Don’t Make Decisions for 2019 until You Read Our 2019 In-House Predictions on China, US and the rest of Asia
When we launched Global Coin Research a year ago, our goal was to help our readers from all over the world to understand what’s happening in Asia in the crypto market, exchanges, and blockchain projects.
We want to help our readers overcome the information, language and culture barrier to define what matters on the ground in Asia, that’s most consequential in shaping the crypto world, and the future.
As cryptocurrency and blockchain are such multidisciplinary fields, it is of the utmost importance to understand the various types of entities and individuals that affects it- and that it affects.
As the space becomes more mature, we have realized an obligation to help folks understand not just blockchain in Asia, but Asia itself. What are the regulators thinking about China? How are the US projects received in Korea? These important questions all require an understanding of the cultural, political and economic agendas.
As a result, we realized what may be more valuable for readers are practical tools, first-principles, and knowledge around the most important entities and key figures that affect the billions of lives there. As a result, we are doubling down on providing more guides and resources for 2019, starting off with our recommendation on the 5 Books to Understanding China and its Internet Economy, including Implications for the Cryptocurrency Ecosystem.
This post is about my predictions for 2019. As a writer, I often feel very privileged that I can hide behind the screen and just write and easily put my ideas out there and get them disseminated. And with time on my hands, what I also get to enjoy more than most other folks in industry is that I get to spend a lot of time thinking, observing and listening from smart people all over the world.
These predictions for 2019 are all my own. I hope they serve as a point of view and as an initial place for exploration as you are making decisions for your company and investments for 2019 and beyond. There are so many more ideas and content packed in every bullet point, but we tried hard to keep them succint and easy to digest. Ultimately, we’d love to get your feedback and hear from you.
My Top Favorite Predictions
Funding and Markets
Korea, Japan, Singapore
My Top Favorite Predictions
Despite the number of reports and ongoing media coverage about China’s digital currency, we have to be cognizant that investors and media all like to speculate, and their prediction timing can be off by years. The truth is that China’s Central Party moves very slowly, and we likely won’t see China releasing its own digital currency next year or the year after. However, we may see more direct dialogues and interactions between the technology, blockchain companies with the central regulators (discussed more in detail in Chian section).
Globally minded, crypto funds with an understanding for Asia will enjoy significant information and go-to-market advantages than funds that purely just have a US arm. By the end of 2018, we’ve already seen a number of prominent, seasoned Crypto investors gravitating towards a global crypto investment approach such as Dragonfly Capital, Primitive Ventures, Presence Capital and Hashed. And we will see more of them in 2019. These funds have access to resources globally (including being physically closer to the exchanges and companies based out of Asia), which is something very unique and I think is highly differentiated in this market.
That is to say, even when I talk to a number of Asian funds, they always seem to have a good grasp of US markets. But it’s often not the other way around. This is arguably because all of the large profile projects are based out the US, but that geographical proximity will no longer be enough in the next year. Companies will come to investors and ask them what differentiated things do they have to offer.
My advice for standalone US funds, start finding global alliances now and build your presence in Asia gradually. Know who the Asian funds are, even if you don’t believe in their investment philosophy, but exchange ideas and do your typical investor-dating. Being able to get access both hemispheres will be increasingly valuable. Aside from the partners from the funds mentioned above, individuals who are that have shared their thoughts on crypto globally that I enjoy following include Lily Liu, Sizhao Yang and Su Zhu.
China built its own version of the internet over the last 20 years. And next year, we’ll begin to see initial applications its own version of blockchain appear. It has begun steps to build blockchain standardization and advocating for the development of a reference blockchain architecture standard for guiding the selection and application of blockchain systems across diverse domestic industries.
As a result of ongoing work done there, we should also start expecting the percentage of blockchain and crypto talent in China grow disproportionally higher than other countries in 2019. This is certainly an opportunity for US projects IMO.
Trading continues to be one of the most thriving businesses in this space, and for 2019, I believe we are going to see disproportional growth in trading tool, technologies and platforms vs other areas in crypto.
As such, Singapore, along with Hong Kong, as existing financial hubs that are friendly to crypto trading and exchanges, are all going to play a bigger part of the global crypto space next year. (read more around this in the Exchange section)
In 2019, Hong Kong will become a larger blockchain hub in terms of fintech companies than New York.
Given regulation limitations in the US, there will be several homeruns fintech/crypto companies coming out of New York, but Hong Kong will be where blockchain companies will see real struggles, advancement and eventually adoption. And we are already seeing that to some extent, with the Hong Kong Exchange turning to blockchain to help international investors trade mainland Chinese shares via the Hong Kong’s Stock Connect system, and HSBC, BNP Paribas, Standard Charter, also launched a Hong Kong blockchain trade finance platform.
Simultaneously, we expect traditional and crypto exchanges to start converging in Hong Kong and Singapore. Go to the exchange section below for details.
Funding and Markets
On a macro level, China and the US economy are both experiencing large economic uncertainties going into 2019. China especially is undergoing threats of ongoing GDP slow down and financial risks, under a president that’s becoming increasingly too powerful. China regulators and cybersecurity administration are also further gaining internet control (will be discussed in more detail in China section).
Given the ongoing trade war in midst of a gloomy global outlook, there will be more capital and talent flight to hubs like Singapore and Hong Kong. Those two cities will become increasingly more important in 2019 for crypto and fintech, so be sure to visit when you are going to Asia because they are a great place to get a feel for the burgeoning crypto ecosystems.
Exchanges and Trading
You’ll see a convergence between crypto exchanges and traditional exchanges. And that will happen first in Hong Kong and Singapore as those markets 1) have shown more openness towards crypto and blockchain technologies, 2) are younger than the US exchanges by operation years and therefore more open and flexible to new technologies and ideas, 3) enjoy the supported by a relatively open and transparent group of regulators.
The Hong Kong Exchange is already adopting some of the blockchain technologies, ie. turning to blockchain to help international investors trade mainland Chinese shares via the Hong Kong’s Stock Connect system, while Binance has the blessing of Singapore to set up shop there. While we are still early in this phase, and mutual trust has not developed amongst the players. By end of 2019, I expect to see one of the large Asian exchanges experiment with their own crypto exchange and also adopting blockchain technologies in areas where it would improve the efficiency of its operations.
In terms of volume, users and interest, the gap between Binance, and other exchanges (including Coinbase) will increase in 2019.
The exchanges are growing up to be more sophisticated institutions after this year, and Binance being the most “organized”, can move quickly and launch things.
Binance needs to succeed its proof of concept phase in Singapore before it can do more. But I have conviction in them because for them, it’s either execute or be mediocre and be competed away. To read more on our thoughts on Binance and the exchange ecosystem, premium readers can access the State of Exchanges report.
Crypto OTC and secondary trading in China is growing to be increasingly mature, and it will look to continue its success from 2018 and grow to be one category of the most profitable crypto businesses in China in 2019.
As we observe DDEX forking away from 0x to fulfill market demand at the end of year, along with the good results coming out of a number of OTC shops in China, we believe OTC in China will thrive in 2019. This ongoing crypto bear market will likely continue for a few more quarters, so its a great time for traditional Chinese trading funds and crypto funds will evolve its OTC and secondary markets further. More sophisticated trading tools and platforms from the US will likely look to Asia for tes and launch in Asia given the growth of activities there.
Overall, I believe more interesting trading platforms and tools will be built around crypto in Asia, while the US trading firms can only experiment within the confinement of US regulations.
To understand China, you HAVE to understand what the regulators and the Central party are thinking. The Sinocism newsletter has been my go-to-resource for daily updates on what’s happening in China with the latest news, along with some great commentary from the author Bill Bishop on the political and economic landscape there. One thing that I want to highlight from Bill is one of his predictions for China for 2018 (published end of 2017), which has really played out infront of us this year:
Big Data, AI and the Technology Revolution
The Chinese Communist Party has embraced technology, and specifically Big Data and Artificial Intelligence, as a key part of the Chinese government’s blueprint for becoming a superpower and achieving “the great rejuvenation of the Chinese nation,” while maintaining Communist Party control.
The PRC has huge data sets generated by nearly a billion Internet users, few legal restrictions on the use of that data, a rapidly growing pool of talented Chinese AI engineers and extremely government polices, including significant financial support.
This technology revolution can bring much good, including better health care, improved governance, more efficient transportation systems and enhanced pollution control.
It will also enhance surveillance and control capabilities in disturbing dystopian ways, as is already happening in the Xinjiang region, and potentially give the PRC an edge in the next great revolution in military affairs.
That was from December 2017. In my latest State of China report published in December 2018, I’ve wrote about how China has been swiftly gathering user information, centralizing data and shutting down user accounts from large tech companies. So be sure to check that out and enjoy our current 50% discount you haven’t.
As I’ve written about this before in early 2017, I still believe that in China, the tech internet conglomerates (BAT) will still be the ultimate winners in crypto, but where the actual value will accrue and who will ultimately be in control is being put into question.
By end of next year, China’s central party’s technology division will have developed its own information management system that directly control and interfere with data coming from these tech conglomerates, taking away the last bit of independence and ownership (if there were ever any) that used by enjoyed by Alibaba, Tencent and Baidu.
The regulators could potentially use more of its Great Cannon, an cyber attack tool that is used to launch distributed denial-of-service attacks on websites by intercepting massive amounts of web traffic and redirecting them to targeted websites. Essentially, the Great Cannon acts as a “man-in-the-middle,” able to not just shout down a conversation but actually able to change content as it passes through the Internet. The first known target of the Great Canon in late March 2015 were websites hosting censorship-evading tools, including GitHub, and GreatFire, a service monitoring blocked websites in China.
If you are a premium subscriber, you can read more about these topics written in more detail in our State of Crypto — China post.
US or international projects shilling and marketing their tokens in China will continue in 2019, but the regulators are getting more sophisticated and will be quicker to act when more unwanted campaigns arise in 2019.
In the last couple of years, the regulators have banned ICOS and most recently airdrops. Next year will be a formative year in where the primary regulators decide and finalize on many part of their overall blockchain strategy and start implementing their own version of blockchain and reject any outsiders.
If you are an outsider now, getting into China would become increasingly more difficult. We have thus far seen companies such as MakerDAO, Ethereum and Consensys successfully making way into China, but we don’t expect many new US or international projects to participate in this region. Local projects will dominate going forward. Nonetheless, the opportunities in Korea and Japan and rest of Asia will be aplenty. See more in the Korea and Japan section.
China’s will exert its blockchain influence internationally in 2019, and this time, so loudly that you can’t ignore them.
It used to be that China largely kept to itself, had its own version of the internet, and didn’t bother with the rest of the world as it focused on its own growth, but that’s decreasingly the case. China, under President Xi, has a new ambition to become a world power and global influence.
Even in the last year, the regulators have been vocal and providing ongoing commentary and insights on the crypto ICO activities, the usefulness of blockchains, and the market landscape. Once they finalize all the right pieces in the next year, they will seize the opportunity to play a key role in the international development of blockchain standards.
Taiwan next year will be interesting for ongoing reverse ICOs, which is a term that is returning selectively to some countries. Crypto Congressman from Taiwan Jason Hsu and I had a conversation about his hope for Taiwan to turn into a crypto hub, be sure to check it out.
Similar to my views of Korea, I ultimately believe Taiwan may be a great location to attract blockchain talent but unfortunately too limiting as a market. There will be a few breakout projects, and there could certainly be adoption of reverse ICO projects outside of Taiwan and nearby countries, but I don’t see it going too far given their product is very localized and their limited distribution. The ecosystem is still very small.
For the companies that raised lots of money in the last 2 years, and have promised to deliver something by 2019, I honestly don’t have much hope for most of them. What I’ve seen in 2018 is that these projects have been delaying, secretly or outwardly competing with others, and acting “stealth”. UGH
At this point, I hope and believe the company that’s already been executing and building things will start eating into companies that haven’t delivered. The existing ones are already too inundated with managing their large funding and teams, and if they didn’t get their initial product right last year, or the market has gone against them, then it’ll be really hard to revert.
I think the most interesting projects that will breakout in 2019 will be new ones. They will get to market faster because they have built momentum and hustling DNA in the team from the getgo. We’ll also see these new projects taking these existing projects and their code and learnings and build better projects.
A number of fund redemptions are coming in early 2019, concurrent with what appears to be a record-breaking number of crypto individuals raising new funds. I am hopeful that we’ll see a turnover of poor performing funds and shilling investors into smart money and quality investors this year.
Now that we know that Facebook is pursuing a blockchain strategy, you can imagine that its only a matter of time that many of the other large US tech conglomerates will follow and tap into their international presence for blockchain opportunities- perhaps we will start seeing Yahoo incubating blockchain projects in Japan, Microsoft in India. They will either launch their own blockchain plans or partner with existing players like Consensys or Ripple.
We didn’t see much of this year, but as we anticipate more tech IPOs to land in 2019 (Airbnb, Lyft, Uber) more quality and experienced tech employees may leave those companies and also existing slow moving crypto companies and join quanlity crypto companies that are bulding things. I am excited for this.
Korea, Japan and Singapore
2019 will be the year where we will be disappointed by Korean projects like ICON and GroundX to fulfill their international blockchain ambitions. We will also not likely see any international projects coming out of Korea except reverse ICOS. These projects have been and will continue to only make a stir locally in Korea, and will work with regulators and the local market to build presence.
Thus far, all of the decisions and successes from these projects have been limited to Korea, while they have made very little effort to engage with crypto activities and organizations outside of Korea. Some have tried and have been turned away by US investors like GroundX, but increasingly I don’t think they have to go too far outside of Asia to capture opportunities.
Korea as a market will continue to be a place for potential experimentation for international projects in 2019. However, the regulators will be focusing on something else other than helping you find users.
The government has agreed to invest $35 million, triple that of 2018, in next year’s budget to develop blockchain technology and industry related to distributed ledger technology.
Nevertheless, the regulators Korea regulators, after working more closely with ICON and local blockchain partners, will start using private blockchain in 2019 that they have planned out and started to build in 2018. But similar to China, they will be building their own version of blockchain.
Although regulators seem to be supportive of local exchanges, and even pushing banks to work with them, Korea will also grow increasingly more protective of its exchange and local residents and make sure events like the Kimchi premium will not happen again.
We’ll have a better and more established Japanese blockchain market and structure by the end of 2019, but I don’t see much of the Japanese crypto market evolving or exerting influence internationally besides being a testbed for international projects.
The Japan blockchain community appears to be experiencing a Crypto identity crisis- it’s traditional tech community is not culturally and operationally equipped to be global and open, but it wants to be like the US community.
Ultimately I see some US crypto companies form partnerships with large Japanese conglomerates, but these conglomerates do not have much influence outide of Japan. Additionally, before the international projects solidify their footing, their offerings may be copied and localized.
Singapore will become the place for ICOs and institutional trading in 2019. This is partially due to China’s ban, and Binance’s Launchpad initiative. In many more ways better set-up and welcoming than that of Korea and Japan’s market, given the transparency and clarity in which the Singaporean regulators have been approaching with and executing in this space. They have not shown country-wide agendas towards blockchain and have been very level-headed about supporting the finance industry with blockchain.