As we wind down the last couple of weeks of 2018, we are left with more questions than answers about the financial markets, highlighted by a global stock market that continues to tank; a risky trade war between the United States and China; and a Brexit mess that Europe is trying to resolve.
While those three issues will no doubt continue to garner a lot of attention in 2019, we will also be following these four story lines in the new year:
1. Will Bitcoin Rebound Next Year?
This has not been a good year for Bitcoin. That’s probably an understatement. The truth is that 2018 sucked for the world’s largest cryptocurrency by market value. And since – as we’ve stated many times in this space – the cryptocurrency market follows Bitcoin’s lead up or down, this year has been terrible for all digital coins. At this time last year, in those heady days of 2017, Bitcoin was soaring t0 record highs and all the people who doubted cryptocurrencies were scratching their heads and feeling a bit of what the kids call FOMO – Fear of Missing Out – because crypto millionaires actually became a thing. And then the calendar turned, the bottom fell out, the bottom below that bottom fell out too, and we were in the midst of a historic crash that has a lot of people licking their wounds.
As the calendar turns from 2018 to 2019, the question is whether cryptocurrencies’ luck will also turn. We are pretty certain Bitcoin won’t be reaching levels anywhere near its 2017 highs, but even a modest gain would be comforting.
2. Blockchain’s Growth Beyond Cryptocurrencies
There was a time not too long ago when blockchain technology was so closely associated with Bitcoin that a layman could be forgiven for thinking they were interchangeable, one in the same: Either a distributed ledger is what Bitcoin runs on; or Bitcoin is a distributed ledger. The problem for blockchain at the moment is the that the only innovation the technology has really given us so far is Bitcoin. And as detailed above, no one is really celebrating Bitcoin this year.
But one of the more interesting developments with blockchain has been the healthcare industry‘s aggressive adoption of the fledgling technology. A report this year by the PwC Health Research Institute showed that nearly half (49%) of the global healthcare companies surveyed “are developing, piloting or implementing blockchain projects.” From global payments to the travel industry to the real estate business, the possibilities for its utilization seem limitless.
While the application of blockchain as a tool for innovation may still be mostly theoretical in a lot of industries, there appears to be unmistakable momentum in its development.
3. Regulators Will Get Serious About Data Protection
Blame it on Facebook. Or mostly Facebook. If you think Bitcoin had a bad year – and, again, we all agree that Bitcoin had a bad year – its year looks downright pleasant compared to Facebook’s. A company that seems incapable of protecting user data, it felt like the largest social network in the world was confronting a new scandal every other month in 2018. In fact, it only makes sense that in the last month of the year Facebook would face one last scandal, this one coming after the New York Times published findings on Tuesday from an investigation into how the social network gave 150 companies access to more user data than it had previously disclosed.
Facebook could now reportedly be facing billions in fines from the compounding of this year’s scandals, while a growing number of voices are calling on increased regulation to protect our data. When you have an estimated 2.23 billion users worldwide, this failure at data protection is not just a problem – it’s become a crisis. And given Facebook’s global reach and its importance to the global markets, we expect that its data scandals will push regulators across the globe to push for increased oversight of data well beyond the social network.
4. Will the ICO Market Grow Up?
Given the slump that cryptocurrencies suffered through this year, it’s not surprising that the market for initial coin offerings (ICOs) was also mostly terrible in 2018. In fact, a study by ICO Data in September (via News BTC) showed that more than half the blockchain startups launched this year actually failed to raise any funds. While the cryptocurrency crash was no doubt a huge problem for coin offerings, we also can’t ignore the fact that the ICO market continues to be plagued by bad actors: Whether its through misleading investors or defrauding investors or using celebrity ringers to promote a coin offering, it’s hard not to see red flags all across the market.
Mike Novogratz, former Goldman Sachs partner and founder of crypto merchant bank Galaxy Digital Holdings, recently told Bloomberg that the ICO market “is pretty much dead right now” because a lot of investors have had their confidence in coin offerings shot. “There was a lot of fraud, and there was a lot of hype, and people lost money,” Novogratz told Bloomberg. As News BTC notes, Novogratz believes the ICO market is now “in the process of detoxifying itself.”
Novogratz notes that while the SEC “slammed on the brakes,” he remains confident the agency isn’t out to kill the ICO market. This appears to be true: In a speech delivered on Dec. 6, SEC Chairman Jay Clayton said he believed “ICOs can be effective ways for entrepreneurs and others to raise capital,” but that “when a security is being offered, our securities laws must be followed.” Meanwhile, Thailand’s securities regulator has signaled a willingness to loosen rules tied to coin offerings, telling the Bangkok Post that the country is aiming “to find greater equilibrium in the regulatory process and reduce regulatory impediments, while taking risk management and investor protection into account.”
If regulators start to soften their rules around coin offerings, there’s no doubt the ICO market will have plenty of room to grow. But this year has shown that it’s also time for the market to grow up.
Photo: Getty iStock