Source: Statista. Bitcoin price index from November 2016 to November 2018 (US$).
Cryptocurrencies experienced substantial growth in 2017, followed by a less impressive 2018. This raises the question: Are we witnessing a classic boom and bust cycle? Several experts in the field share their insights.
Source: Dash. Taylor.
“The total market value of all cryptocurrencies combined is currently at the same level as in September 2017. However, what often gets overlooked is the continued growth in actual usage and the constant innovation happening in the sector. Bitcoin, for example, is now processing more transactions than it has since January. Dash, the project I am involved with, has doubled its transaction volume in the past year, despite the declining prices. We are quietly observing a shift from pure speculation to real-world adoption.
“Having said that, speculation and price fluctuations remain prevalent in the cryptocurrency realm, and yes, a number of dubious projects will inevitably fail in the coming year. This pattern mirrors the dot-com bubble at the turn of the century. Despite the crashing prices of internet company stocks, internet usage continued to rise, and businesses persisted in building better online experiences. I believe we are seeing a similar scenario unfold in the cryptocurrency space today. If it were merely a fleeting ‘flash in the pan’ Ponzi scheme, as skeptics would argue, transaction volumes would not have continued to grow amidst a declining market.
“In 2019, I anticipate further adoption, innovation, and the exploration of new applications for cryptocurrency. This journey will be marked by a multitude of failures and a select few phenomenal successes. These outcomes will provide valuable lessons and lead to the emergence of new models for success. Digital assets are certainly not for the risk-averse, but they are here to stay as long as people value financial freedom, privacy, and independence. It goes without saying that I do not foresee cryptocurrencies disappearing anytime soon.”
- Ryan Taylor, CEO of Dash Core Group
“2018 saw significant technological progress, particularly in the area of privacy. We witnessed the initial implementations of bulletproofs in cryptonote coins, resulting in a 90% reduction in transaction size and a 95% reduction in associated fees.
Source: Loki. Jeffreys.
“Looking ahead to 2019, treasury management will become a critical aspect for all cryptocurrencies. Projects that raised funds at the peak of the market and did not convert their holdings into traditional currency or stablecoins will face difficulties as their initial capital may have lost up to 90% of its value.
“We’ve already seen major projects like Steemit forced to lay off 70% of their workforce due to the bear market reaching new lows. If this downward trend persists, numerous ICOs might confront the same harsh reality. It’s uncertain whether this will hinder innovation. Perhaps what ICOs truly need is not more funding, but unwavering conviction and clear ideologies, which often spark the most groundbreaking ideas.”
- Kee Jeffreys, Co-founder and Tech Lead at Loki
“Even with the anticipated arrival of tokenized securities, I am optimistic about the future of utility tokens. They will play a crucial role in raising capital for censorship-resistant and decentralized applications. We are already witnessing this with prediction markets and distributed computing.
Source: Brave New Coin. Delfin.
“Regarding market saturation, both natural evolution and market forces will determine the fate of the cryptocurrency ecosystem. Crypto assets that can build the strongest network effects will likely dominate, while those lacking unique characteristics may fade away. It’s important to remember that this asset class is still in its infancy.
“2019 is shaping up to be the year of tokenized securities, suggesting that the underlying technology might take center stage. However, it would be unwise to dismiss the first ‘killer app’ built on this technology – cryptocurrency.”
- Raphael Delfin, Head of Research at Brave New Coin
“While I believe there is a future for utility tokens, they will likely originate from protocols with broad applications and robust infrastructure, rather than niche, single-service utilities. The next bull run will probably revolve around Security Token Offerings (STOs), where regulated companies tokenize large portions of existing asset classes or even equity in small to medium-sized businesses entering the crowdfunding space.
Source: Horizen. Viglione.
“The prevailing trend will involve less stable projects fading away until we see a broad market recovery. This is already happening, with smaller projects ceasing development and shutting down. Even some larger projects are announcing significant staff reductions and scaling back their growth plans – everyone is feeling the effects. Mergers and acquisitions would be an interesting new development in this industry. Perhaps the next market cycle will feature more mature organizations capable of leveraging M&A for growth during downturns.
“Bitcoin has already had a global impact as a currency, though this realization is not yet widespread! In 2019, we will witness the continued development of a new kind of public infrastructure. While private applications of blockchain technology will continue to advance, expect their impact to be somewhat limited. We still need to enhance the security, scalability, and governance of these systems.”
- Robert Viglione, CEO and Co-Founder of Horizen
“The future of cryptocurrency is undeniably dynamic. Despite the current climate, 2018 saw endorsements from traditional financial giants like Fidelity and Nasdaq, which will undoubtedly provide a significant boost for cryptocurrencies in the new year.
“As institutional investors, high-net-worth individuals, and family offices increasingly view cryptocurrency as a serious asset class, and with regulators working to enhance standards and guidelines for adoption, I anticipate the market maturing in tandem. If the industry can maintain its focus on growth, I believe a comeback in 2019 is highly likely.
Source: NGC. Lim.
“Bull markets naturally attract more cryptocurrency and blockchain projects due to the potential for quick profits. At the market’s peak, companies and investors often operate with a fear of missing out.
“However, the current bear market has a silver lining. Projects now tend to have genuine intentions and recognize the importance of developing compelling use cases, building strong leadership teams, and continuously improving to demonstrate their legitimacy. With increased competition, the blockchain industry is poised for consolidation, and the projects with the strongest ‘survival of the fittest’ mentality are most likely to thrive.
“We will also see a growing emphasis on academia. Institutions like the University of California, Berkeley, and the National University of Singapore’s CRYSTAL Centre (Cryptocurrency Strategy, Techniques, and Algorithms) are already engaged in research and development, nurturing the talent needed to drive the entire blockchain ecosystem forward.”
- Roger Lim, Founding Partner at NEO Global Capital (NGC)
“I anticipate 2019 to be a more stable year for cryptocurrencies. I expect some regulatory uncertainties to be resolved, paving the way for companies that were previously interested but hesitant to engage with cryptocurrency and blockchain.
“I believe major cryptocurrencies will make strides in both on-chain and layer 2 scaling, enhancing their practicality and reducing the need for alternative coins (altcoins). I predict a significant decline in the number of altcoins over the next 12 months. Regarding price, having been in this space for over five years, I wouldn’t venture a guess. However, I am hopeful that increased use cases and capacity will drive wider adoption.”
- Oliver Carding, Co-Founder of Crypto Kaiju
Source: Zilliqa. Dong.
“At the start of each year, we wonder, ‘Will this be the year of mainstream adoption?’ While I cannot definitively say that 2019 will be it, we will witness a surge in practical use cases as organizations seeking to implement and develop blockchain applications become more focused. It’s highly likely that some compelling applications will emerge.
“I foresee tokens offering genuine value to users leading the way in 2019. For instance, tokens that reward users for content creation and community engagement, tokens facilitating decentralized payments, and tokens powering cost-effective smart contracts hold tremendous potential.
“As entrepreneurs and businesses embrace and implement blockchain technology, a significant hurdle remains – finding the right balance between scalability and security. 2019 might be the year we overcome these challenges, see the technology gain traction beyond the testing phase, and welcome numerous far-reaching decentralized applications.”
- Xinshu Dong, CEO of Zilliqa
Source: Wachsman. David Wachsman.
“We will witness the deployment of consumer-ready decentralized applications extending beyond the traditional boundaries of the crypto ecosystem. Moreover, mainstream financial institutions will begin utilizing thoroughly tested blockchain infrastructure in their operations.”
- David Wachsman, CEO & Founder of Wachsman
Glossary:
Altcoin: Any cryptocurrency other than Bitcoin.
Bear market: A market characterized by falling or declining prices, in contrast to a bull market, where prices are rising.
Bulletproof: A method for reducing the size of confidential transactions in cryptocurrencies.
DApp: A decentralized application, typically running on a decentralized network using trustless protocols.
ICO: Initial Coin Offering, similar to an IPO, where investors provide funding to a cryptocurrency issuer by purchasing tokens. Token prices can fluctuate after the ICO. Their utility depends on the issuer’s decisions and the project’s success.
Layer 2: A new wave of solutions designed to enable a higher volume of cryptocurrency transactions in real-time, preventing system slowdowns and excessive transaction fees.
Network effect: A cryptocurrency’s value can be assessed by the number of network nodes it commands. A node can be a user. If only one person uses a cryptocurrency, it holds no value. A sufficient number of users is necessary for meaningful transactions. As user numbers increase, the service becomes more valuable to everyone, attracting even more users and businesses willing to accept the cryptocurrency. This creates a powerful network effect (similar to Facebook) that makes it challenging for competitors to gain market share.
On-chain transactions: Transactions recorded directly on the blockchain.
Ponzi scheme: A fraudulent investment operation where high returns are paid to early investors using money from later investors, rather than actual profits.
Stablecoin: A type of cryptocurrency designed for price stability, often pegged to another asset like a traditional currency.
STO: Security Token Offering, proposed as an alternative to ICOs. Security tokens represent a form of ownership in the issuing company or its assets.
Trustless: The distributed, secure, and transparent nature of blockchain eliminates the need to trust individual entities within the system while ensuring transaction execution and verification.
Utility token: Sold during ICOs with the promise of future use for purchasing goods and services from the issuing company. However, these tokens can become worthless if the cryptocurrency project fails.