2017 was the year cryptocurrency attracted obsessive mainstream media coverage, with Bitcoin leading massive growth in cryptocurrency markets in the lead-up to its all-time high of almost $20,000 in December. While Bitcoin fell, countless enjoyed incredible runs heading into January. The sudden spikes made a lot of people a lot of money, but many more were burned buying into the hype and HODLing through what became a year-long bear market. While hype and get-rich-quick hope evaporated completely following the final winter crash that followed Bitcoin Cash’s drama-filled hard fork, the price movements have obscured a year where many projects took steps toward executing their grand promises.
As the dust settles on another wild year for cryptocurrency, there’s plenty of evidence that 2019 will be no less eventful. Here are five things that are likely to form a major part of cryptocurrency’s evolution heading into 2019.
1. The Futures Arrive
The past year has repeatedly made fools of anyone brazen enough to say cryptocurrency’s protracted bear market has bottomed out. And with market conditions worsening in recent weeks, few would dare predict a reversal anytime soon. But the last glimmer of short-term hope for price increases was based around the proposed December launch of Bakkt’s Bitcoin futures, which has now been pushed back to January 24.
Bakkt is backed by some serious Wall Street muscle. CEO Kelly Loeffler is the wife of New York Stock Exchange Chairman and Intercontinental Exchange (ICE) CEO Jeffrey Sprecher. ICE is also an official supporter of Bakkt, and the project also has connections with Microsoft and Starbucks. Microsoft’s cloud solutions will be utilized to allow Bakkt customers to purchase, sell, store, and spend cryptocurrencies, while Starbucks will utilize the platform to allow its customers to use cryptocurrencies for in-store purchases.
Bakkt will begin in late January with an offering of physically-settled Bitcoin futures, while the other features are expected to be rolled out throughout the first half of 2019. Bakkt’s services will initially be restricted to Bitcoin, but the service’s official Twitter account has hinted that other cryptocurrencies may be offered in future.
The Nasdaq exchange is also openly pursuing the launch of a similar service within the next year, for which it will partner with investment management firm Van Eck. In addition to this, Nasdaq CEO Adena Friedman told CNBC back in April 2018 that Nasdaq “would consider becoming a crypto exchange over time,” though no concrete plans have been announced yet.
It’s worth noting that the launch of these services in no way guarantees price increases. The much-hyped launch of Bitcoin futures through Chicago Mercantile Exchange (CME) a year ago was identified by San Francisco Federal Reserve researchers as a direct cause of Bitcoin’s decline from last December’s all-time high.
2. Ethereum 1x
In a statement released to TechCrunch in January, Vitalik Buterin characterized 2017 as a year in which hype “far exceeded the reality of what existing blockchain systems can offer.” In contrast, Buterin called 2018 “the year of action”:
“...the year where all of the ideas around scalability, Plasma, proof-of-stake, and privacy that we have painstakingly worked on and refined over the last four years are finally going to turn into real, live working code that you can play around in a highly mature form in some cases on testnets, and in some key cases even on the public mainnet.”
The activity of 2018 should climax in 2020, when Ethereum 2.0 is expected to go live. We recently delved into some of these expected updates, which would include a switch to a hybrid Proof-of-Work/Proof-of-Stake consensus mechanism. In the meantime, a raft of significant updates dubbed Ethereum 1x are expected to be enacted during 2019.
As outlined in a recent CoinDesk article, Ethereum 1x is expected to arrive in June 2019. There is currently vigorous debate within Ethereum development communities over what exactly will be incorporated in Ethereum 1x. There are competing proposals for mechanisms to reduce the growth of data stored on the Ethereum blockchain and thus improve scalability. One proposal would see network users charged storage rent for smart contract data stored on the Ethereum blockchain, while another proposal would allow for ‘stateless contracts,’ with portions of smart contract data stored off-chain.
Developers are also investigating the possibility of archiving older information stored on the blockchain. It’s also expected that the number of transactions per block will be increased, allowing Ethereum miners to process a greater number of transactions, collect more in fees, and improve transaction speed. Smart contract creation is also likely to be streamlined with a greater number of ‘precompiles,’ which are out-of-the-box smart contract solutions that can be more easily deployed by platform developers. Metering may also be introduced with a prototype of a new virtual machine dubbed eWASM, which will be able to accurately determine the gas utilized by smart contracts operating on Ethereum.
None of these proposals have been finalized yet. With consultation still ongoing, few would be surprised to see the proposed June 2019 implementation of Ethereum 1x delayed. However, it seems a near certainty that Ethereum will evolve significantly over the coming year, in preparation for the much larger update expected in 2020.
3. The Evolution of Crypto Exchanges
Coinbase remains by the far the best-known and most accessible on-ramp for turning fiat currency into crypto. 2019 will likely be a big year for the platform, with many changes to come.
CNBC recently reported that Coinbase has begun offering over-the-counter (OTC) trading services to select clients. This will service is expected to soon by made available to accredited investors through Coinbase Prime, and will eventually be rolled out to Coinbase Pro. Speaking with Coinbase’s head of institutional sales Christine Sandler, the CNBC article explains the benefits OTC sales will bring to large-scale investors:
“Clients can call Coinbase and say "I'd like to buy $1 million in bitcoin right now — what's the spread?" Coinbase, in this case, finds willing buyers and sellers without tipping off the market that a big order is coming. Coinbase will then get a bid and an offer, and reflect that in multiple price quotes for the client.”
Coinbase's basic service currently only offers a handful of cryptocurrencies, with users able to exchange US Dollars and other major fiat currencies for Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, and Litecoin. The long-rumored roll-out of additional crypto trading pairs has already begun on the Coinbase Pro platform, with ZCash being the latest to be added. Additional cryptocurrencies are likely to be added to Coinbase’s basic service in the coming months.
Being listed on Coinbase adds legitimacy to projects and has so far been associated with big short-term price increases. Coindesk reported a 15% spike in ZCash within minutes of the Coinbase Pro announcement, while BAT saw a 20% increase following announcement of its Coinbase Pro listing in November, and 0X enjoyed a similar price bump in October.
Coinbase is also likely to face increased competition as new exchanges begin offering fiat-to-crypto conversion. Binance CEO Changpeng Zhao Tweeted that the exchange had begun beta testing fiat-crypto pairs in Singapore back in September.
Former Huobi CTO James Ju’s Blue Helix Exchange (BHEX) is another Singapore-based service that will offer fiat-crypto pairs. BHEX has opened offices in the US and UK, and its crypto-to-fiat pairs is set to include Chinese Yuan. According to a press release published on Business Wire, BHEX has secured $15 million in funding from firms including Google, Alibaba, Tencent, Baidu, Barclays Capital, and Societe Generale. BHEX’s services will include OTC trading and decentralized custody of crypto funds.
Decentralized exchanges (DEXs) are also shaping up to offer a serious challenge to established crypto exchanges in the coming year. Stellar X launched in September to much hype and fanfare, with many excited by the prospect of zero-fee trading. DEXs have yet to really threaten centralized exchanges, largely because they’ve been seen as much more difficult to use and have consequently had the Catch-22 problem of low trading volume. If Stellar X or another DEX can amass significant trading volume, these services could form a major disruptive threat over the coming year.
The cryptocurrency space has largely been sustained on speculative hype. With that hype evaporating throughout 2018’s protracted bear market, any positive price movement in the coming year is likely going to require real adoption.
Even the most bullish long-term cryptocurrency supporters aren’t predicting serious mainstream adoption to occur within the next 12 months, but we are likely to begin to see some movement in this direction. Projects such as EOS, TRON, and VeChain all migrated from Ethereum to their own main nets during 2018, and there is a strong incentive for many of these projects to push for real use of their networks as the blockchain platform wars rage on. Projects such as IOTA and VeChain have amassed partnerships with numerous major companies and their supporters will be hoping to see some of this begin to translate into real usage of their networks over the coming year.
Ripple is a project likely to experience a big 2019, as it deepened its ties with a raft of major institutional institutions throughout 2018. As we explained in an article published in October, Ripple has amassed wide-ranging use cases and world-spanning partnerships which have helped it bypass Ethereum to become the second biggest project by market cap heading into 2019.
We may also see invisible adoption of blockchain technology and cryptocurrency networks occurring over the next year. We recently looked at the numerous developers aiming to create the first breakout blockchain-backed game, and some of these endeavors could find success before the end of 2019.
5. There Will Be Blood
If nothing else, the past year has shown predicting crypto price movements is a hazardous business. With a few weeks left in the year and Bitcoin currently back below $4,000, the many predictions of $100,000+ Bitcoin in 2018 seem incredibly unlikely to come to fruition.
Countless projects have experienced 99% capitulations since the altcoin market’s all-time highs back in January 2018. Most of these projects are unlikely to ever recover, and plenty will continue their slow descent into irrelevance heading into 2018. The days of dozens of ICOs raising tens of millions - or billions, in the case of EOS - already seem a distant memory. Binance announced a Gold Label rating to distinguish reputable crypto projects, and 2019 will probably see further steps taken to reduce the viability of scams and projects fuelled by baseless hype.
As explained here, hundreds of thousands of Bitcoin miners have been pushed into insolvency throughout the latter half of 2018. This trend seems likely to continue into 2019, with the Shark Pool mining group also aiming to stamp out some of the Bitcoin-branded altcoins through mining of empty blocks.
And just as no-one was considering the potential impact of Bitcoin Cash’s contentious hard fork on the cryptocurrency market back in December 2018, there will no doubt be seismic events over the coming year with enormous consequences.
Whatever 2019 brings, past experience shows cryptocurrency is likely to remain as turbulent and unpredictable as ever.