What’s the next big trend in crypto?

Published in

Blockchain Marqets

6 min readJun 11, 2018

I’ve been doing research on cryptocurrencies for about seven months. In this period, I’ve had the chance to interact with some of the smartest people I’ve ever met. I’ve also read hundreds of white papers related to blockchain technology, some good, some not that good and some just terrible.

All of that has taught me a lot, not just about blockchain technology but also about other fields such as human psychology, artificial intelligence, computer science and game theory among others.

Although I’m relatively new to the blockchain space (I’m not one of those guys that claimed to have bought Bitcoin in 2012) I can say I’m quite experienced in the field. That’s because in this world things happen on a much faster pace. In this seven months, I’ve already experienced one major bull run, one huge crisis (-90%) and several corrections and short bull runs. I’ve also seen hundreds of new projects been launched.

By this point I’m able to see some patterns. Projects that claim to do something really unique but when they launch they’re not able to demonstrate why are they actually special. Bad projects raising USD 40 million or more with only a white paper and a website, no product yet. That continues to amaze me. On the other hand, there are great projects that no one seems to care about because they are blinded by the exuberance of newer projects.

With more than 1600 different cryptocurrencies out there, it is safe to say that not all of them will make it. Of course not. People get blind by the potential of growing their money 10, 100 or even 1000 times and so they don’t spend as much time and effort in doing a proper analysis on their investment. I remember seeing the same happening during the dot com frenzy in 1998.

Blockchain is a fascinating technology that has a real chance to wipe out complete industries that have proven to operate in an inefficient manner (e.g. banking, healthcare, insurance to name just a few). Precisely because of being the catalyst of change that will impact billions of people is that early investors will get rich. There is no question about that.

Now, as I mentioned before, not every blockchain project will be a success. The vast majority won’t make it. This means that people that invested in them (and never sold their coins) will lose their money. There is no question about that either.

So, how can we make sure we are one the right side, on the side of the minority that will eventually succeed?

Here is when being able to see patterns in the market plays a big part. If we are able to see trends we can better anticipate the future results.

Some of the trends I’ve seen:

Infrastructure projects tend to do better.

People tend to forget that blockchain is a very new technology. It’s still in its infancy. In fact, no big company or government has implemented it on a big scale yet. They are all testing it.

So, projects that focus in building the basics of the technology are the most important. Some of the projects that are doing that are Cardano, NEO, EOS, Ethereum and Stellar.

Almost everyone agrees that Bitcoin, at this point, has no real world adoption. You can neither buy a coffee nor pay for groceries with it. From that perspective is a failure. It’s only value is that other people think it’s a great store of value (they see it as digital gold). That’s the only reason why it’s price is so high. I personally see it as a ‘greater fool game’, I buy Bitcoin in the hope that I’ll be able to sell it later to someone more stupid than me, for a higher price of course. That’s, of course, nonsense. So, as time passes by, we’ll see that Bitcoin will lose relevance to other cryptocurrencies that will actually make micropayments possible.
There are still a lot of scams and hacks. So security is still a major issue. As long as there is no regulation, this things will continue to happen on a significant scale.
The current nature of the average crypto investor is middle-age tech savvy men that invest not more than 10% of his disposable income. So the market is still small. Institutional investors haven’t arrived to the game yet.

Why haven’t institutional investors (pension funds, banks, insurance companies, mutual funds, endowments, sovereign funds, etc) invested in cryptocurrencies if they are so profitable?

They haven’t entered the crypto market yet because of the lack of regulation.

Here is the problem:

Almost all existing cryptocurrencies claim to be utility tokens. So, currencies (tokens) that can be used to transact within a platform (it could be one specific platform or the entire internet). The key word here is “utility”. You buy the coin with the intention of using it to pay for something. Now, we all know that this is not the reason why you and me are buying those coins. Let’s be honest. We buy them because we expect it’s value to rise in the future. People buy them as an investment. The financial regulators (like the SEC in the US) know that and they don’t like it, of course. They see those coins not as a “utility” but more as a “security”.

So, an institutional investor is only allowed to invest in securities, not in utility tokens.

I believe that in the near future the majority of these “utility” tokens will become securities. The incentive for the companies that issue those tokens is enormous. By becoming compliant as a security token they can access a market of trillions of dollars ready to be invested in the next big thing.

This is the next big thing in crypto: security tokens

Not only institutional investors with their trillions of dollars will join the crypto market (increasing the value of cryptocurrencies on a huge scale) but also assets will be tokenized. Stocks, for example, will become tokens that you’ll be able to trade without having to go through a broker.

Just to give you an idea of where we are today. This is the current size of the cryptocurrency market compared to other assets and to the stock market: