2018 was a challenging year for the cryptocurrency market and 2019 will bring hurdles as well as new opportunities for cryptocurrency investors. In this article, you will be introduced to five key aspects that digital currency investors will need to look out for in 2018.
2018 was an interesting year for crypto. As Brave New Coin predicted around twelve months ago, key themes of the year have been regulation, the widespread adoption of KYC procedures, crypto taxation, and an increase in institutional investor participation in the market.
All that was overshadowed, however, by a steep correction in the crypto markets that led to a 70 percent drop in the price of bitcoin year-to-date.
In 2019, we expect similar trends with regulations and the institutionalization of crypto to take center stage.
A Slow Start to the Year
Despite calls for a bitcoin rally being just around the corner by several bitcoin advocates and analysts, the year 2018 has left many – especially retail investors – scarred. 70+ percent drops in asset value are something that investors are not used to from the equity and bond markets so many investors will tread more carefully in the crypto markets in 2019.
Institutional investors who believe in the future of crypto, however, will likely start to fill their boots while prices are still low.
The big boost that everyone is waiting for is supposed to come from the launch of Bakkt’s bitcoin derivatives trading platform at the end of January. However, given that the launch of bitcoin futures on the CME and CBOE only have bitcoin a brief boost in the high of the 2017 rally, it is unlikely that bitcoin (BTC) will start to "go to the moon" when Bakkt launches.
The Death of Unregulated ICOs
Token sales continued to raise money in 2018 despite the collapse in cryptoasset values. More ICOs were held than in the year before and the average amount raised by ICOs have also increased, according to CoinDesk’s ICO Tracker.
The most successful crowdsales this year were held by EOS and Telegram. EOS raised 2.5 billion in its year-long token sale on the Ethereum network while Telegram hand raised 1.7 billion.
Interestingly, Telegram did so through SAFT agreements in a private sale to institutional and accredited investors. In fact, there has been a shift towards the security token model and away from the unregulated ICO model as regulatory pressure increase on ICO projects, especially in the US.
This trend will likely continue in 2019 as more and more startups will go down the route of issued tokenized securities, instead of risking legal ramification of holding an unregulated token sale that may or may not be considered a secruties sale once a cryptocurrency regulations frameworks have been put into place.
As a result, we could potentially see the demise of the unregulated ICO market in the coming year. While this innovative, borderless fundraising method has enabled anyone in the world to invest in exciting new startup projects, which has never been possible before, ICOs have also resulted in heavy losses for investors. The majority of ICO tokens aggressively underperformed throughout the year as it became more and more apparent that most of these projects were not going to deliver on their promises.
For startups looking to raise funds – especially in emerging markets – an increase in token sale regulations will likely result in higher barriers to entry for this fundraising model.
The Bitcoin ETF
The Bitcoin ETF saga has been one to follow for several years now, and every year we think we are going to get one. No Bitcoin ETF has been approved in 2018, and there are doubts that it will be the case in 2019 despite bitcoin having gone mainstream as an investment asset over the last two years.
However, with "crypto mum," SEC Commissioner Hester Peirce, on our side and the formulation of cryptocurrency regulations that aim to bring more transparency to the market, we could edge closer to the approval of a bitcoin ETF.
And who knows, maybe we will even finally end up trading one on Nasdaq or the New York Stock Exchange before the end of 2019?
A Global Regulatory Framework for Crypto
The G20 have announced that they want to introduce a global regulatory framework for cryptographic assets. However, in 2018, they have not managed to make any progress in the formation of such a framework.
Given that this has been a topic at all G20 meetings this year, we will likely see progress on this matter in the coming year. Whether heads of state will be able to come to an agreement of what such a framework should look like is another question.
A well-formulated global regulatory framework has the potential to boost crypto markets as it would give this new digital asset class a blanket regulatory approval. However, an attempt to overregulate the cryptocurrency industry would likely hinder the next big crypto rally. So, regulations will once again be a theme that traders will need to follow in the coming year.
More Regulated Crypto Financial Products
In 2017 and 2018, we saw the emergence of a range of new regulated, cryptocurrency-based financial products.
Grayscale Investments launched several altcoin funds, Swiss bank Swissquote launched bitcoin certificates**, **and XBT Provider launched an Ethereum ETN on Nasdaq in Stockholm and has more cryptocurrency exchange-traded notes in the pipeline.
The trend of productizing cryptocurrencies into financial products that are easily accessible for retail and institutional investors will likely continue in the coming year while we will also probably see more bitcoin and altcoin derivatives hit US exchanges.