*The views expressed here are the author’s own and do not necessarily represent the views of Humans of Blockchain.
2018 came to an end, and it has been truly a hard year for all Crypto enthusiasts. The prices for the Cryptocurrencies plunged, the bear market seems to be dominating, most of the ICO projects didn’t succeed, the majority of watchdogs tend to lead a strict regulative policy, ETFs were rejected few times already, and some experts claim that ICOs are already dead!! So, why am I still optimistic towards 2019?
- NASDAQ will list cryptocurrencies sometime during 2019. Some experts believe that this will happen during the first half of the year.
- Large institutions, like Fidelity, Blackrock and Goldman Sachs have already started to get involved into Cryptocurrencies and Blockchain Technology. For example, Goldman is working on a Bitcoin trading desk which should be launched soon. Fidelity is actively developing a Crypto custody and other related services. Blackrock, the largest investment management firm in the world, announced recently plans to invest in the Bitcoin futures market. Consequently, I believe that more institutions will enter this industry and offer a variety of crypto-based derivative products, which will bring stability and reduce volatility as the number of market participants will continue to grow gradually
- Regulatory approval for Crypto Exchange Traded Funds is imminent, and is expected to happen during 2019, sooner than later. Many applications have already been submitted and there are huge efforts from consortium legal teams who work with the regulators in order to get them approved. Such ETFs will allow investors to diversify their portfolio and gain exposure to another asset class which is not directly correlated with the traditional equity market.
- Chicago Mercantile Exchange and Chicago Board of Exchange already offer futures trading, this has allowed institutional investors to test the waters. Although they could not hold actual Crypto assets, they could speculate about its price fluctuation. The next step, is that once they can legally hold Crypto assets they would feel much more comfortable of what to expect.
- Crypto custodial services which meet the strict requirements by regulators and institutional investors are getting live already. Coinbase, one of the Crypto leading exchanges in the world, has already launched regulated custodial services after partnering with Electronic Transaction Clearing (ETC).
Although it seems as if regulators are being way too strict with ICOs, the truth is that the regulators are way less demanding from ICOs compared to IPOs. Whether that is from the filing process or the incurred costs. On the positive side, all these regulations will help in two ways.
Firstly, all fraudsters are going to jail, we can read this on the news quite often.
Secondly, institutional money will not enter a non regulated market.
Therefore, those regulations are surely benefiting the market for the long run. The price spike which we have seen last year, was mainly caused by two main groups, the first one is dirty money which needed to be kept in a safe anonymous place, and the second is retail investors who want to catch a rising tide. However, the soonest regulations started to crack on the money laundering, such assets started to liquidate which caused a sharp decrease in the prices. Consequently, the retail investors could not absorb over 50% melt down of their assets, which caused them to sell at a loss, which brought the market down quite substantially through a domino effect locked in a malicious circle.
When we see that the price of Crypto is selling at a lower rate than it’s cost of production (mining) this means that it is panic sale only by the weak hearts, and those are the last few retail investors to leave the market. Having such very highly discounted prices, combined with regulatory clarity and needed infrastructure by institutional investors to trade and store their assets, 2019 is going to be a big year for institutional and smart money.
The price appreciation may or may not attract back the retail investors who might still have deep wounds from 2018. However, their participation compared to institutional money is very negligible. Therefore they won’t make such a huge difference on the price movement which will be for the first time traded under regulated circumstances, where there are the real buyers and real sellers at each side. Not like 2017 where robots were selling to each other without exchanging a single transaction on the Blockchain, just for the sake of artificial price inflation, and trade volumes manipulations by the top 10 exchanges. Such things are history already, and for sure they will not repeat during 2019.
Will we see another bull run of cryptocurrencies, and what kind of preconditions might be for that?
The imminent participation of institutional investors will surely result in a bull run. How big will that be, we don’t really know. But one thing for sure is that it will not be 50 to 100 fold as we have seen during 2017. The reason will mainly be due to the fact that market manipulation will be almost absent, and the bears will have all the needed tools to shorten Cryptos which have registered huge unjustified gains within a very short period of time.
Therefore, it will be an even level playing ground where all market participants have equal rights to participate and influence the price fluctuations. We will not see anymore artificially inflated trading volumes or bots trading off the Blockchain for the sake of manipulating the Crypto prices.
What will be the future of ICO/STO?
I think that both will co-exist. However, we might see higher adoption for STOs specially for non-utility tokens and big scale projects which wish to have regulatory clarity. I do expect that the biggest portion of investments during 2019 will go to STOs, just for the sake of regulatory protection they offer to their investors.
Having said this, I still believe that very high quality ICOs will get funded, and we are going to see quite few big successful projects coming next years. Specially that we have already passed through the crypto craze of 2017 and the one year correction of 2018. I believe that we have gone through a full cycle already where 2019 will be the BIG year of Crypto and STOs\ICOs.
Will other regulative forces behave as strictly as U.S. SEC did this year, or we will see some “flexibilities” in different other countries?
For sure we will see countries like Malta or Estonia who are a little bit more open minded. However, for the long run, being strict is surely better than banning the whole thing altogether like China. So, strict regulation by the SEC will enable Billions of USD to flood the market which otherwise would have found no way to participate. So, strict regulations are still good regulations. It will just make it slightly harder for entrepreneurs to start their projects, but I am sure the serious ones will find a way. Just like the traditional start-ups which get created on daily bases around the world.
Which countries will succeed in attracting crypto projects to their territory? 2018 has shown great awareness of Malta, Liechtenstein, Singapore, etc. Will they retain their leadership or is there any serious contender to enter the game?
I think 2019 will be a very big year for regulatory clarity, whether from the US, Europe, Russia or Asia. There are very serious discussions right now among the big economies in the world. Malta, Estonia, Liechtenstein and Singapore are all small countries. Therefore, they are more flexible and less bureaucratic. However, once there has been a full regulatory clarity, will such small countries still be able to compete with the whales? Only time will show….
There are no magic pills and there are no silver bullets. 1st of January 2019 will most likely be similar to 31Dec 2018. The same way, it took a year long price correction, it will also take a year long to recover from the down trend. The process will be slow and gradual. Those who invest at a very highly discounted prices will enjoy the benefits for the long term. whether that is 6 months, one year or two. Crypto and Blockchain are here to stay, adoption is on the rise and regulatory clarity is on the way. All indications favour the market recovery during 2019 at a steady pace.