2018 turned out to be a disaster year for many investors in cryptocurrency. Expectations were high after the crazy price increases of Bitcoin and other cryptocurrencies witnessed prior to and in 2017. Unfortunately, after an all-time high in January, crypto prices soon dropped to a low point and many coins lost up to 95% of their value. The many hacks, scams, regulations, the Google/Facebook ban on crypto-related advertisements, and the war in the Bitcoin Cash camp attributed to the negative exchange rates. In the past year, the media declared Bitcoin dead more than 100 times and its link to the many “altcoins” ensured that those rates were highly dependent on those of “mother” Bitcoin and therefore also decreased significantly. Despite researching the Netherlands showing that the number of investors in cryptocurrency has decreased by 100,000, another recent study showed that the number of investors worldwide has doubled. During my lectures, I am often queried about the most important developments in the field of cryptocurrency that 2019 has in stock for us.
Here are my top 5:
Mass Adoption With BAKKT?
BAKKT is one of the most discussed and promising projects that cryptocurrency must make accessible to the general public. The preparations for the launch of this open and regulated trading platform should give users the option to not only to trade in cryptocurrency and assets but to also store and spend them.
With the platform being funded by the owner of the New York Stock Exchange and built in collaboration with Microsoft and Starbucks, it has the involvement of some serious organizations and individuals.
The involvement of Starbucks is very interesting since most payments in the United States are currently made with the Starbucks app, even more, than with Apple Pay. In addition, the regulated trading in a transparent platform and the solution it offers for transaction times has drawn the attention from many large institutional investors and it may turn the stock market upside down. Unfortunately, the launch of the platform has already been delayed twice, since more time is needed for both streamlining the customer registration process and for obtaining approval from the US government. However, various authoritative experts from the sector claim that this won’t last much longer.
Will there finally be an ETF in 2019?
While BAKKT is ready to be launched, it remains very unclear when the first ETF will be approved. An Exchange Traded Fund is a so-called “index tracker”, which follows the official price of an asset without the owner owning it. It enables investors to easily speculate on the price rise or fall of Bitcoin without owning the crypto. This offers a solution to many investors since they don’t want all the hassle that comes with purchasing Bitcoin and other cryptocurrencies. It is anticipated that the approval of the first ETF will see a large influx of institutional investors with significant amounts of money to spend. Often the comparison is made with the first ETFs on gold, which has multiplied the value of the precious metal many times.
There have been dozens of proposals for ETFs, but they have all been rejected by the US SEC, as they consider the market to not yet be sufficiently regulated and developed. According to the SEC, there is still insufficient evidence for the required size and volume of the market and too much chance of manipulation and fraud. The STC claims that there is a lack of regulations to prevent this from happening and, if it does, to punish it. The ETF application from VanEck, the party known for its ETFs on gold, currently has the best chance of success.
Unfortunately, the decision on this application has already been postponed a few times. The absence of practical solutions to combat fraud is the reason why various experts don’t expect that it will be approved in 2019. That would be a pity as the approval of an ETF will be precisely the “stamp of approval” many institutional investors are waiting for to invest in cryptocurrencies.
Does The Institutional Tidal Wave Follow?
Apart from BAKKT and ETFs, there are also many other projects that can facilitate a tidal wave of institutional money flowing into the cryptomarket. This will, of course, be one of the most important developments for the market for both confidence and influence on prices. Many companies are eager to invest, but the lack of the right infrastructure and regulations has made them hesitate.
Various products that resemble ETFs are already active. BinckBank offers a Bitcoin ETN and certificates in Switzerland can be used to invest in a basket of cryptocurrencies via Bitcoin and ETP. It is also possible to trade in Bitcoin futures and swaps via Bitmex, providing you first buy Bitcoins yourself.
Various launches of crypto platforms are also expected from the largest players in the global financial market in the coming years. For example, one of the biggest asset managers in the world, Fidelity, will offer its own service from early 2019 to allow large investors to invest in Bitcoin and other cryptocurrencies. The American Nasdaq too will offer Bitcoin futures.
The German Boerse Stuttgart and ErisX also expect to be able to offer services to enable institutional investors to trade in cryptocurrency from the start of this year.
Performing Projects
One of the positive aspects of the cryptomarket crash in the past year has been the self-cleaning capability. Almost all predictions assume that 90–95% of the cryptos will fail. According to the Deadcoins site, we have reached the halfway mark of the 2,000 known cryptocurrencies. This is important for the sector since many scams and drools projects attributed to the poor reputation. Companies in the bear market that endured the ‘survival of the fittest’ test have worked hard in the past year on the products that they have promised. Many breakthroughs are therefore expected in the coming year, which will, of course, have a positive influence on the rate.
Regulation
The rapid emergence of cryptocurrency meant that governments lagged behind with their regulations. Fraud has been and continues to be committed in various ways and there are still things happening with regular stock trading on a daily basis that is prohibited and punishable. That is why several governments have banned the trade. Good regulation is desperately needed to give the market a more trustworthy character, to provide stability and to enable it to achieve its real potential. Various authorities are working hard to soon establish a framework with regulations. For example, much is expected from the guidelines that the G7’s Financial Action Task Force on Money Laundering (FATF) will publish in June, and the US government has already prepared several proposed frameworks that are ready for publication.
Of course, there are many other developments that the coming year has in stock. The price increases witnessed in recent weeks, and the positive sentiment I have noticed very clearly among the many investors and experts, make me look forward to the coming year!
Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.
