2017 was a landmark year for Cryptocurrency.
Spearheaded by Bitcoin, the value of digital assets rocketed from $15bn to $500bn in 12 months. Digital coins fuelled the second most significant bull market since its invention.
2018 promises to be even more exciting. With financial regulators becoming more vocal, improved crypt technologies emerging and mainstream institutions investing in platforms to support digital payments, our cryptocurrency market predictions for 2018 will undoubtedly raise the curiosity of casual observers.
One thing we do know for sure is cryptocurrency markets are dominating public imagination.
While some commentators are excited about new technologies and the prospects of blockchain technology paving the way for an improved financial system, investors are eagerly anticipating another windfall.
Of course, the real anticipation in 2018 is what the future holds for cryptocurrencies.
Blockchain technology has enormous potential to change trade and financial markets. With a focus on peer-to-peer regulation, if the world embraces digital currencies, we will see the balance of power prized away from the hands of banks and corporations.
Is full-scale adoption of cryptocurrency a question of if or when?
There are probably more twists and turns in this tale – and the monopolists of the fiscal space will undoubtedly have their script to write. As cryptocurrency enters its next chapter, here’s what we expect to unfold in 2018.
Cryptocurrency Trends For 2018
The $10 trillion dollar bull case for cryptocurrencies from CNBC.
More Institutions to Enter Bitcoin Futures Market
When two of America’s leading financial market companies floated Bitcoin Futures on the “regulated” stock market in December, opinion was split.
Cryptocurrency experts fear prices of digital coins will be compromised now Wall Street Traders are in on the act. Others don’t think Bitcoin Futures will have much of an impact.
When Cboe Global Markets launched Bitcoin Futures on 10th December, the price of Bitcoin was $14,557. When CME Group entered the game a week later, Bitcoin was at an all-time high of $19.783.
Since then, the Mother Coin of cryptocurrencies has been in freefall. At the time of writing Bitcoin is valued at $10,914.
Cryptocurrency is a volatile market, but it is not a coincidence that the latest drop came once Wall Street arrived at the party. Government regulators in China, South Korea, and the US has not helped Bitcoin prices either.
Cantor Fitzgerald and Nasdaq are also planning to launch versions of future derivatives in the first half of 2018. Analysts also expect other financial institutions to approve bitcoin exchange funds in the second half of the year.
Cboe will pave the way for institutional investors to come on-board when they launch cryptocurrency ETF’s.
While some commentators are concerned about the involvement of traders gambling on Bitcoin, Andrew Busch, the chief market intelligence officer for the US Commodity Futures Futures Trading Commission (CFTC), has said government regulation is in place to preserve the integrity of Futures contract:
“Our role as a derivatives regulator is to make sure that the futures contract is not manipulated. We’re going to do that for sure.”
Futures contracts are not a new mechanism. They were first used in ancient Babylon. They became established in modern markets in Japan around the early 1700’s. Futures trading exists for a wide range of commodities, all of which have different terms and conditions.
Bitcoin Futures function in a similar way to gold.
Investors buy and sell contracts on whether they think the value of Bitcoin will be higher or lower than its current price on the date the contract matures. Because investors do not own any Bitcoin, the actual commodity does not change hands. All contracts are settled in cash.
You would not expect Futures to affect the price of Bitcoin. However, it is interesting to note that the futures market for gold is almost ten times bigger than physical gold. As more financial institutions put up derivatives for a cryptocurrency, we expect to see the same patterns emerge.
Will this affect the price of Bitcoin?
We expect to see an obscene amount of cash exchange hands among financial institutions. Nothing new there.
However, the money involved with Bitcoin Futures will not be pouring into the cryptocurrency market. It will tough be used to buy synthetic derivatives that don’t directly impact Bitcoin because there is no exchange of digital coins taking place.
The value of cryptocurrency is determined by the number of people that are adopting a particular coin and using it to trade. At the moment, crypto-coins trialling as an investment vehicle.
But as more regulated institutions acknowledge Bitcoin as a commodity in 2018, they will entice serious money into the actual cryptocurrency market.
More Volatility for Bitcoin
Buying on the cryptocurrency dips from CNBC.
The cryptocurrency market has not had the best start to 2018. Coins are shuddering left, right and centre and the mainstream media are most significant the fall from grace as a “cryptocurrency bloodbath.” Long-term holders of Bitcoin, however, know considerable swings in prices are typical.
It’s no secret that the cryptocurrency market is highly volatile.
Furthermore, Bitcoin has suffered winter blues for the past three years. Rival altcoins also outperform Bitcoin with superior technology and improved blockchain algorithms which attract investors to altcoin options.
However, most cryptocurrency trading still goes through Bitcoin. Investors looking to buy an altcoin typically have to purchase Bitcoin first then trade their Bitcoin shares in for the altcoin. The Mother Coin is mostly a store of value and will probably maintain its pre-eminence as the market’s yard-stick by which all other tokens are valued.
Analysts predict 2018 will be another volatile year for Bitcoin – and if speculations are correct, this year will be a very rocky ride. Some experts claim the price of Bitcoin could drop as low as $4000 and swing back to over $20,000.
However, several analysts are predicting Bitcoin to achieve tremendous gains. Kay Van-Petersen of Saxo Bank has made the bold prediction that Bitcoin could hit highs of between $50,000 and $100,000. The analyst, who has a history of correctly predicting Bitcoin prices, defended his claim by saying:
“First off, you could argue we have had a proper correction in Bitcoin, it has had a 50 percent pull back at one point, which is healthy. But we have still not seen the full effect of the futures contracts.”
April could be a fascinating month once the first quarter of Futures trading matures. However, for more detailed information, visit our article on the Bitcoin price prediction for 2018.
Growth of Altcoins
Altcoins are arguably more interesting to watch than Bitcoin. There are more than handful than certainly have more potential to become a currency of the future.
In recent months, digital currencies such as Ripple, Stellar and IOTA have been attracting a lot of attention.
According to Erik Voorhees, CEO of digital exchange ShapeShift, the majority of transaction on the platform are altcoins. Furthermore, 30% of millennials prefer to invest in cryptocurrencies, and Bitcoin is not an interesting anymore.
The smart money will go on altcoins that have a clear and transparent technical vision.
Taking the cryptocurrency market as a whole, the value of blockchain today is vastly underrated. Earlier this month, market capitalisation for the entire cryptocurrency market passed $700bn. However, the future value of crypto assets will run into trillions of dollars.
In 2016, the only digital coin with a value over $1bn was Bitcoin. Today that number is well into double figures – some estimate as many as 36. It is inevitable that more coins will be added to this list throughout the course of 2018.
As technological innovation progresses, we expect prices for altcoins to be bullish this year. Other tokens will fall by the wayside.
For more information, read our opinion about Altcoins To Watch In 2018.
Security in the cryptocurrency space needs a closer look from CNBC.
The biggest threat to cryptocurrency is government regulation.
Politicians argue that cryptocurrencies are used for criminal activities and warn about the dangers of investing in crypto assets. The irony in their claims is criminal when you consider how the banks manipulate the financial markets.
The truth is blockchain technology removes the power from a central controlling entity such as a bank or government. In the US, the Securities and Exchange Commission (SEC) has warned celebrities they could be acting “unlawfully” for encouraging people to invest in crypto.
Yet when quizzed about the legality of digital coins, SEC chairman, Jay Clayton answered:
“The answers to these and other important questions often require an in-depth analysis, and the answers will differ depending on many factors.”
Experts do expect to see some form of enforcement by regulators over the coming months.
China issued a ban on Cryptocurrency exchanges and ICOs in September last year, and the South Korean government has proposed outright prohibitions on trading. However, it seems both Asian governments will lift the bans, but install regulations.
The SEC has also suspended some companies in the US from trading because of a lack of transaction transparency. Some experts expect regulations to be enforced this year which could cause a major swing in prices across the entire sector.
It is understandable the banking elite does not like cryptocurrency, but governments will face a public backlash if they press forward with sanctions that throttle innovation. Trust in authority is already low.
However, consumers do need more assurance that privacy and security will be protected.
There is also a need to establish controls that do not allow investors to hide taxable income. Of all the government agencies, we expect tax offices to be the most active in 2018. Public ledgers in the blockchain make it easier for tax agencies to calculate taxable earnings.
It will be very difficult for governments to collapse the cryptocurrency market and banish the community entirely. Digital coins are already too prevalent to confiscate, and government agencies don’t understand blockchain technology well enough to find a justifiable reason to dismantle the system.
Banks Will Adopt Blockchain Technology
Global banks have been trialling cryptocurrency technology since 2016, but to date have been reluctant to sanction widespread use of virtual tokens.
Mario Draghi, the President of the European Central Bank, explained, “we don’t think the technology is mature for our consideration.”
However, 2018 will be the year where banks step up trials in cryptocurrency.
The Bank of England has already announced plans they intend to work on their form of digital currency that will allow bank account holders in the UK to convert their funds into digital format.
The cryptocurrency that is most likely to be adopted is Ripple (XRP).
American Express, Santander team up with Ripple for cross-border payments via blockchain from CNBC.
The concept of XRP actually predates Bitcoin, and the technology is far superior to its competitors. Ripple can make bank transactions in as little as three seconds. Bitcoin takes at least 10 minutes, sometimes up to an hour.
To date, Ripple has persuaded over 80 banks from around the world to trial their technology. The advantages for bank customers are speedier transactions for lower fees. While the biggest banks around the world are still not convinced about Ripple, the it would be tough to replace the concept.
To transfer money overseas under the current banking system requires written communication between the two corresponding banks and takes several days to process.
While blockchain can clearly improve the efficiency of the transaction process, banks stand to lose 30% of their transfer rate. This could be a sticking point, and bank chiefs will drag their feet on full-scale adoption.
But as governments regulations are enforced, banks will also ease blockchain into the banking set-up.
Digital Currencies Will Be Introduced to Online Shopping Platforms
Another major influence on the cryptocurrency market in 2018 will be the gradual roll-out of cryptocurrencies on eCommerce platforms.
The senior vice president of eBay has already publicly stated the eCommerce giant is “seriously considering” cryptocurrencies as they become more of a mainstream payment instrument.
Other big players in the internet shopping market such as Amazon, Google and Facebook are also looking into effective ways of adopting cryptocurrencies.
Jack Ma, founder of Alibaba publicly stated digital currencies are ‘not for me’ yet has invested $500m in technology start-ups, one of which is Symbiont, who are developing smart contracts software – a feature of Ethereum and Tron (owned by a former student of Ma’s school of technology.)
Online stores may not take steps to trade with cryptocurrencies on a grand scale just yet, but firms with a sophisticated audience are likely to adopt digital payments to grow confidence. Digital conglomerates will develop platforms to help pave the way to mainstream adoption.
We’re still in the early stages of technical development, and there are still creases to iron out in terms of functionality, privacy, and security.
But over the next few years, cryptocurrencies will start to influence consumer behaviour. 2018 will be the first steps towards the long-term goal.
If you are interested in particular crypto-coins, you should read our guide to The Best Cryptocurrencies To Invest In 2018 and see if you agree with us.
What are your cryptocurrency market predictions for 2018? Leave a comment in the box below and let us know your thoughts.