Cryptocurrency has been around for 10 years now, with Bitcoin’s 10th birthday on 3 January 2019! Its first decade has certainly been a wild ride, and I don’t think anyone expected Bitcoin to come as far as it did, nor for everything that was developed out of the cryptocurrency industry to come this far. I know I cannot wait to see what the next 10 years bring. That being said, let’s take it in baby steps.
What exactly happened in 2018? In a nutshell, prices tanked, weak hands were shaken out. Lots of OTC (over-the-counter) institutional buying. ICOs are being brought to heel, being charged essentially as unregulated securities. Most of the two thousand cryptocurrency projects are dying off or failing in obscurity. The ones that remain have truly been making strides in development, particularly Bitcoin, Ethereum, XRP, EOS, Cardano, Neo, Litecoin, Stellar Lumens, Tron, IOTA, Monero, Dash, Tether (and sure, Bitcoin cash, Bitcoin Satoshi Vision).
What will 2019 bring?
What Will 2019 Bring in the Cryptocurrency Industry?
TL;DR: No one knows!!
Don’t stop reading there though! We can take some good guesses at what to expect, although most of the time most predictions are incorrect. That doesn’t mean that we can’t have some fun and talk about expectations for 2019.
General Cryptocurrency Market Conditions
I think that the trend of 2018 will continue into 2019, without the price plunge. I believe that the price will generally be “stable” between $3000 – $5000 USD/BTC. Big players will shake out weak hands with repeated dips and surges in price, as well as delaying the next bull run until Q4 2019 or mid-2020 (Q2/Q3). This may result in the average Joe investor/uninformed public investor being scared out of the market and selling too early. Capitulation likely is ongoing now… the price may dip a little more, but hard to know for sure or by how much. With the variations in price between $3000-$5000 (if I am correct), we may see increased arbitrage trading.
ICOs… now STOs
I believe that people who started ICOs without any real business plan or crypto-mission will fizzle out if they have not already. Many ICOs have been shut down as unregulated security offerings or have been forced to sign a Form D, which is a short registration form whereby a company discloses pertinent information for prospective investors. This is much less than the standard method of registering as a regulated security with the SEC. Regardless, if they signed a Form D, then they are a security, no different than a stock in a corporation, only a digital stock. Not what we are particularly interested in.
Moving forward, there will be many companies that wish to raise funds with a crowdsale and to do so legitimately. Something known as an STO, Security Token Offering, is exactly as it sounds. Rather than dispersing a “coin”, people who purchase the token of fundraiser have a digital stock of said company’s shares. I believe that in 2019 we will see more development and regulations around how to properly conduct an STO, which is analogous to present day IPOs, but with a tokenized or digital share, and the ability to have fractional ownership of a share (useful for more expensive stocks such as Google/Alphabet, Amazon, Tesla, Microsoft, Facebook etc).
Moreover, I believe that current companies with millions of shares in today’s traditional market may begin to shift their shares over to STOs/digital versions of their shares. This is what DX exchange is starting to do with some voluntary tech stocks (Tesla, Microsoft, Facebook, Alphabet, Amazon).
Background Tech Development
Unbeknownst to most of us, there have been so many new developments and upgrades in the cryptocurrency space. Both Ethereum and Bitcoin have major upgrades coming. Meanwhile, XRP and Ripple are growing exponentially with every passing month, gaining new partners and users of their network and developing more use cases with R3 and Codius.
Moreover, other cryptocurrencies are developing on their own schedules such as Tron, Cardano and EOS, although I do not have much information on their state. Some notable background tech developments include scaling solutions such as Constantinople, Lightning Network and continued work on true fungibility of Bitcoin and other cryptocurrencies.
The Ethereum upgrade Constantinople is fast approaching with incremental transaction speed improvements. Although I do not have any hard numbers, and I am by no means a computer scientist, it appears that 2-3 of the 5 EIPs in the Constantinople upgrade have to do with improving transaction speed/efficiency.
The Bitcoin Lightning Network upgrade is still being tested. However, it was talked about quite a bit in 2018 and proposed 14 January 2016. The network posits the development of ‘off chain state channels’ that allow a series of transactions to occur near instantaneously ‘off chain’ with the final end network state being confirmed ‘on chain’, on the main public bitcoin blockchain. It has been claimed that this would allow massive scalability (over 1 million transactions/second) and speed improvements on the bitcoin core network. Understandably, I believe that Bitcoin core developers are taking the time to properly assess the code and test it. Additionally, this would allow the Bitcoin core network to maintain its block size of 2 MB (after segwit) which means that it is able to maintain its decentralization since only 2 MB is added every 10min (rather than a large amount such as in the Bitcoin Cash protocol of 32 MB).
I believe that in 2019 we will see some of these developments come to fruition. The massive bull market that occurred at the end of 2017 shed light on the inefficiency of the bitcoin and ethereum networks. Both became massively bogged down with transaction fees jumping as high as $50 USD on the Bitcoin network, while crypto-kitties clogged up the Ethereum blockchain. It became quite apparent that in order for another bull run to be sustained, the networks must actually be able to support the volume.
The Constantinople upgrade should be deployed in 2019, even if it is delayed, it should be implemented within the next 12 months. However, the timeline for the Bitcoin Lightning Network is murkier. I have no idea when the Lightning Network might be launched. The Bitcoin core developers should have been looking into it for the past 3 years, but for something so massive and important I personally think that it’s a great idea that they take their time testing it and double/triple/quadruple checking the code. After all, we’re talking billions of dollars on this network… soon to be trillions (I hope).
Mainstream Adoption of Cryptocurrency in 2019
It will take time for mainstream adoption of cryptocurrency and cryptoassets to occur. However, I believe that 2019 will make large strides toward mainstream adoption. There must be a transition from fringe adoption to everyday use. I think that this transition will be multipronged. This is my opinion on what might happen, but I certainly do not have a crystal ball.
First, there will be a steady increase in stable coin use and deployment (via custody-ing more USD for every stable coin). Concurrently, there will be the development of crypto-native financial applications that bridge cryptocurrency with traditional finance and the traditional legal system (i.e. Wyre, Fincross). This will allow people to use the stable coins on apps that are not dissimilar from ones that are already in use today (i.e. Apple Pay, Android Pay, Google Pay etc). I think this will be a crucial step because a digital version of a dollar is not that far of a stretch for the average person, especially young person to make. They may not even realize that they are transacting in a cryptocurrency stable coin dollar.
Second, further development of crypto-native financial applications will occur in the finance industry, beginning with the tokenization of stocks, bonds and mutual funds/ETFs. Investors will be able to trade their favourite stocks 24/7 with digital stock certificates – security tokens.
Third, simple legal documents will begin migrating to a blockchain (most likely Ethereum for the time being). Things such as marriage certificates/license, college diplomas, university degrees, professional licenses, vehicle ownership, etc. These will exist on a private platform where you control your non-fungible digital tokens.
In addition, XRP and Ripple have made huge strides in onboarding banks and financial institutions (Money Business Services, Payment Service Providers, Remittance companies, etc) with over 200 clients using RippleNet. RippleNet allows access to xCurrent, xVia and xRapid (the XRP component). While all 200 clients have not indicated that they will be using XRP, some Money Service Providers/Remittance companies have indicated their intent to use XRP (i.e. SendFriend). Moreover, the first bank, Euro Exim Bank in London, has confirmed it will be using XRP as a liquidity solution across branches in 80 different countries! This is the beginning of a series of progressively larger dominoes falling down.
As soon as one bank starts using XRP and reapingt he cost savings then other banks will follow suit so as to not be left behind in the competition.
I am not claiming that ALL of these things will happen for sure within the next 12 months; however, I do think that it is reasonable to believe that most of these items will be in development or early stages deployment… in fact some already are as we have stable coins already and payment solutions are being developed already too. The Ethereum blockchain is also recording some iconic things such as marriage license and college degrees!
Institutional Involvement in Cryptocurrency
Institutions have been watching the cryptocurrency market and industry by the sidelines for a long time now. However, after the crypto bubble burst throughout 2018 they have been steadily buying into the crypto market. With an estimated daily volume ranging from $250 million to $30 billion USD in daily OTC purchases by institutions across the board.
Big names such as the Yale Endowment Fund, big banks (i.e. Goldman Sachs), Fidelity Investments (Fidelity Digital Asset Solutions) are all buying into cryptocurrency. Intercontinental Exchange, the parent company of the NYSE is opening a cryptocurrency trading platform, Bakkt, that has been delayed 2-3 times awaiting US regulatory approval. Moreover, cryptocurrency custody solutions are being built out (Coinbase Custody, Fidelity Digital Assets) for large institutional investors so they do not need to manage the actual private keys of their investments.
I believe that in 2019 we will see these institutional investors continue to buy into the cryptocurrency market. They will develop cryptocurrency investment vehicles and start selling these products to high net worth clients. I am hesitant to guess that the average investor would be able to purchase cryptocurrency assets at their local bank or stock exchange in 2019… perhaps it will trickle down to the average Joe investor by 2020/2021… however, the average Joe investor can invest in cryptocurrencies in many different creative ways today!
Token Taxonomy Act – 2019
I believe that the Token Taxonomy Act will be passed sometime in 2019, likely in Q3 or Q4. Once this bill is passed into law, then I think that we will see a snowball effect as legal clarity arrives, massive amounts of institutional money will flood into the cryptocurrency industry in the following 12-18 months. I think that institutions have the intelligence and patience to not buy in all at once as that would artificially raise prices. Moreover, they have been buying OTC for the past year at least, so they likely already have some stores of cryptocurrency.
Proof of Work in 2019
I think that we will continue to see Proof-of-Work operations in 2019. I do not foresee any near future of a Bitcoin without PoW. I do not think that Ethereum will transition from PoW to PoS within 2019. I do not think that any new cryptocurrency that comes on the scene will utilize PoW though… PoW seems to be a dying method. While highly effective at preventing manipulation and securing a network, it is costly.
I have a hunch that bitcoin will always be a PoW system and with that it will be unique, giving it a heavier security profile than most other cryptocurrencies and making it a heavyweight for a store of value.
Conclusion for 2019 Cryptocurrency Predictions
That about sums up my predictions. Sorry, no price predictions. It near impossible for myself or anyone to know what the near term future holds for prices. Long term I am very bullish on Bitcoin, Ethereum and XRP. I believe that we will certainly see large price movements upwards with all three of those currencies over the next 3 to 5 years. However, for 2019 its anyone’s guess… and if I were to guess, I would think that they would stagnate around their current levels (in January 2019) or increase by 10-20% roughly.
One thing is for certain: the 2017 rally and 2018 bear market have put cryptocurrency on the world stage, and it’s not going anywhere. It is as much a social revolution as it is a financial revolution. There is increased public awareness, higher academic interest, enhanced network security (increased nodes in both Bitcoin, Ethereum and XRP) and progress towards scalability.
2018 was a capitulation/wash-out and development year for the cryptocurrency industry. 2019 will likely carry that forward over the coming months and perhaps start another upward trend near the end of the year… only time will tell.
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