Launched in 2009, Bitcoin is the pioneer of cryptocurrency and last year turned out to be a great year for it. Over the years, a number of other cryptocurrencies have also been introduced like Ethereum and Litecoin and they have also continued to gain traction. In the start of this year, the combined cap of all cryptocurrencies had reached a whopping $830 million, but its total market capitalization experienced a huge drop of 65% in the next month. This caused a lot of experts to deem the crypto industry instinct, but the up and downs have continued and proven one thing; cryptocurrencies are here to stay.
Blockchain technology is becoming widespread and more and more industries are adopting it. Similarly, cryptocurrencies are being accepted in a greater number of places, which are all positive signs. Guy Galboiz, an established Crypto Investor, says, when you are thinking of investing in this market and trying to figure out what strategy to use, it is best to be aware of the ongoing trends. Guy Galboiz gives us some of the top cryptocurrency trends that have been seen and will continue to become evident in 2018 are:
Trend 1: Platforms can still be considered everything
One of the easiest and safest ways of making money via digital assets is by investing your money into a platform. Last year in January, the price of Ethereum was around $8 and by December it had risen to a peak of $1,400. This marks an increase in value of 175x and was primarily due to the rise of ICOs launched on the platform. Only 70% of these ICOs had risen at that time and more will continue to surge this year. This means that the value of all platforms that launch ICOs will undergo an increase.
Hence, putting your money in platforms is a lucrative and safe aspect when it comes to investing in digital assets. While decentralized applications can raise huge sums of money through the ICO process, they still have not reached mainstream adoption. They have a long way to go before they will be able to reach the levels of adopt necessary. Moreover, when you are thinking about investing your money, time generally plays a more important role as compared to the technology, team or any other factor that may influence its value.
If Facebook had been launched in 1995, it would have been an utter failure because the internet was not as quick or widespread. The market may be full of decentralized applications focused on consumers, but the landscape for change also needs to be ripe for their success. Yes, eventually, they will succeed in the long term due to the hype and marketing, but there is still time.
Trend 2: ICOs will remain popular, but there will be a change in platforms
In 2017, the ICO craze ended up taking the world by a storm as it provided blockchain startups 3.5 times more capital than venture capital. Therefore, a lot of people have begun to regard the ICO model a better option that the VC model because it is a win-win situation for both founders and investors. The latter are able to see an increase in liquidity. When a large amount of money is invested by venture capitalists in startups, it means that their capital will be locked up for about five to ten years and they are promised a large payday.
In contrast, instantaneous liquidity is made possible due to the benefit of token sales thereby allowing investors to move out when they want to. As far as founders are concerned, they are able to extra freedom and money for creating projects they love. Previously, they had no other choice but to participate in Silicon Valley in order to get venture capitalists to invest. Today, token sales can come in handy for raising funds all around the globe. Founders no longer have to surrender ownership and there is no need to answer questions of venture capitalists; they are able to retain full ownership and get smaller contributions from a big pool of investors.
Trend 3: Pre-ICOs will garner more money than the ICOs
According to Guy Galboiz, the price of an ICO goes down as soon as it becomes tradeable if it doesn’t sell out. More projects are choosing to minimize this risk by selling a major portion of their tokens at a discounted price during the ‘presale’ period. These ‘pre ICO’ funds are usually invested by syndicate groups and private investors. During the pre-sale period, the heads of these syndicate groups pool in their money and then come up with a discount price.
As far as the projects are concerned, they are able to reap the benefits of a cheaper fundraising process and on day 1 of the ICO, 50% are already sold, which makes them seem to be in higher demand. Thanks to syndicate leaders, you can invest in ICOs at a discounted price, but this requires a lot of trust as they will serve as custodians of your money.
Trend 4: ICOs will have to deal with a regulatory pushback
A ban was imposed on ICOs by Korea and China in 2017 and it was declared by the Securities and Exchange Commission (SEC) that most of the ICOs would be subject to laws of US Securities. In addition, legal action would be taken against them if they failed to comply. Over time, it is expected that more and more governments will adopt an increasingly intolerant and hostile stance in the case of ICOs.
With the rise in regulations, there will be an increase in arbitrage because ICOs will automatically move to take advantage of countries like Switzerland that boast more relaxed regulations. Due to the pushback from regulators and governments, the craze of ICOs may experience some sort of slow down, but it could also strengthen the foundation of the market.
Trend 5: Most ICOs will be launched by Ethereum, but will have a lower market capitalization
As mentioned previously, almost 70% of all ICOs in 2017 were launched on the Ethereum network. While this is expected to continue, people should also know that Ethereum is known to have scaling issues and the network’s weakness could lead to more projects choosing to launch their ICOs on other platforms. Therefore, investors need to be very cautious about where they are investing their money, especially when it comes to ICOs and presales this year. Most ICOs will end up failures and you have probably lost your chance if you are not in the pre-ICO stage.
For instance, if the value of half the tokens was $1 during the pre-sale and the ICO is priced at $3, it is obvious who will come out the winner when the coins finally make their way to an exchange. While investors may believe that they will be able to enjoy a profit at the ICO price as well, it is a given that those who bought early would have a better reward and risk profile. Thus, before you invest any money, it is recommended that you take a look at the discount offered in the pre-sale. You should find out who is buying into the pre-sale by going through the networking and telegram groups. If you are considering joining a syndicate group, make sure the organizers can be trusted with your money.
Moreover, as the stance of regulators towards tokens is becoming tolerant day by day, you should also ensure that governments are unable to interfere in the ICO process. Almost 80 projects that had launched their token sales suffered due to interference of the SEC and this is only the beginning of the regulatory backlash. Last, but not the least, investors also need to be aware of ICOs being launched on platforms other than Ethereum. For instance, NEO has an excellent list of ICOs that will be launched in 2018.
Trend 6: The debate over Bitcoin’s lightning network will intensify
Back in December, the controversy surrounding cryptocurrencies had reached its peak and the mainstream public became aware about the scalability limitations that are associated with Bitcoin as well as Ethereum. This caused the fees of both platforms to rise exponentially and also slowed down the transaction processing. Everyone agrees that a network’s top priority should be scaling, but the primary issue is how to go about it. The lightning network is being used by Bitcoin as an off-chain solution whereas on-chain solutions are the focus of Bitcoin Cash. As far as Ethereum is concerned, it has shifted its focus towards sharding and proof of stake. Different algorithms are being used by Altcoins such as DPoS.
Now, the question is whether these industry giants will improve scalability or give new entrants the opportunity to sweep the market and end their dominance. Kik, the chat messaging application has already chosen to cancel its ICO on Ethereum and has switched to Stellar. Some people are of the opinion that Bitcoin will be able to maintain its dominance in the cryptocurrencies market as innovations such as Segwit and the Lightning network will continue to be widely adopted. Due to this, the blocktime for confirmed trades has increased whereas the transaction fee has seen a decline.
Trend 7: It will become easier to purchase digital assets
The current cryptocurrency exchanges in the market are simply not equipped to handle the ballooning demand that stems from speculators and investors in the market. As a result, because of the boom of 2017, almost every exchange had no other choice, but to close their doors to any new investors. Due to this rising demand, the number of traders on Coinbase has exceeded those on Charles Schwab.
Likewise, several million traders are also joining Binance week after week. For the overall market, this can be considered a rather good omen, but it is also an indication that there is a great deal more work to be done on the infrastructure of these coins before they can be taken seriously by the mainstream.
Guy Galboiz further explains that establishing a cryptocurrency exchange is a great opportunity for companies to be able to make some money because they are able to take fees from those who are ordering and the market makers. The massive demand from traders and investors alike is a demonstration that there is a huge amount of money to be made by companies that are willing to service them. Subsequently, there are predictions that the launch of centralized as well as decentralized exchanges will make it easier for people to trade cryptocurrencies as will ETFs and numerous fintech companies joining the bandwagon.
However, it is important to note that even though centralized exchanges may be efficient and quick, but they also carry a significant risk for high value investors and traders. These exchanges are vulnerable and some major ones have suffered from security breaches in the last few years. If the market continues to grow rapidly, these exchanges will need to enhance their scalability and processes. Holding your assets on exchanges is not recommended for this reason. Software and hardware wallet solutions are available, which can make your life easier and stress-free, especially when you own a large amount of coins.
As these centralized exchanges carry a risk, decentralized ones are becoming more preferable and more of these are cropping up. They are not as easy to use as centralized exchanges, but this is expected to change. New technologies are also being launched in the market such as atomic crypto swaps, which can do everything that decentralized exchanges can. As a matter of fact, they will be faster, cheaper and boast a world of new features that these exchanges lack.
Apart from that, value-added services are also expected to be introduced for helping large-scale and ordinary investors. Some of the top cryptocurrency exchanges are already offering these services and these services will soon be introduced to institutional and retail investors as well.
Suffice it to say, no one has a crystal ball that can be useful in predicting the future, but traders can opt to hedge against the uncertainty in the cryptocurrency market by keeping these trends in mind and also maximize their returns.