of stable assets including national currencies and bonds.

However, defi and stablecoins have attracted criticism from various…