Hype Fizzled, Institutional Players Entered and Reputational Concerns Lessened
With Cboe Global Markets and CME Group launching futures on bitcoin at the end of last year, we entered 2018 in an interesting place when it came to the future of cryptocurrencies. Bitcoin was priced at about $14,000, we had big players like Thomas Peterffy of Interactive Brokers as well as Jamie Dimon of JP Morgan saying cryptocurrencies were a fraud and, the plethora of conferences dedicated to digital assets had not yet peaked. (Has it yet? Our sources believe peak was in May with Consensus Invest NYC)
The end of December can be a time of reflection and we decided to look back at some of the things we noticed in the 2018 crypto market. Speaking with our Hehmeyer Crypto Trading desk as well as external experts Ian Grieves from ErisX, Russell Rhoads from Tabb Group and Mike Unetich from Trading Technologies; we have compiled a list of the top trends of the year.
1. Hype Fizzled
Our sources believe that the buzz around bitcoin decreased as media looked for other shiny, new things to discuss.
With the price of bitcoin dropping so dramatically this year, we want to take you back to an article we published on the Hehmeyer blog back in April about the Hype Cycle and the Technology Adoption Lifecycle. Innovators and early adopters were going to drive the price up significantly and then the price would fall into what is called the Trough of Disillusionment. As bitcoin prices hit one year lows, have we gotten over the media hype to enter the Slope of Enlightenment and then the Plateau of Productivity?
2. The emergence of large players in cryptocurrencies
2018 saw a lot of big players enter the cryptocurrency space such as brokerage houses like TD Ameritrade and Fidelity. Goldman Sachs is looking into a bitcoin derivative, non-deliverable forward and, in large endowment news, Yale University made headlines when they announced they would invest into a large crypto fund as part of their investments. With big names entering this space and, in addition to exchanges like Cboe Global Markets and CME Group, we have Intercontinental Exchange’s Bakkt and ErisX offering risk management products; it seems the market was substantiated in 2018.
3. Reputational concerns associated with crypto decreased
While it may be a bear market, Bakkt reports that people and companies are continuing to commit resources to cryptocurrency projects. As we reported back in October, Tim Grant of DrumG, said that “crypto used to be a dirty word but we are all breathing a sigh of relief now that we can talk about it.” It seems trading firms are staffing up, more exchanges are being started and crypto is not as taboo as it used to be.
In conclusion, our sources believe the digital assets space is like a group of school-aged students trying to find themselves. They are learning about the world, testing boundaries and trying to figure out what they want to be when they grow up. They are making headway; through regulated exchange projects, better practices for AML/KYC and the best solutions for custody. Unfortunately, there are some growing pains with random hacks on less secure exchanges, hangovers from illegal security token offerings and messy coin forks casting doubts. The industry has some growing up to do before its true value is revealed.
With that, we invite you to come back next week to see what our experts predict we will see in 2019.