Bitcoin and other cryptocurrencies have certainly taken their lumps in 2018. About a year after the record price peaks, some estimates of about $ 750 billion in the cryptocurrency market value have vanished in a large collapse of blockchain-based digital currencies.
Is bitcoin blooming increased? Is it "finished" for bitcoin extraction and cryptography in general? Not necessarily, market professionals say. In fact, apart from the actual prices, it was actually a good year for blockchain, as illustrated by an increase in investments in DLT (distributed ledger technology) which is the basis of bitcoin and other cryptocurrencies, but has applications elsewhere.
Let's take a look at the state of the cryptography industry, including some reasons why 2018 could be considered a turning point for bitcoins, blockchains and cryptocurrencies.
Crypto Bears Growl
Between a run at the end of 2017 to buy Bitcoin (BTC), the most actively traded cryptocurrency rose to a record high of around $ 19.282. Since then it is mostly downhill. A year later, in mid-December 2018, BTC traded around $ 3,400, a decline of more than 80% from the peak of 2017.
Other cryptocurrencies have fallen far beyond what is traditionally considered a bearish stock market (a fall of 20% or more). The Bloomberg Galaxy Crypto index, which tracks the largest and most liquid cryptocurrencies – including Bitcoin, Ethereum, Monero, Ripple and Zcash – had plummeted by 85% from a January peak.
In December 2018, the combined market capitalization of over 2000 cryptographic coins and trading tokens was $ 110.8 billion, according to CoinMarketCap. That is down from a peak of about $ 822 billion in January.
Why are cryptocurrency prices so many?
Uncertainty about potential regulation, reports of frauds and many other factors have cooled investor interest and slowed the trade in cryptocurrencies, say market professionals. The speculative frenzy that has fueled the cryptocurrency rally in recent years (the BTC has gone from less than $ 1,000 in January 2017 to over $ 19,000 by the end of that year) has pushed prices above justified levels from any economic or market fundamentals.
"For cryptocurrencies, 2017 could be summarized as the year of" breakout ", with new products, great retail interest, media coverage and speculation," says Kiran Nagaraj, Cryptocurrency Services Leader at KPMG , a consulting company.
In contrast, 2018 "brought a healthier focus on utility, adoption and institutionalization" for cryptocurrencies, adds Nagaraj. "However, this process is still in its infancy and the recent price action in many cryptocurrencies is perhaps reflecting on this".
Nagaraj recommends not to fix fluctuations in cryptocurrency prices in the short term; instead, note the "investment of talents and infrastructures that lead to crypts" and "pivot companies are doing on the market".
"There is an emerging and tokenised economy that has just begun," he says.
The cryptocurrency rally that peaked last December was "a wonderful, historic move," writes Tuur Demeester, an investor and analyst, in a blog post in 2018. Demeester expects more "sideways and downside potential "of prices due to" slow retail demand, hesitation from institutions "and market values that are still relatively high.
Moving the trade towards regulated platforms
Bitcoin and other cryptocurrencies are still relatively new and largely unregulated, as are many of the trades on which they trade. Unlike traditional currencies, cryptocurrencies are not controlled by any government or central authority.
US regulators, including the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), have studied the crypto markets, although it is not entirely clear what the regulatory regime might be. SEC officials also said in 2018 that digital currencies are not considered securities, but that many initial coin offerings (ICOs) are, and therefore fall within the securities laws.
"Cryptocurrencies may be the bright new opportunity today, but there are serious risks," says Lori Schock, director of the SEC's investment and advocacy office, on the agency's website. "If you choose to buy digital currencies or tokens, you recognize that they are new.There may be significant risks involved in putting your money into something that has not been around very long."
Although the message from US regulators was "the buyer is careful," cryptographic products are starting to appear on regulated exchanges, which some investors may see as a move in the right direction.
For example, the bitcoin futures products listed by Cboe Global Markets are available on thinkorswim® TD Ameritrade's platform to qualified account holders and are regulated by the CFTC.
The drive towards greater access and greater transparency for retail customers has continued beyond the bitcoin. TD Ameritrade recently invested in a new cryptocurrency exchange called ErisX in an attempt to "offer customers investment options in digital assets beyond the famous bitcoin futures", according to J.B. Mackenzie, responsible for futures and foreign currency trading at TD Ameritrade. "While TD Ameritrade customers can already trade bitcoin futures at the Cboe Futures Exchange, "says Mackenzie," ErisX will allow customers to potentially trade other cryptocurrency futures, such as Ethereum and Litecoin. "
He says that the company's retail customers appreciate transparency and ErisX aims to offer cryptocurrency to customers "where they can see them on a real exchange, something they feel comfortable in a regulated space".
Keeping the ICO in mind
Since cryptographic markets have grown in recent years, so have the first coin offerings (ICO), through which the tokens of a digital currency are sold to investors (similar to IPOs in the stock markets). One problem: not everyone behind these ICOs could be on the level.
In September 2018, the SEC declared a self-described "ICO Superstore" and its owners agreed to pay almost $ 570,000 to set aside the charges of acting as unregistered broker-dealers for digital tokens. The SEC stated that the company, TokenLot LLC, promoted its Web site as a means of buying digital tokens during ICOs and also to engage in secondary trading.
The president of the SEC, Jay Clayton, according to media reports, says that ICOs should be regulated by US securities laws, citing concerns over fraud. Current and future legal cases look at what kind of regulatory structure, if any, will form around cryptocurrencies.
Blockchain: Beyond Bitcoin
While bitcoins and other cryptocurrencies capture the securities every day, the underlying technology could have a longer-term impact on businesses and consumers, analysts say.
Banks and other financial services companies, as well as companies in other sectors, have increased their blockchain investments, looking for ways in which some other form of distributed ledger technology could reduce costs, improve efficiency and security or open up new markets. The financing of risk capital in blockchain totaled at least $ 1.3 billion worldwide during the first half of 2018, exceeding the total for the whole of 2017, according to Crunchbase News.
"Blockchain's capabilities extend from record keeping and transaction logging to documentation management and supply chain management, "KPMG analysts Ian Pollari and Anton Ruddenklau said in a July report." While so Mainly looked at from a banking and insurance point of view to date, the reality is that the opportunities for blockchain abound and it could improve processes for any number of US and global companies. "