As 2019 starts off, it is important to highlight that we will soon celebrate ten full years of Bitcoin.
Accordingly, over the next few editions of this newsletter, we will lay out the key themes that we believe will play out over the next 12 months. We will look at key milestones for 2019, both project specific and for the overall industry. There are quite a few potentially path breaking technologies that various teams are working on in this space; Some of them include progress with BTC’s lightning Network, where microtransactions are already happening, ETH’s Shasper (Sharding + Casper), the rivaling developmental efforts around mimblewimble of new generation privacy coins (Beam and Grin), the launch of Bakkt exchange and other institutional crypto products.
However, the most signficant update in 2019 is going to be around cryptocurrency and ICO regulations, with the first draft of formal regulations for cryptocurrencies set to arrive this year. After multiple setbacks last year, the potential approval of Bitcoin ETF at some point this year could set the price sentiment for the rest of the year. The proliferation of stablecoins, one of the biggest talking points of 2018
, could well extend into 2019, and we might also see state-backed digital currencies (CBDCs)
cropping up. The smart contract platform wars will get even more exciting with Dfinity expected to launch its mainnet later this year. It will be interesting to see whether Ethereum manages to fend off rivals and maintain its position as the leading platform for decentralized applications (DApps). Over the next few days, we will delve deeper in to each of the above themes .
Going back to the institutional question, it will be interesting to see how the overall macro scenario plays out. There is significant global uncertainty, a non-trivial chance of recession, the ‘Trump curveball’ bucket (for want of a better word), the continued uncertainty around the Brexit situation, the increasing political (and environmental) outlook, and a general fin de siecle feel all around, especially given that the major central banks have exhausted their armory of economy-stimulating options. Theoretically, a scenario where other asset classes are not necessarily performing well should bode well for crypto, given the relative lack of correlation with other asset classes; As volatility increases across asset classes, investors are probably getting better returns for their risk with cryptocurrencies. However, in a general ‘risk-off’, flight-to-safety environment, will portfolio managers at the mainstream institutions really make a pitch for cryptos to their investment committees? Even if there is some movement into cryptos on the institutional fringes, it is likely to be into passive vehicles such as Bitwise and 108token, rather than into active cryptocurrency hedge funds, the vast majority of who will struggle to return any meaningful amount of capital to their LPs, especially if they kicked off post Q1 2018.
In any event, the next few months will be the calm after the storm; the speculators and the shillmeisters have left the building; the ones that truly care are mostly far removed from the echo chamber that is social media; they are toiling away slowly but steadily, learning, evolving and iterating. Because they know that this is not the beginning of the end, this is the end of the beginning.