Current State of The Crypto Market (June 19th, 2019)

Current State of The Crypto Market (January 2nd, 2020) – Year End Wrap Up

Hackers:  As we celebrate a quite successful 2019 in the crypto industry and enter the new year with new hope, hacks and scams across the industry remain a problem we have to face in 2020. Centralized exchanges and custodial wallets were the most targeted institutions across 2019 with investors losing over $500 million in the process.  Remember Satoshi’s words in the Bitcoin whitepaper released in 2008:  “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”  The transaction of cryptocurrency through exchanges and custodial wallets breaks this very important rule. Remember, not your keys! Not your coins.

Key Players:  The digital currency space has seen rapid growth and expansion in 2019, with heightened interest from governments and global corporations. Cryptos recovered from the 2018 bear market, when with Bitcoin crashed to as low as $3,800. The blockchain sector has seen exponential growth in 2019, as it became recognized by governments and institutions around the world as a transformative technology. This year, blockchain adoption reached new highs as it continued to find new use cases. News broke with an array of exciting blockchain-related developments, with the United Nations-led International Organization for Migration launching a blockchain tool to prevent the exploitation of migrant workers, and Chinese President Xi Jinping giving a seminal public endorsement of blockchain technology. When asked about Crypto in the new year, Erik Voorhees, founder and CEO of ShapeShift, a Swiss-based instant crypto exchange said “For 2020, I’d like to see perception of crypto assets return back to a balanced state. By this I mean, in 2017 every crypto in existence was worth a gazillion dollars (which was crazy), and in 2018/2019, there has been a similarly overly pessimistic view (anything other than Bitcoin is worthless). Both extremes are misguided, so I’d like to see the quality projects start to be differentiated more clearly from the garbage projects.”

Banks & Institutions:  As the cryptocurrency universe enters 2020, U.S. lawmakers are drafting bills to provide clarity around stablecoins and offer regulations for tech companies like Facebook that might want to create their own cryptocurrencies.  The draft legislation “Keep Big Tech Out Of Finance Act” was proposed on July 15, 2019 by the Democratic majority of the House Financial Services Committee. While this legislation specifically targets Libra, a new digital currency spearheaded by Facebook, the proposal aims to prevent big technology companies from operating like financial institutions.  According to a copy of the draft legislation, a large technology firm is described as a company offering an online platform service with at least $25 billion in annual revenue.  With that in mind, the bill specifically proposes that:  “A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System.”

Adoption: The next decade will be critical and formative years for how digital currencies are implemented and regulated around the globe.  The European Union is shaping up to be an epicenter for the cryptocurrency space, and it could dominate the conversation early next year. However, crypto-based companies operating in its member countries are in a battle for their existence, as the Fifth Anti-Money Laundering Directive (AMLD5) comes into existence in two weeks.  Expected to be enacted on January 10, 2020, AMLD5 imposes stringent financial data reporting responsibilities on cryptocurrency firms.  Several EU-based cryptocurrency firms have already shuttered their services, citing the incoming regulatory measures. These include British payment processor BottlePay and Dutch cryptocurrency mining platform Simplecoin.