according to Forbes magazine
2017 has been an extraordinary year for cryptocurrencies and blockchain. The price of bitcoin has increased by almost 2,000%, rising from € 840 ($ 1,000) in January to more than € 15,900 ($ 19,000) at its peak in December. Ethereum, Litecoin, Ripple and other cryptocurrencies have seen similar peaks as well as the arrival of new cryptocurrencies. 3.1 billion euros ($ 3.7 billion) were raised using ICO (Initial Coin Offering), questioning the future of venture capital. And finally, CryptoKitties has become a busy blockchain: its sales reached 10 million euros ($ 12 million) the first month.
2018 will also be an important year for cryptocurrencies. Here are my 4 major predictions:
- The cryptocurrency market will continue to evolve with the involvement of institutional capital
Last month, the Chicago Board Options Exchange (Cboe) and the Chicago Mercantile Exchange (CME) announced that they will begin offering Bitcoin contracts to bring together cryptocurrencies and traditional financial markets, while giving some legitimacy to a class of assets that previously enjoyed notoriety. Goldman Sachs was one of the first institutions to announce that it could handle these customers on a case-by-case basis. It will launch a cryptocurrency exchange office in mid-2018. Other institutions will certainly follow suit as customers request access to cryptocurrencies and the infrastructure needed for this exchange at the institutional level already exists. This approach includes exchanges of necessary compliance, tools to ensure security as well as insurance products.
In 2018, we will see the launch of many crypto funds. Today, there are more than 100 (84 of which were launched in 2017) and they represent assets under management worth 1.67 billion euros ($ 2 billion). The proliferation of these funds will be coupled with the development of new investment instruments for crypto assets (futures instruments, ETFs (Exchange Traded Funds) and mutual funds), and will allow reaching all investors, even the most preservatives. For example, it would be possible to consider the development of a S & P 500 ETF hedged in bitcoins or a cryptocurrency ETF estimated by a network potentially comprising a basket of 5, 10 or 20 best cryptoactives.
- ICOs will become more professional as experienced investors enter the market
2017 will have seen the ICOs. Unprecedented volumes of capital have been raised through projects such as Filecoin and Tezos bringing together more than $ 200 million in a single funding cycle. Of the 230 ICOs inventoried in 2017, many are from nothing, only an idea (often written on white paper), a team of developers and little application.
This year, seasoned investors will be involved in these new ways of financing. They will require more validation and transparency, bringing the ICO process closer to traditional fundraising by making it very difficult to raise funds from a blank sheet of paper. This trend will be supported by the development of ICO platforms such as Coinlist. They take care not to accept all companies on their platforms, which makes it possible to have cryptosocieties with accounting and tracking tools.
The professionalization of ICOs will be reinforced by the arrival of SAFT (Simple Agreement for Future Token Sales), commodity-oriented investment contracts, pre-ICO fundraising and only accessible by authorized investors. At a SAFT sale, no sale takes place. Instead, traditional paper contracts are exchanged, they promise access to a future product.
SAFTs allow developers to build a network that works and tokens with real value even before launching an ICO. Most importantly, they help businesses financed with Tokens to comply with US safety regulations. As LFAA becomes more established, we will see a decrease in the number of commodity-based ICOs, pre-network firms, and therefore the reduction in speculative tokens sales.
The exchange of cryptocurrencies will also be scrutinized. In 2018, the British Ministry of Finance will be ready to regulate cryptocurrencies in line with anti-money laundering and anti-terrorism measures, forcing traders to identify themselves in some cases. Online platforms where cryptocurrency is traded will have to pay particular attention to their customers and will be required to report any suspicious transactions. Jurisdictions around the world will certainly follow in their footsteps.
In the short term, the intensification of regulations could lead to a fall in prices and a decrease in volumes traded. In the long term, they can contribute to the legitimization of this industry, thus bringing it closer to the world of traditional finance.
Concerns about the growth and performance of this new sector will lead to new platforms and new approaches
Both Ethereum and Bitcoin, the main platforms of the market, face many problems that have made them question more than one about their long-term potential. Around the world, the equipment needed to exploit bitcoin is as energy-hungry as Denmark and some say that by 2020 they will consume as much energy as the planet does today.
Bitcoins transaction times now range from 10 minutes to several days. Transaction fees have increased and are above 4 € (4.75 $) per transaction. These inconveniences will only get worse with the increase in the number of users on the network. Likewise, the potential evolution of Ethereum is limited. The craze for CryptoKitties has shown that a peak of traffic on a single application is enough to saturate the entire network and cause a sudden increase in prices.
When users become aware of Bitcoin and Ethereum defects, they will look for alternatives, leading to the birth of new currencies and platforms. Litecoin, Ripple, Monero and Zcash have already proven that they can replace Bitcoin. In 2018, we will see the creation of new currencies such as Chia, a "bitcoin, better". Created by the founder of Bittorent, Chia is designed to provide a safer and more environmentally friendly operation that also includes security measures. In the same way, Ethereum's position as the leader of smart-contract platforms will be endangered by more recent platforms such as NEO and Cardano.
In 2018, various solutions and improvements will be made to the problems mentioned above. For example, off blockchain solutions such as Lighting Network (Bitcoin) and Raiden (Ethereum) will allow users to avoid high transaction fees and delays. An update of Ethereum's central protocol will be performed. The transaction verification method will no longer be proof of work but evidence of stake, the latter is faster and less expensive.