2018, Crypto Year In Review
After the “irrational exuberance” phase that affected the market in middle to late 2017, a sobering tide seems to have quickly installed and washed all expectations and optimism from the market, at least for the upcoming months. Let’s examine what factors affected and started 2018’s bear market and explore what’s to come.
Winter has come
Some minor corrections (that took little time to recover) contributed to making some investors complacent during the course of 2017. This complacency continued until February 2018’s fall in the market, which was the first sign that the end of the bull market was a real threat and the bears’ arguments started to gain traction.
In hindsight, and putting aside pure price speculation, we could also acknowledge that a series of events took a negative toll on the market and industry generally during this time. From Bitfinex endless accusations which prompted the US to launch an investigation, the delay of Ethereum’s Constantinople hard fork and subsequent crackdown on ICOs, to the recent Bitcoin Cash’s fork — aka “Hash Wars” — which raised concerns that big players are in control of the market. Another important factor that needs to be considered was the introduction of futures, which made shorting crypto assets much easier and accessible (first BTC but later on ETH and others on Bitmex for example). The bear market sadly also affected many companies which had to lay off employees in order to catch up financially to this new reality.
A Post-Speculation Era?
It’s certainly not all bad news. One could argue that with a more restrained approach to valuations in the industry, the focus has shifted to what is really important; development, mass adoption and a deeper understanding of new financial concepts that cryptocurrencies and blockchain technology brings to the table. As a result and maybe also due to necessity, the #HODL meme slowly re-branded into #BUIDL, and certain markers do indicate that enthusiasm from developers and companies didn’t subside as much during this time.
However, blockchain criticism and skepticism about its promises also played an important factor during the entire year. Utility tokens and questionable ICO models were scrutinized with much more attention. Volatility also became a real issue and stable coins started to populate the top 100 first, and then the top 50 places on the marketcap list.
At the same time, scalability proposed solutions around scalability were questioned but seem to be advancing with the Lightning Network making steady progress and Ethereum’s own solutions apparently moving closer too. The fundamentals have not changed in the last few months, however the market seems to have got ahead of itself.
2019 and beyond
As mentioned previously there’s surely plenty of healthy development ongoing and the groundwork is being laid with new exchanges being launched (i.e ICE’s Bakkt, Boerse Stuttgart Group) that include trading functionality for STOs (security tokens).
However, the price prediction game is a dangerous one. There is not a single marker or factor that can define a close estimate of what an asset like BTC or XRP should be really worth, as many of these don’t have true intrinsic value, at least as understood in traditional finance circles. That doesn’t mean there is no value, but right now it must be conceded conceded that most of the current valuation is based on future usage and potential. On a separate note, recent Facebook and Google controversies started a new debate on who truly own our personal information and identity in the digital word. Concepts like decentralization, privacy, direct ownership and censorship resistance are starting to be the center of attention, with the mainstream media and public at large starting to understand why it is so important moving forward.
As more infrastructure is built on top of blockchain technology (and as long as scalability solutions allow it) these new digital economies and companies will start generating real revenue and therefore real, quantitative demand. Only then will the bridge between the old and new economy be permanently cemented. And while nobody can say exactly when or how will it happen, one thing is for sure — it will happen one block at a time.
