The last quarter of 2017 marked the all-time high of both Bitcoin’s price and the number of ICOs operating in the market. Although prices since then have cooled off, activity in the blockchain market refuses to slow down, turning 2018 into a fundamentally important year.
We’ve been witnessing a shift in sentiment, as well as developmental progress, that is setting the market up for another explosion in price activity. It’s hard to say what will contribute the most to the next bull run, seeing as there’s been so much going on the space recently.
This article will attempt to outline some of the main factors that could contribute to new all-time highs.
While we might not see those highs in 2019, considering natural market activity, regulatory acceptance, institutional interest, and developmental progress — there’s still plenty of exciting developments to look forward to throughout 2019.
Traditional market cycles are an emotional roller coaster, and the volatility of the cryptocurrency market only exacerbates that idea. However, if you understand you’re on a roller coaster, it’s easier to detach yourself from the ups and downs, and maybe even enjoy the ride.
It’s not a perfect analogy, but there are legitimate reasons to be optimistic about the technology behind cryptocurrencies in addition to their declining prices.
In fact, the combination of falling prices and strengthened fundamentals has been a dream come true for those looking to increase their crypto holdings.Source: Wall St Cheat Sheet
You’re likely familiar with the diagram above. When you look at the long-term charts of Bitcoin , the resemblance is pretty much on the nose. Of course, there are no guarantees in this space, but there is a case to be made for another bull run occurring within the next few years.
For the sake of context, the last notable bull run happened between April 2013 to December 2013, when the price went from $50, to $1,160. That’s an increase of 2,220%.
The main thing to note in the diagram (aside from the cyclical nature of the market) is the fact that it’s emotionally driven.
Fundamentally bullish news aside, the financial market naturally moves through bull/bear cycles, and it’s the emotions of the crowd that fuel its movement. If this premise can be applied to cryptocurrency — and I believe it can — we’re likely to see another bull run based on emotion alone.
What’s more, the next emotional swing upward is currently being reinforced by technological advancements that apply directly to global economics, advancements that have been gaining an increasing amount of traction despite the rise and fall of prices.
In addition to the incredible timing of the natural market cycle coinciding with both positive institutional responses and improved technological functionality (which we’ll look at throughout the rest of this article), the next Bitcoin halvening is scheduled to occur in May 2020.
We won’t get into the details here, but the basic idea is that mining rewards will be cut in half. Halving mining rewards limits the amount of BTC entering the market, thereby preventing hyperinflation.
Price-wise, the first 2 halvenings (in 2012 and 2016) were followed closely by new all-time highs. Under this logic, the next parabolic pump wouldn’t occur until the end of 2020 at the earliest.
However, it’s hard to say whether this will be the case, considering anticipation of the halvening is likely to be factored into the price of Bitcoin earlier than it has been previously. Whether it artificially inflates the price as early as 2019 remains to be seen, but it’s worth contemplating now.
Cryptocurrency enthusiasts are making a massive claim when they predict that fiat currency will be replaced. And when they go on to explain that it’ll be replaced by what most people understand as “that internet money thing used to buy drugs and launder money,” it’s not surprising they get looked at sideways.
As awesome as it would’ve been to have a global economic revolution on the back of the Q4 2017 bull run, becoming independent of centralized banks will be extremely difficult, and organizations like the Federal Reserve are going to oppose it every step of the way. However, if the “powers that be” can can use blockchain technology to their advantage, it’s a different story.
So maybe the cryptocurrency revolution won’t happen overnight, but rather in incremental steps that will take decades to form. If the creation and small-scale utilization of cryptocurrencies was the first step, the response of government agencies we’ve seen recently might be a second step in the right direction.
The ICO craze reached its peak in 2017, right in stride with the price of Bitcoin. It seemed like everything under the sun was being tokenized, and millions of dollars were being raised to fund these projects.
While the market has seen a decrease in both the number of ICOs taking place, and the amount of capital being raised by ICOs, there has been an increase in the amount of money an individual ICO makes.Source: CoinDesk
This shift from “quantity to quality” was likely influenced by the SEC’s decision to view ICOs as securities during most of 2018. This had a 2-fold effect: the investigation of hundreds of ICOs , and the realization that existing security laws just don’t fit this new asset class.
This realization has led to the creation of what’s known as Security Token Offerings (STOs).
The main difference between ICOs and STOs is that STOs distribute tokens that actually represent a stake in the companies’ assets, whereas ICOs distribute tokens that only realize their value once the project fulfills the promises of its whitepaper (which needs to have a strong use-case to begin with).
On top of the introduction of STOs, the existing regulatory framework around securities is currently being reconsidered, which might make ICOs exempt from security laws after all.
The fact that government agencies are taking cryptocurrencies seriously at all speaks volumes in itself, and when combined with their increasing acceptance of crypto in general through regulatory adjustments, we might be witnessing an event of great historical significance unfold in real time.
Most conversations surrounding the mass adoption of cryptocurrency eventually lead to getting institutional agencies involved.
One of the more notable advancements in this realm is called Bakkt , which is an open-source Bitcoin Futures trading platform backed by the Intercontinental Exchange: the same company behind the $20 trillion New York Stock Exchange. It’s also worth noting that Starbucks and Microsoft have partnered with Bakkt.
Bakkt was originally scheduled to launch Bitcoin Futures in the beginning of Q4 2018, but multiple delays have pushed the current launch date into Q1 2019.
Kelly Loeffler, the CEO of Bakkt, had this to say about the delay:
As is often true with product launches, there are new processes, risks and mitigants to test and re-test, and in the case of crypto, a new asset class to which these resources are being applied. So, it makes sense to adjust our timeline as we work with the industry toward launch.
Institutional investors were given access to Bitcoin and Ethereum after Fidelity launched Fidelity Digital Assets in October 2018. Since then, there has been an increased demand for more altcoins.
This has led the head of Fidelity Digital Assets, Tom Jessop , to schedule the launch of a startup called Fidelity Digital Asset Services (FDAS) for Q1 2019.
FDAS would bring investors access to the next 4 or 5 cryptocurrencies in marketcap ranking, as well as the aggregation of exchange data and trade execution.
We’ve come across several clients who have reasonably large positions in crypto that are held in self-custody, and a number of customers who cannot execute orders to purchase digital assets until they have a custodian. So, I think there is a lot of pent-up demand right now.
It’s also worth noting that Fidelity confirmed they have been mining cryptocurrencies since 2015 .
We’re witnessing the beginning of institutional acceptance and participation of cryptocurrency, and the 2 companies listed above aren’t the only big players taking the space seriously. Here’s a quick list for more information on institutional interaction:
As you can see, there are some big names leading the way. It’s possible we’re witnessing a massive, yet natural, shift away from fiat currencies toward digital assets.
Next, we’ll look at what the blockchain industry is doing to prepare for the potential shift heading its way.
Some of the highest-ranking cryptocurrencies have major updates scheduled for 2019. There’s a lot of impressive projects working hard on innovative projects, and here’s a sample of what’s to come in 2019.
Development on the Lightning Network continues, and seems to be the main focus for the time being.
Since the Bitcoin blockchain is currently only able to handle a maximum of 7 transactions per second , the network is slow compared to established payment gateways like Visa, which can handle an estimated 24,000 transactions per second when maxed out.
Full implementation of the Lightning Network is scheduled to be released some time during 2019, and trials have been underway since summer 2018.
Ethereum has some major developments taking place in 2019, mostly aimed at improving the scalability of the platform.
The Constantinople update was originally scheduled to happen in the latter half of 2018, but was postponed to January 2019 . The update is aiming to provide scaling solutions, better processing times for developers, improvements to Ethereum’s economics, and more.
The second major Ethereum update, which doesn’t have an official release date yet, is an upgrade is called Serenity, and it’s a massive undertaking.
Justin Drake , a popular researcher at the Ethereum foundation, summarized the Serenity update well:
[Serenity] contains various new radical ideas. Part of it is around a move from Proof of Stake (POS) away from POW. And the other big idea is sharding, so scalability — having a thousand shards compared to just one shard.
This article would last until the next bull run if I continued listing updates. To learn more about major developments happening within the top 10 cryptocurrencies, check out this article .
The development that’s currently taking place will almost certainly lead to functional improvements in blockchain technology, which will further support the increasing institutional demand for digital assets.
Furthermore, considering both the price of Bitcoin at the time of writing and the findings from the LinkedIn 2018 Emerging Jobs Report , the graph above continues throughout the rest of 2018 in a similar fashion.
Crypto jobs are on the rise, while the price does whatever it needs to do.
What’s got you feeling optimistic about crypto in 2019? Share with us in the comments below.