For the new year, there are a few trends that I suspect will play out and represent opportunities.

 

Market gets smarter…sometimes

I remain convinced that Bitcoin is the premier asset and should retain the dominant position in anyone’s crypto portfolio. With the momentum of financialization and growth in Bitcoin technology stacks, I see increased financial media attention, the BTC ticker showing up in world financial reports and more and more institutional products being built.

 

In terms of altcoins, I remain bullish on a select few high value, quality projects and the market will get smarter with each cycle. I stand by the decentralised money and stores of value are where the majority of value capture will occur however some innovation and competion on smart contract platforms will persist.

 

Thus my shortlist of projects to watch are:

 

BTC – obvious reasons. The big fundamental developments to watch are Lightning network and the privacy debate which will be hot topic this year. I expect the market to remain tethered to BTC performance.

 

ETH – I expect that it will perform well given ease of access, DeFi mania and exciting use cases (rightly or wrongly). It remains a youth vote grounded in use cases for gaming, non-fungible tokens and money protocols.

 

DCR – the most undervalued coin outside Bitcoin in my opinion with a plethora of high value developments incoming (lightning network, DEX, Privacy rollout).

 

MKR – A solid project goal with insane regulatory and centralisation risks. It’s a slow burn, low liquidity token that could be 5-10 years too early but also has network effects.

 

XMR / ZEN / ZEC – privacy coins may see some attention given the surveillance state we move into. They also run the risk of being delisted and having liquidity pools shut down. High risk but valuable technology. These will be hot topic given the Bitcoin privacy debate.

 

XTZ / ADA – I think pure PoS is a system of oligarchy and a poorly designed system. That said, the market has treated Tezos very well this year. I suspect it will end up in the top 10 for most of the foreseeable future. Cardano might also deliver something this year but I wouldn’t hold my breath.

 

Stablecoins (USDT, USDC, DAI) – I will wager that the market cap of Tether will push to reach the top 3 this year. Stablecoins as a combined market will likely eclipse BTC in total value as this is a dominant demand area right now.

S***coins continue to perish

There is a plethora of reasons why small cap altcoins will continue to bleed out and fade into irrelevance in 2020 and beyond. It is likely we will see some irrational altcoin pumps but my gut feeling is that these pumps are for selling. It is just too high a risk to trade low cap altcoins on small exchanges because liquidity will kill your exit strategy.

 

Additionally, the leveraged trade on BTC by holding speculative small caps is over. The derivatives industry enables high leverage plays directly on BTC with significantly reduced exposure to shoddy exchanges, poor liquidity and terrible fundamentals. Trade derivatives, not low tier altcoins.

 

My picks for coins that are high-mid caps that have fundamental reasons to get rekt  in the years coming are:

 

XRP – It has zero use case.

XLM – Ripple’s alter-ego is still Ripple.

BCH / BSV – They lost the hash-war and have no chance against Bitcoin network effects.

EOS – The blockchain is riddled with technical errors and an oligarchic block producer system.

IOTA – The blockchain is defunct and has no use case.

DASH – Is slowly unzipping at the seams. It was a scam from day one and reality is catching up.

 

Ethereum 2.0

Ethereum Phase 0, the beacon chain, is supposed to be delivered Q1 of 2020. This is purely the consensus layer of the chain and will commence the ability for early adopters to stake and secure the chain. This is a risky operation as passing 32 ETH as a validator to the beacon chain will be a one way bridge. You are binding your ETH investment in an illiquid state, likely for years, and really are gambling on the success of the protocol. The incentive is that staking ROI is expected to be high, >15% for those taking the risk.

 

I expect to see both accumulation, hype, fear and volatility in the lead up to this event. The market pricing today I believe reflects the risk and complexity of this transition. No timeline is available for Phase 1 and 2 which expand the functionality to that of the current Ethereum chain making this a prolonged event.

 

Bitcoin Technology

For Bitcoin, the new technological developments on Lightning network and privacy will be the big news of 2020.

 

The privacy debate is already starting to bubble up as Binance Singapore has started banning user withdrawals that use coinjoins. Surveillance of the public chain by auditors and governments will expand and thus privacy options must be explored. The key questions will be Auditability vs Fungibility and whether it will be a Soft Fork or a contentious Hard Fork.

 

I strongly expect this to drive some speculative investment into the ZEC, XMR, DCR and even ZEN projects.

 

Lightning network will also begin to gain traction. I suspect that LN will gain adoption with exchanges and OTC traders first before becoming more widely utilised as the UI/UX improves. What I am excited to see are programmable features built on top of LN which will greatly expand the feature set available to Bitcoin. This technology is a few years away from maturity but is headed in the right direction.

 

Sidechains like Liquid are now live and starting to onboard users. This expands the Bitcoin functionality set and may be used to provide increased transaction flows between large parties, tokenized assets and increased privacy. That said, I remain skeptical of Blockstream as I honestly believe that they are rent seeking with alterior motives.

 

Decred Opportunities

I see the following narratives playing well into Decred’s strengths and 2020 will be a year where DCRs fundamentals deserve to shine:

 

Lightning Network – Decreds LN goes live and is likely to gain more users than Bitcoins due to ticket purchases and splitting functionality.

 

Privacy Mixer – Bitcoin CoinJoins are a horrible UI/UX experience and very expensive. Decred mixing will be simple, extremely effective, have a great UI/UX and be cheap as chips.

 

BlockStream Hypocrisy – The hypocritical behavior of Blockstream sledging Ethereum, DeFi and tokens will come under fire as they launch products that literally compete with what they condemn. At the same time, Company zero will engineer their role out of Decred and secede the treasury entirely over to stakeholders.

 

UAHF – Bitcoin advocates bang on about UASF (User Activated Soft Fork) as the infalible solution to all Bitcoins governance problems. I believe it worked once, it might work again, but it has a lifespan. Meanwhile, Decred can comfortably perform a User Activated Hard Fork without a chain split. This is occurring as we speak and is a massive differentiator.

Staking Fever

With exchanges like Binance and Coinbase now offering staking as a service, I strongly suspect that staking coins will gain new retail investor attention. The rise of crypto banks that aim to gather as much of a stake on your portfolio as possible is a growing trend as detailed by this Deribit insights report.

 

https://blog.deribit.com/insights/the-great-race-to-crypto-banking/

 

Staking as a service is where you leave your staking coins on the exchange and they conveniently stake them and provide you with the payouts. The new and uninformed folks to the industry will see this as yield and staking will be a hot topic. Binance has already offered staking with zero fees for Tezos which means they are incentivizing this behavior to gain majority stakes in a network governance and security. Binance is already a 50% staker in Tron so we can see where this is all going.

 

Fundamentally speaking, this is massively bearish for pure PoS but massively bullish for investor ignorance and stupidity. There is a potential swing trade in coins like Tezos and Cardano to ride the hype but I would not sit on that train too long, take profits.

 

Regulatory clarity

I expect to see more regulatory clarity on this technology. It will likely come from a few sources:

 

Crack down on scams and ICOs will continue. That said, I suspect that the SEC and similar authorities will target the truly fake and dishonest scams. Larger ICOs like Tezos and even the horrendous actions by Ripple will likely range from slap on the wrist settlement to no action. Like Block-one, the more expensive your lawyer, the smaller your fine.

 

DeFi could come under pressure to KYC and gain banking licenses for issuing loans. This will test the centralisation of the products and will likely have some unpleasant side effects. That said, if Maker for example was targeted and has to KYC users, I suspect a more decentralised fork will sprout up a few months later. The hydra effect.

 

Financial products will be classed which helps to provide clarity of whether the underlying is a security or not. This will also play out in the tax system where investor responsibilities for staking gains, forked coins and capital gains will have more clarity. It is likely to be a grey area as authorities have a bad habit of making overlapping and misleading policy but over time this will clear up.

Summary

2020 will likely be a significant year for the industry. The halving hype will likely lead prices higher and a number of protocols are beginning to reach maturity. Ethereum needs to prove itself in the face of immense competition and technical hurdles. Decred needs to carve itself a position in the market else it risks fading away into the background. Bitcoin needs to level up its privacy or risk being trivially banned by the authorities.

 

With immense challenges come immense opportunities. The macro economy is ripe for digital disruption and non-sovereign stores of value. The thesis is right, but as with many investments, the timing is difficult to get right and risks remain high.

 

I look forward to another eventful year to learn and grow. Keep me posted on Discord of any topics or projects you want explored in depth!

 

FINAL NOTE – Do take a moment to update our RSC Top 10 projects spreadsheet. First access will send an approval to me, I usually grant access fairy quickly so check back in soon after.

 

I will use this to target my coin research so get your top (and bottom) projects in there!

 

https://drive.google.com/file/d/14eOcvyJrSBmgXTDuONMUaPWFvDriV4BA/view