This time last year, Bitcoin was nearing its zenith of becoming the biggest asset bubble in history. Driven by irrational investor exuberance and a fear of missing out (commonly known as FOMO), it was common to see 10x price increases across many cryptocurrencies. Stories abound the internet of people turning tiny investments, sometimes as little as a few hundred dollars, into millions. Within social media circles these people were referred to as ‘lambos’. And the common catchphrase became “When lambo?”, meaning, “When is your coin going to make you enough money to buy a Lamborghini?” Even websites selling supercars were cropping up accepting only Bitcoin or Ethereum as payment! Let’s also not forget Ripple which saw gains of 36,000 percent in 2017!
Fast forward to December 2018 and the landscape couldn’t be more polarised. Bitcoin is down 85 percent from its peak this time last year, symptomatic of a wider cryptocurrency malaise, where prices are down anywhere between 70-100 percent. For the experienced investor, who chose to sit out the ‘hyperbole’ it has proven to be another case of “I told you so”. The party is well and truly over.
Whichever side of the fence you sit on, here are my 7 crypto predictions for 2019 and beyond…
1. ONCE THE PRICE OF BITCOIN BOTTOMS, EXPECT A SLOW RECOVERY OR STAGNATION, COUPLED WITH CONSOLIDATION
Bitcoin has been the biggest asset bubble in history; and history tells us that after a collapse in an asset bubble recovery is slow, if not anemic. Expect a collapse and consolidation throughout the market – miners, tokens and coins.
2. CRYPTO ETFs WILL NOT BE APPROVED IN 2019, DUE TO UNRESOLVED MARKET PROBLEMS
Many see regulatory approval of Crypto ETFs as a potential game changer given it will provide institutions access to a regulated product. But with the U.S. Securities and Exchange Commission (SEC) still having major concerns around crypto exchange manipulation, fraud and digital custody risks, don’t expect this to happen anytime soon!
3. SECURITY TOKEN EXCHANGES WILL EMERGE AND EVENTUALLY SUPERSEDE TRADITIONAL CRYPTO EXCHANGES
Arguably, no security token exchange is yet institutional grade or liquid enough, to support scale, but expect this market to mature in 2019. Security Token Offerings (STO) will eventually become the go to fundraising option for blockchain projects which means Security Token exchanges should supersede traditional utility token exchanges. Read more about the token market here.
4. ICOs WILL DIE A SLOW DEATH
Earlier this year, I published a paper on why many initial coin offerings (ICOs) are a waste of time. Indeed, reportedly more than half of ICOs from 2017 have already failed. I now expect this market to come close to near-death as demand shifts to regulated STOs. ICO demand will be limited to a smaller section of the retail market.
5. TIER 1 INSTITUTIONS WILL BEGIN TO EXPLORE THE TOKENISATION OF ASSETS
Expect more institutions to get involved in pilots trying to tokenise everything from bonds, equities, and investment funds. Expect to see the entry of some big name financial institutions beyond Fidelity, NASDAQ and the Swiss Stock Exchange.
6. INSURANCE OF DIGITAL ASSETS WILL INCREASE IN SCOPE AND SCALE
There will be increasing insurance coverage of crypto exchanges and digital custodians for cold storage. Lloyds of London announced their intent to do this back in August, and I expect more mainstream players to follow suit in 2019.
7. CRYPTO CFDs IN THE RETAIL MARKET WILL BE BANNED
The UK taskforce on Crypto Assets (FCA, BoE and HM Treasury) have already given a strong indication that they will ban these products in 2019, or severely restrict their use to protect investors.
For more insights and analysis on cryptocurrencies, check out our Capco on Crypto series.