The Good, Bad And Downright Nasty From The Year To Come For Cryptocurrencies In 2019
With the beginning of 2019, it makes for an appropriate time to weigh up some of the pros and cons that come from the world of the most roguish area of the global financial world – that being the cryptocurrency world.
No matter how deep you dig into the world of cryptocurrencies and blockchain; there will always be the skeptical outsider, the overly enthusiastic evangelist, and lastly, the incredibly cynical opponent.
And each of these types of people has a number of motives for why they have these opinions and they have often found themselves in the uncomfortable position of being on the same side.
In this world of detractors, those in the middle, and evangelists, each want to be on the receiving end of what they perceive to be good news from the cryptocurrency world. And uneasy alliances are not uncommon within the cryptocurrency world. The best examples that we have seen originate from the blockchain space, including the likes of Ethereum and Bitcoin and the relationship that they have with the financial world.
From the likes of Jamie Dimon, who has made his comments incredibly clear as to his hostility towards cryptocurrencies, and in contrast: nations like Iran and Russia, whose leaders have been steadily walking towards cryptos.
While detractors have called cryptocurrencies every derogatory name in the book; from being the digital ‘Tulip Mania,' to being a wholly fraudulent Ponzi scheme. Even while Cryptocurrencies have invited a great deal of ‘buyer beware' from veterans within the financial world, it hasn't stopped institutional investment and interest from pouring in.
So, we're taking the opportunity to look back at some of the bad and good times of cryptocurrencies for buyers to consider, as well as some of the downright nasty developments that have come from the space.
Cryptocurrencies – The Good Times
2018 has been one of the most turbulent years for the world of cryptocurrencies, and the lions share of these coins have had to walk a tumultuous path in order to obtain a broader scope of use as well as institutional interest.
It has also been over a year since Bitcoin was made readily available for investors through the medium of Bitcoin Futures, which were announced through the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange Group (CME).
Institutional interest had finally come for Bitcoin through the medium of futures contracts, and even with Bitcoin undergoing a rise and fall worthy of Greek epics; going from $20,000 per coin, down by over 80 percent. Now, while this decline took place during the inclusion of these futures contracts, the rate of trading through these respective exchanged increased exponentially.
This increase is easily demonstrated by taking a look at the average daily volume range reported by the Chicago Mercantile Exchange Group has ranged around 3,500 to 7,000 contracts. This is pretty impressive coming from a medium that has taken so much mainstream flak, this actually reached a high point of over 14,500 contracts over the course of November 2017.
One of the good times that cryptocurrencies have enjoyed in the not too distant past was from more institutional interest. This interest came from NASDAQ, which is expected to make major moves within the crypto trading world within the first few months of this year. This is very much the case with the company behind the New York Stock Exchange – the InterContinental Exchange (ICE), which will be working towards a crypto trading platform – Bakkt.
So what do these developments mean for the cryptocurrency world? A few things, in all honesty:
Firstly, it means that institutional investment and interest is circling the cryptocurrency world, and it has only increased thanks to the inclusion of financial futures product on an internationally recognized cryptocurrency exchange.
Secondly, the trade of these futures on these same exchanges gives a great deal of reputation for them. More so from the fact that these markets boast a very strong reputation, along with enjoying a high level of regulation and security for their consumers. They have a far lower risk of things that could jeopardize its reputation, such as hacking.
Thirdly, the offsetting of risk that comes with deals between businesses, individuals and financial markets (whether they are futures or equity based marketplaces), it allows for a more conscious investment strategy adopted by investors. This then results in smarter investments, along with the increasing freeing of financial capital.
The end result is that this freed up capital can then be used to inject more fuel into the US economy, which rolls on to other financial benefits for the international community, including its many markets.
Along with an increased pace towards regulation and exchange based trading. Over the course of 2018, we have seen an increased professionalization coming from crypto trading, one that is diametrically opposed to the more detached HODL-ers and start-up platers that made up the majority of traders during the latter 2017 boom phase.
This can only be a good thing, as these new and otherwise flighty individuals and their eventual exodus removes a factor from the potential for volatility.
While there is an increasing professionalization taking place within the cryptocurrency market, it hasn't half put a damper on people's perspectives of it as a whole. One example of this was the North American Bitcoin Conference that took place in Miami in Mid-January, where the organizer believed that the event would be more a funeral as opposed to a party for cryptocurrencies. It is fortunate that retrospect makes present crises past comedies, as the event was a party in more ways than one. With over 5,000 attendees as well as having there be a great percentage of which were returning visitors and exhibitors.
These ranged from the more established companies, to the dynamic startups, some of which offered loans for those looking to put cryptocurrencies to commercial use; including a Hollywood producer looking for crypto based investment capital in order to create an Entourage like television miniseries.
The event was nothing if not eclectic, but as vibrant, diverse and dynamic as one comes to expect from a cryptocurrency event.
Cryptocurrencies – The Bad Times To Consider
While the past year has had its fair share of good news for investors of all shapes and sizes, as well as for those hopefuls looking for daybreak amongst the dark, winter-esque clouds. This hasn't stopped the fact that there has been such a dramatic level of downward movement for Bitcoin, for example.
This has resulted in a number of speculators to argue that the downward slide of Bitcoin from $11,000 down to around $3,600 is a wholly terrible thing. And while they can certainly have their opinions, but It's not necessarily true.
Now, it has to be said that Bitcoin and its price movement between later 2017 and early 2018 had all of the signs of being in a bubble that has steadily deflated over 2018. It's this steady deflation that has allowed for a greater deal of stability to come to the cryptocurrency market, which can only be a good thing!
There are economists out there that honestly see the value of BTC being observed in conjunction with other accepted means of measuring assets, like the Volatility Index / VIX, which has gained the colloquialism as the ‘Fear Gauge.' This is somewhat a good sign, as it wasn't too long ago that Bitcoin had gained a reputation as being thoroughly divergent from other more institutional systems of investment such as equity indices.
This has since changed, thanks in large part to the weakened state of sovereign economies with many of them proving, even at this stage of recovery, incredibly vulnerable major economic risks and crises. With Bitcoin finally falling into line with this ‘Fear Gauge,' it means that it can be regarded in a more appealing light to investors more commonly used to trading in equities.
It's taking these attributes into consideration that we see the 80 percent price fall from Bitcoin can be see as a good trend for the cryptocurrency market at large. There is a great deal of sympathy that is still owed to those that lost money.
While we're on the matter of price volatility, it was only back in late 2018 that we saw equity prices undergo a great deal of undulation, so it is pretty interesting that cryptocurrencies were relatively stable by comparison.
One of the downsides we have along with this slightly added level of price stability is the fact that financial regulators are starting to take their eyes off the cryptocurrency space. This is not at all helped by the fact there is a reduced call to action in the cryptocurrency space.
It was only in 2018 that we saw a great deal of political and financial pressure on regulatory bodies across the board to work with governments and cryptocurrency exchanges to enforce these regulations. With this in mind, especially the level of stability coming to the market, prices coming down but showing an underlying strength, regulators are taking a step back to re-assess and catch its breath.
The question remains, however: will there be regulation and actions from these bodies in the foreseeable future? Most likely, yes. It is just that it will happen at a slower pace, and that's not such a bad thing.
Cryptocurrencies – The Downright Bad
While the good sounds pretty good for the cryptocurrency space and even the bad still has a good side to it, there's no redeeming the downright bad that we are seeing from within the crypto-space. But it's not exactly surprising when considering the patch-work regulatory measures we're seeing, as well as having the crypto space being in such an early, formative stage of its life.
We see it from the seas of the 17th & 18th centuries, as well as the wilds of the American Frontier, rogues exists and robberies of all kinds happen because the law is too far flung and too weakly projected to pose any challenge to this behavior. As a result, we are seeing cyber-criminals and hackers targeting cryptocurrency exchanges because there's no clear cut laws in place, and coin exchanges aren't exactly good at adhering to good cyber-security practices.
One of the more recent examples we have seen has been from the crippling attack on Cryptopia, which is a coin exchange based out of New Zealand. Hackers reportedly stole a total of $16 million worth of Ethereum.
One of the earliest demonstrations of coin exchange hacking that we have seen was from the now infamous Mt Gox cyber-attack in 2014, which resulted in a mind-boggling loss of over $475 million in crypto assets that were stolen.
The one painful and agonizingly repetitive lessons that coin exchanges need to stop learning and start applying is better regulatory practices, security measures to prevent cyber crime, and financial safety assurances for those investors that buy into their crypto exchanges with the understanding that market changes is all they need to worry about.
Every single market that has gone from its early and formative years to become an institutional source of capital investment has had a growing pains moment that often spans centuries and decades until it's streamlined.
Cryptocurrencies have the advantage of that it has only been around for just over 10 years and so much progress has been made. But while progress has been made, there is still a good deal to come. But this doesn't detract from those that see cryptocurrencies as something more than just a means of investment – they represent digital sovereignty, personal financial freedom, and a freedom away from persecution from a multinational, globalized financial institution that doesn't honestly care about small-scale investors that make up the majority of its customers.
Not to mention the fact that banks work on such a sluggish pace as to condemn a generation of unbanked individuals in emerging markets from taking control of their lives and expressing financial independence as was never before seen. It's this kind of progress and what cryptocurrency means that goes to show how impactful it can be in the battle against extreme poverty.
Crypto anarchists will likely say that people should buy into cryptocurrencies because the older, bigger, institutional systems are in their death throes, figuratively speaking. Personally, that's not going to happen and it's a product of wishful (albeit apocalyptic) thinking.
As we steadily walk into 2019, there are still clouds on the horizon. But they are nowhere near as dark, or thick as they were during the dark days of crypto. And there's far more sunshine and blue skies than there are clouds to come.