building the MetaFi ecosystem to bridge the gap between CeFi and DeFi
building the MetaFi ecosystem to bridge the gap between CeFi and DeFi
14 May 2019, 16:05
2 min reading
Cryptocurrencies did not have their best (cough, cough) year in 2018. Instead of shedding tears and burying the whole market, let’s try to understand what actually happened and where are we headed. Crypterium Research has predicted the price falling to $3000-5000 and ICO market crisis back in July, and now we are ready to offer
Cryptocurrencies did not have their best (cough, cough) year in 2018. Instead of shedding tears and burying the whole market, let’s try to understand what actually happened and where are we headed.
Crypterium Research has predicted the price falling to $3000-5000 and ICO market crisis back in July, and now we are ready to offer a deep and comprehensive forecast for 2019 market with key trends, development of main players, price dynamics, regulations updates, etc. Scroll down to see how the crypto market will change in the new year.
2018 was marked by tough testing for many crypto projects. After reaching a peak of $800 billion, capitalization of the crypto market has shrunk by 88% and is now in search of a point that will mark the start of a new cycle.
One of the most well-known crypto funds, Pantera Capital, lost over 70% of the net asset value. Bitmain, the giant mining company, lost $750 million in Q3 of 2018, while Q4 might be even worse. Galaxy Digital, an asset management firm dedicated to digital assets and blockchain, lost hundreds of millions as well.
This correction spawned a new trend in the form of a massive launch of stablecoins – cryptocurrencies designed to minimize the effects of price volatility with a value pegged to traditional currency, like US Dollar or Euro. A lot of major players, including Gemini and Coinbase, rushed to create their projects to conquer the market from the monopolist – Tether. Most likely, this trend will be continued in 2019 and will positively affect the market as a whole and its stability.
The fall of the market did not rule out the interest of large players in the industry. On the contrary – the correction and revaluation of the market have indicated a good entry point for them. The key events to wait for in 2019 are the launch of the infrastructure for the official entry of institutional investors to the market.
The operator of the New York Stock Exchange is launching Bitcoin futures platform in 2019, Nasdaq follows the suit next year, while Fidelity decided to launch institutional platform for BTC and ETH. All these tools will allow institutions to freely acquire, store and work with any cryptocurrencies (primarily BTC). These decisions represent a critical shift in the evolution of crypto markets toward more accessible, useful, and regulated instruments.
The main players of the crypto market – exchanges – have also been thoroughly tested by the market. Daily trading volumes fell from peaks of $70 billion to an average of $15 billion. So it’s no surprise that 2018 was a time of business expansion and finding growth points.
The largest exchange, Binance, for example, has actively begun to develop initiatives like Binance Labs, Academy and Research, and expand to new regions opening subsidiaries in Malta, Uganda and Jersey for obtaining licenses and entering the fiat market. OKEx launched the Digital Asset Exchange Open Partnership Program – an alliance of exchanges under the auspices of OKEx, which provides assistance in the establishment of exchanges and provides them with their solution. Huobi has created its derivative platform and plans to release its own stablecoin.
There’s another trend we’ve already told you about – crypto exchanges are working on decentralised solutions. Yes, you heard right. Since the beginning of the crypto market, there was this paradox: the main idea behind digital assets is decentralization but major players are centralized. The situation might change in 2019.
The event that can change the concept of crypto exchanges is the launch of Binance DEX. Other top players generally follow these trends. Bithumb and Bitfinex have launched their DEX on the blockchain of Ethereum, experiments with the implementation of DEX on the EOS blockchain are planned.
In 2019, exchanges may also change due to the introduction of technological experiments with high-performance distributed ledger technology (DLT) and the incorporation of its activities into the regulated global trade.
In 2018, Bitcoin showed a correction of -84%, which repeats the level of corrections of previous market cycles. For example, 2015 price correction was -86% (from 1172$ to 163$), while 2011 price correction was even bigger -93% (from 32$ to 2$). The previous research conducted by Crypterium defined the Bitcoin price range to be anywhere between 3000 to 5000 dollars this year. At the moment, Bitcoin is actively trading in this range, breaking through the support zone at 6,000. However, the most recent correction puts BTC price between 3000 to 4000 USD.
Based on the significant fundamental factors such as the launch of BAKKT and NASDAQ futures, 2019 is expected to be positive for price dynamics. Technical analysis using a logarithmic scale shows that Bitcoin can increase to $12,000 signalling further growth in 2020. That year is very close to another fundamental factor – the BTC halving date (the 50 per cent reduction in block rewards on the bitcoin network). The historical pattern shows Bitcoin prices booming one year after each previous halving.
Let’s also take a look at the total capitalization of the crypto market. According to our analysis, crypto market capitalization reached a similar bottom, as in the 2014 -2015 cycle, while key support levels at a capitalization level are now $100 billion. We expect that in 2019, the market will be able to break through the resistance (red line), stabilize and begin to grow.
Based on retrospective data and favourable fundamental events, we can expect a return on total capitalization of at least $ 300-400 billion by the end of 2019. This fact, in general, stays in line with our forecast of BTC price with a similar increase of 3x times.
In 2019, The strongest projects will be those who prove their use cases. Currently, the altcoin market has not yet emerged from the stage of manipulative price dynamics. Altcoins that have a serious use case can be revised on the market and demonstrate positive dynamics in the near future. The best solutions will be determined by the market.
For the most part, the trends of 2017-2018 will be repeated. Currently, the most popular and most used digital asset is BTC. Bitcoin will continue to set the direction of the market but its influence will gradually decline due to the emergence of many direct trading peerings of altcoins with stablecoins and fiat. 2019 will be the use-case search year for most projects. Only those that find it will survive, others will lose their value. Thus, the more serious and massive the use case of altcoin is, the less dependent it will be on BTC.
It is possible that market leaders will be determined next year. The main directions for use-case are payments and money transfer, supply chains, and data management. In these areas, the best solutions from the altcoin market may appear, and they will lead the industry in a new way.
There’s another interesting trend – the emergence of a new technological solution that can compete with the distributed ledger technology – directed acyclic graph (DAG). This solution is faster and more scalable for distributed data recording. The full launch of projects, like Hedera Hashgraph, which raised $100 million during the ICO, is set for 2019, and if they are successful, the crypto-world may change for good.
Throughout 2018, the ICO market showed a negative trend, from month to month the amount of investment was decreasing. The peak of investments was in January 2018 in the amount of $1.5 billion, in November, this amount fell to $180 million, which means a drop of almost 90%. The fall of Ethereum – the main currency used during ICOs – itself has led many companies to cut costs and staff in order to adapt to the current situation.
While the market showed decline and correction, many investors came to realize that the effectiveness of their investments was questionable. The ICO format gradually left crowdfunding scheme and came to closed private sales. The latest projects that launched ICOs, are already far superior in quality to those that were carried out in 2017. However, the negative dynamics of fundraising did not stop. In this situation, It’s not a surprise that a new type of fundraising appeared – STO (Security Token Offering).
STO means an increased attractiveness for accredited private investors because it gives the right to receive income from the company #39;s activities, as well as the protection of their interests due to the fact that the company must meet all the requirements of the regulator. The main challenge for STO is to comply with the requirements of regulators in token holder #39;s countries of origin.
In June 2018, the blockchain platform for STO Securitize announced it had raised $ 500 million in STO (Kairos, Lottery.com, 22x), and Tzero, a platform for security tokens, collected $134 million.
Despite the growing popularity of STO, it is too early to write off ICO. Since ICO is essentially the only way for an ordinary, non-accredited investor with modest amounts of capital to participate in investment activities. At the same time, with the influx of new ordinary investors and stable market growth, the trend on ICO can make a return.
Despite the decline in 2018, many high-quality projects collected more than $100 million (Telegram – 1.7 billion, filecoin – 257 million, dfinity – 195 million). However, a serious revaluation is expected after they will enter the secondary market.
In the USA, the market is led by the main protagonist – the SEC, who still believes that BTC and ETH are not securities. At the same time, there were several scandals caused by the regulator. Paragon Coin and Airfox, for example, got $250,000 penalties and had to refund for all crowdfunded investments in the US. This SEC activity scared the market a lot. As a result, most of ICOs froze their PR campaigns.
On the other hand, another US regulator – CFTC – recognized Bitcoin Futures as a commodity. It was one of the biggest market events as It led to the ICE BAKKT and Nasdaq initiatives to include BTC to their exchange listings.
Europe, in its turn, is still undecided on crypto regulation. There are general proposals for the need for regulation, but there is no significant progress, especially at the EU level. There are local regulations in some countries, but they only regulate some parts of the market. The main requirement is the full compliance with the standards of Anti-Money Laundering.
In some countries, there is a tightening of legislation – Estonia is a good example. In others – like Malta – the situation is vice versa – the government wants to adapt cryptocurrency in its banking system. The launch of the Virtual Financial Assets Act (VFA) in Malta made this country one of the most attractive cryptocurrency jurisdictions in the world. The largest exchanges are actively moving there.
Another positive note is the creation of a single global watchdog for money laundering. The Paris-based Financial Action Task Force – FATF, will set up its first rules on oversight of digital assets by June of next year. It’s a major step towards creating international standards for regulators. Jurisdictions worldwide will be required to license or regulate exchanges, ICOs and firms providing encrypted wallets, to help eliminate the use of cryptocurrencies for money laundering, terrorism financing or other crimes.
Meanwhile, the Asian market has maintained a negative agenda since 2017. Last year there were quite a lot of limitations in terms of regulation. Now the situation looks a little bit better. There are many interesting solutions, such as protecting bitcoin as property and allowing it to be purchased. South Korea still is one of the largest crypto markets and the country is actively trying to regulate it. The most notable step in regulation is the prohibition of anonymous trade and the ban on trading by minors and government officials, as well as the legalization of Bitcoin as a method of remittances.
Next year market can stabilize and start to grow as cycles always change. There is a lot of positive news from regulatory services, exchanges and price dynamics prognosis. The cold shower was something the community needed and with lessons learned, the industry can continue to develop and bring changes much appreciated by the enthusiasts.
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