5 Big Crypto Themes For 2018

In 2017, cryptocurrency went from being an anti-authoritarian, anarchistic curiosity to what is now undeniably a once every decade or two (perhaps millennia) burgeoning of a new industry that though formidable is still in its infancy. To put it in perspective, this time last year, the total cryptocurrency market cap was $20.8B, with a small upstart known as Ethereum pricing in at $10.98 per ETH. Today, those figures stand at $740.3B and $976 respectively. Cryptocurrency and the concept of distributed ledgers we call blockchains will change the way we live, interact, and exchange information. They represent what will become the backbone of a new era of unfathomable and immutable transference of information. Indeed, it’s been a crazy year — and things are just getting started.

Here’s what the Abacus team is thinking about as we forge our way into 2018:

Rise of the Alts:

While some of the buying public may falsely conflate Bitcoin with cryptocurrency, more so than ever, the market is waking up to the reality and validity of alt coins, a moniker that will soon be an archaic means of describing what see as ever more mainstream offerings. Bitcoin marks just 33% of the cryptocurrency market cap, whereas even just three months ago it stood at 50%. The limitations of the Bitcoin architecture combined with a flood of real world integration and utility of alt coins is leading to a great reallocation of capital in crypto markets that we believe will continue. It remains anyone’s guess which coins will dominate by this time next year, but it wouldn’t be unimaginable for Bitcoin to lose the number 1 spot, perhaps even sooner than we think.

Regulation:

The once incredibly opaque notion of regulatory protocol in regards to crypto is fast becoming more defined as government’s around the world rush to enact standards. We’re seeing a divide between nations like India who appear to see the myriad benefits of digital currency as a major threat to the Rupee and countries like Estonia and Belarus who are fervently working to position themselves as cryptocurrency meccas. In between, places like Japan, South Korea, Australia, and many more have begun enacting regulations that in conjunction with investor maturity and market awareness are seeing exchanges and markets adopt to traditional best practices employed by the world of big finance. The notion of Poloniex — once the harbinger of the wild west exchange mentality — requiring investor identification seemed farfetched last year but is now hardly surprising. From know your customer regulations, age restrictions, taxation policies, and broker dealer standards being applied to exchanges to policies regarding ICOs, we expect to see more activity in this space. So long as government’s don’t get too heretical and understand that these new technologies portend major socioeconomic potential, some degree of regulation will probably be a good thing and may work to assuage concerns of those that remain skeptical. This will all help facilitate an injection of institutional capital into markets. Speaking of which…

Institutional Capital

Goldman Sachs’s announcement that they’re opening a cryptocurrency trading desk this year portends a monumental infusion of a veritable plethora of institutional capital flooding into crypto markets this year. With Goldman’s announcement, it’s a near certainty that competing ibanks will follow suit, and with their participation comes legitimacy that could stand to raise markets to incredible new heights. Likewise, their participation breeds a forthcoming litany of crypto products and services, from insurance to leveraging opportunities to various new investment vehicles, that will bring with it investment from formal players that have thus far been unable or unwilling to invest. In what way Goldman and their ilk will first begin their crypto pursuits remains unclear, but for certain, the clout and capital that ibanking brings to what was once our little world of crypto could see markets accelerate in ways that could be surprising for even those of us well versed in the landscape.

Atomic Swaps/Peer to Peer Exchanges

With all of the incredible growth, the inherent limitations to the current means of exchanging crypto have reared their head, and a growing number of services are beginning to gain muster that offer alternatives. Centralized exchange volume is beginning to see real competition from peer-to-peer markets that see low cost or free direct exchange possible, with atomic swaps making it easy to go cross chain without requiring a middle man or intermediary coin. Being released from the confines of coin pairings could result in even more volume and poses a response to liquidity issues in certain market places. Most significantly, these technologies make it possible to remove the last great notion of centralization as it relates to inter and intra-coin commerce.

Government Backed Coins

Venezuela’s Petro and Russia’s CryptoRuble are the first two in what we expect could be a growing number of nations creating their own fiat backed cryptocurrencies. Offering a potential solution to issues around security and insurance, central bank backing could also protect from runs on a marketplace as liquidity and supply could be guaranteed (at least theoretically). Venezuela is pegging their currency to oil and gold, whereas the Russian’s newfound calls for expediency in getting their coin to market is probably more than a little related to their desires for anonymity in light of global sanctions. Other nations like Estonia are seeing the idea of government backed crypto as something of an inevitable innovation needed to bring their country into the future. Whatever the reason may be, government participation will bring a new notion of government vs private coins to a front, resulting in what will likely be a fascinating interplay between the two. If these new coins are successful, it’s not entirely farfetched to think that more mainstream nations — contrary to what many first world reserve banks have stated thus far — may begin to seriously consider offerings of their own.

A New Era

To a degree, with the rapidity of change we’ve seen in 2017, the more you know, the more you know you don’t when it comes to feigning clairvoyance in the world of cryptocurrency and blockchain technologies. What is certain by this point however is that these innovations are not fads, and though marketplaces may be predominantly using them as speculative assets for the moment, it won’t be long until the real innovations and utilities behind various currencies and platforms begins to transform the backbone of modern society. Information, more so than ever, is everything, and we’re talking about nothing less than a complete and radical redefining of how information is shared, transferred, stored, and secured, that will go down as one of the key innovations of the century. Blockchains technologies and what they’ll evolve into will be serve as a platform for the next wave of modernity. Ultimately, we’re seeing a faster, safer, and cheaper way to engender the activity needed for society at large to function. On the notion of whether we believe massive positive disruption to those core tenants of data transference is a valuable and investable phenomenon, you’d better believe we’re willing to make a stake.

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