If 2018 is any indication about the future of Bitcoin and other cryptocurrencies, 2019 will prove to be a challenging year for investors and technologists. Between the financial turmoil and acrimonious technological debates, are there any opportunities within this emerging field for entrepreneurs and idle capital?
Bitcoin opened 2018 with a bang at $13,290 and will probably close this year at about $3,800. This represents a 72% loss overall. By comparison, the Dow opened the year at $24,824 and will likely close at about $23,300. This represents a 6.2% loss overall for traditional investors.
Within the broader altcoin market, all other coins have suffered a loss. Ripple declined from $2.23 to $0.35. Ethereum went from $760.06 to $137. Bitcoin Cash forked again, and both coins have suffered a decline. Bitcoin Cash ABC went from $2,443 to $158.48 and Bitcoin Cash SV went from $2,443 to $86.65 – a staggering 97% loss. Rounding out the top 5, newly launched EOS went from $8.83 to $2.62.
Bitcoin supporters have noted that during this year, the lightning network upgrade has expanded greatly. As noted by Jameson Lopp the lightning network has grown to just a few channels to more than 15,000 and to more than 500 BTC available.
Bitmain, on the other hand, has suffered tremendous losses under the leadership of Jihan Wu and Micree Zhan. They had followed Roger Ver’s technological direction to fork Bitcoin into Bitcoin Cash. In August, 2017 Bitcoin Cash successfully forked from Bitcoin and Bitmain had bet big on this fork and technology adding a huge amount of hash power behind the Bitcoin Cash fork. Bitmain had been planning an IPO as well in early 2018. Bitcoin Cash forked again, the IPO was turned down and together with $400 million in losses, Jihan Wu and Micree Zhan are exiting Bitmain.
With the largest maker of mining equipment facing serious financial, technology and leadership trouble, will the other makers of equipment step up to fill the void? In 2019, with the elimination of major disrupters to Bitcoin, it is likely that the Bitcoin ecosystem will thrive in the upcoming year. Already recognized by Time Magazine as a major component that supports freedom in countries like Venezuela, bitcoin has no such restrictions on payments between parties that many other payment processors require. So when Visa, Mastercard and other government backed payment processors try to operate in countries like Venezuela, they lose out to the technologically superior bitcoin payment method. And with the lightning network upgrade, it is possible to pay for a cup of coffee in mere seconds.
With many more countries likely to face economic recession during the upcoming year due to the antics of The Tariff Man, it is possible that we may see adoption rates rising significantly as additional countries face the similar problems that Venezuela is presently facing. Even as the US Federal Reserve plans three additional rate hikes in 2019, on top of the four rate hikes that it issued for 2018, the economy is already facing some serious headwinds. As covered in the November 27, 2018 article series, Cryptocurrency Analysis, a 2019 recession is very likely.
As citizens of other countries experience the severe tumult in their own fiat currencies, leaders from around the world may attempt to “print more money” and this will lead to hyperinflation. This action alone would cause a major influx to bitcoin and similar currencies as citizens seek safe havens from inflationary currencies.
Ethereum seeks to be one of those technologically superior payment solutions. Although the community faces periodic tweetstorms between bitcoin maximalists and Ethereum developers, they have already made some massive improvements in 2018 and there are many more improvements planned for 2019. The long-awaited Constantinople upgrade is slated to hit early January and this will lay the foundation for Ethereum to make some strong moves towards the Proof of Stake upgrades and transaction speed upgrades to handle millions of transactions per second’.
Ripple already has several major banks currently using its’ platform and dozens more that will use ripple’s “xRapid” tool within emerging markets for moving money.
A number of developers are continuing to explore the use of EOS and, launching in 2019, Huboi plans to create a major EOS exchange dedicated to serving those developers.
In light of the financial failure of Bitmain, both forks of Bitcoin Cash is likely to continue to suffer significant headwinds even as the contentious Roger Ver claims to hold more Bitcoin Cash than Bitcoin.
Due to the significant financial events of 2018, the major focus of Wall Street’s attention has been pulled away from the emerging technologies and towards supporting the traditional financial markets. That said, major US exchanges such as Gemini, Coinbase and others are continuing to work on filings with the SEC so that bitcoin-based ETF’s can be traded on the regulated NASDAQ exchange. Given the major rejections by the SEC in 2018 of the bitcoin ETF’s, it is likely that the SEC will continue to reject bitcoin ETF’s in 2019 over concerns of surveillance. In February, the SEC is expected to rule on the SolidX Bitcoin ETF.
With more members of the US Government becoming friendlier to bitcoin, as evidenced by the recent “Token Taxonomy Act”, it is possible that in the upcoming year, additional legislation will be introduced to provide more clarity to the status of bitcoin within the framework of the US regulatory system. Perhaps this will finally bring about more of an understanding as US citizens begin to file their taxes due on April 15, 2019. The existing guidance issued by the IRS does not provide any clarity as to how things like “air drops” and “forks” should be properly treated. Taxpayers are presently relying upon a very old (2013 pdf) guidance that does not cover any of the latest things that have happened within this space.
It is possible that in 2019 we may see some further developments within the AI space as it relates to bitcoin. After all, AI can handle far more complex problems with greater speed and accuracy over the human counterparts. With billions of dollars going into AI developments and entire industries being disrupted, it is likely that we will see AI powered systems using bitcoin before too long.
Meanwhile, the rest of us may be content with listing our new year’s resolutions permanently on the blockchain. Here are my four New Year’s Resolutions. Enjoy!