Will Bitcoin burst? What rollercoaster rides are we in for this year?
As with any event, what happened in the past can only tentatively be used to predict the future, so we can only draw rough inferences from 2017 for 2018.
Bitcoin was the leader of the crypto industry, as its prices grew from $1,000 in the beginning of the year to $19,000 at the end of the year, helped by its split into Bitcoin Cash (BCC) and Bitcoin Gold (BCG). A third fork, Segit2X was purged. But Bitcoin futures – where the Chicago Board Options Exchange allowed Bitcoin traders to agree on contracts based on a future predicted price – also pushed the price of Bitcoin out of the reach of the common man.
While Bitcoin’s remarkable ascent made everyone, including some central banks, sit up and take notice, prominent investors like JP Morgan CEO Jamie Dimon predicted an imminent bubble.
At the same time, Bitcoin fatigue, also brought on by problems like in-fighting, slow transaction times, and ease-of-use issues, pushed altcoins to unprecedented heights and made them more appealing to popular industries and criminals. Of the 36 most popular digital coins that exceed $1 billion, Ripple interested financial institutions, Monero, with its anonymity, lured criminals, while Dash became the “cryptocurrency that your mum could use”. A fourth digital coin, IOTA, replaced the blockchain with its Directed Acyclic Graph (DAG) chain, or so-called Tangle, to make transactions super-fast and to process several transactions simultaneously. Then, of course, there’s the inimitable Ethereum that pocketed an eye-boggling $76.340 billion, end of last year.
All in all, cryptocurrency hauled in a total market value of more than $770 billion at year’s end, according to CoinMarketCap.
At the same time, the desire to have a share in cryptocurrency profits, as well as to control money laundering, terrorist financing, tax evasion and fraud caused governments to try to regulate cryptocurrency. Whether it was a simple wallet hack, fraudulent Initial Coin Offering (ICO) or platform breach, investors lost millions in 2017, with nearly $490 million taken from the most prominent thefts of the year.
Countries like Britain, Australia, Japan, South Korea, Norway and Asia followed the United States and France in scripting measures to tax cryptocurrencies and to regulate ICOs, while other regions like China, Bangladesh, Bolivia, Ecuador, Kyrgyzstan, and Nepal banned cryptocurrency outright.
In 2017, we also saw the rise in initial coin offerings (ICOs), where ICOs raised over $3.5 billion. Unknown hundreds were travesties. A scarce few may be the next Ethereum and worth your investment.
2018 will carry more of the good and more of the bad.
Prices will continue to rock-and-roll. Regulations may halt gains, as when Bitcoin fell more than $2,000 in September when China banned digital currencies.
Expect Bitcoin to trade at both $4,000 and $30,000 in 2018, according to Ari Paul, chief investment officer of cryptocurrency investment firm BlockTower Capital. There’ll be more Bitcoin forks, says Michael Graham, a Canaccord Genuity analyst, but sluggish speed and high transaction costs will roil prices.
Looking at the crypto market as a whole, Valentin Preobrazhenskiy, founder of LAToken writes that we can expect even more volatility in 2018 than in 2017, due to an increase in crypto wallets.
Alt currencies will continue to grow, largely because of Bitcoin’s scalability issues. At the same time, John McAfee has doubled down on his convictions that Bitcoin will prevail and “will be ten times its price in 2018”. Some say this expansion will presage the Bitcoin pop.
There will be multiple more ICOs in 2018 than in 2017, and the first few crypto-related IPOs. “[Regulations in the US will make these IPOs happen] outside the U.S. first,” says Ryan Gilbert, partner at Propel VC, which focuses on financial technology.
Few if any of these ICOs and IPOs will produce the next Bitcoin or Facebook, but as these offerings explode, they will become more competitive and only a few will survive. Digital tokens may split into hard assets, like gold, real estate, or even works of art, to avoid volatility. It may reach the point, where as Bradley Rotter, Principal Officer and Managing Partner of various equity and specialty-financing companies, notes, “everything that can be tokenized will be tokenized.”
Corporate giants and central banks will jump on the cryptocurrency bandwagon. Examples include Cantor Fitzgerald and Nasdaq that plan their own derivatives products. Analysts expect regulators to approve Bitcoin exchange-traded funds in the second half of this year, or early 2019. Central banks, like those in Russia and in Japan – maybe England and North America, too – consider offering their own digital currencies.
Governments will weave more regulations, and, in the United States, the US Securities and Exchange Commission (SEC) will crack down on ICOs to make sure they follow SEC mandates. Come mid-2018, according to Jerry Brito, Executive Director of the nonprofit organization Coin-Center, governments will copy the US to tax and control token sales.
Criminals will spin more sophisticated tricks to finagle the industry. Exchanges, wallets and applications will experience the pinch, but blockchain and cryptocurrency are “resilience technologies” and will grow in complement to the shock. In 2017, hackers stole more than $225 million in Ethereum. In response, blockchain developers innovated smarter infrastructure to prevent users from getting abused. Hackers will strike again, and blockchains will take hundreds of more steps to make themselves more robust and secure.
In short, the bad will produce good, since government regulation may give the industry recognition, which is a trade-off that the crypto industry welcomes. At the same time, hacks cause blockchain developers to tighten their platforms.
If 2017 was all about bitcoins, 2018 could be all about altcoins and the general regulation and maturity of the industry, paving the way for mainstream acceptance.
By the end of this year. The Merkle predicts that one in three millenials will own at least one cryptocurrency. Which cryptocurrencies those will be is anyone’s guess.