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Five Predictions for Crypto in 2019
Traders Magazine Online News, October 10, 2018
What began 9 years ago with a white paper and the Bitcoin genesis block has evolved into a fully fledged asset class. Traders the world over are drawn to the crypto markets by the exponential growth prospects of the technology as well as the opportunity to swing trade in such a volatile market.
Dabbling in the crypto markets is not for the faint of heart as the narratives driving price up and down are constantly shifting and changing. Despite witnessing the spectacular collapse of the 2017 bubble, 2018 has been an exciting year for crypto traders as the market edges its way towards maturity. Making bold predictions in such a rapidly evolving market is a particularly complex task. Nevertheless, there are a few broad themes that will exert a measure of influence over the markets in the coming months.
Here are 5 macro trends that crypto investors and traders should watch out for in the next 12 months.
1. Trading volume increasingly shifts to decentralized exchanges
2. The age of dApps: Money moves up a layer
3. Bitcoin ETF draws in the institutional investor
4. Valuation models introduce some sanity into the markets
5. Increased adoption of security tokens
I. Trading volume increasingly shifts to decentralized exchanges
Crypto enthusiasts are passionate about creating a parallel financial system that is more inclusive, transparent and equitable than the legacy system existing today.
However, centralized exchanges that allow buyers and sellers to trade cryptocurrencies are hampering the growth of the decentralized financial industry. By providing a single point of failure, these exchanges are attractive targets for hackers and regulators alike. From the infamous Mt. Gox breach which caused the 2014 bear market to the recent slew of hacks including Bithumb, Bitgrail and Coincheck, centralized exchanges have proven to be the weakest link in the crypto chain.
Thankfully, exchanges granting traders control over their funds are coming online with increasing regularity. Decentralized exchanges, such as those built atop the 0x protocol, promise to introduce the trustless, permissionless qualities of blockchains to the trading process. While the most commonly used DEX architecture employs centrally-managed, off-chain order books, traders retain possession of their private keys until a counterparty is found, at which point the trade is executed on-chain.
Traders on IDEX, for instance, do approximately $3 million worth of daily volume. While this still considerably less than centralized behemoths such a Binance, which often exceeds the $1 billion mark, as decentralized exchanges become more intuitive and pleasant to use, volume will undoubtedly start to shift towards DEX where traders can enjoy the security of transacting on the blockchain.
II. dApps: Money moves up a layer
Ethereum was created with the very serious purpose of revolutionizing the financial system with smart contract technology. However, the first use-case to highlight the viral potential of decentralized application was the fun, quirky digital collectible game known as CryptoKitties. Cryptokitties is a blockchain game which lets players collect and breed digital cats. During the raging bull market of December 2017, Cryptokitties caught fire with a 4833 ETH (more than $2 million) daily volume of these novel tokens being traded at the height of the kitty mania. However, with Ethereum capable of a measly 15 transactions per second, investors have preferred funding competing foundational protocols as opposed to Ethereum dApps which are constrained by the network’s low throughput.
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