HitBTC 2018 Review

2017 was the year of the amazing bull run; the year the value of Bitcoin grew 1,950%; from $974 to $20,000. Not the year of mass adoption, but certainly the year that blockchain and cryptocurrencies crossed over into mainstream awareness. And the latter is – though admittedly less exciting – a prerequisite for the first.

But that was last year. Today, as end-of-year analyses begin to populate blogs and news portals, we search for an appropriate title for 2018. The year of the disquieting bear market? The year of regulatory backlash? The year of correction?

We cannot claim to have the definite title for 2018. But, in this post, we do look back on some of the events that sculpted the crypto financial year, reflect on what awaits us in 2019, and leave any title searching up to you. What will the year 2018 go down as in crypto history?

The “Great Crypto Crash”

This year’s precipitous and undeniable fall in cryptocurrency prices came in three discernible waves, and was pretty early on dubbed the Great Crypto Crash of 2018. Reminiscing may be a painful experience, but a necessary activity nonetheless. What exactly happened?

On January 8th, CoinMarketCap removed South Korean exchanges from its listing, due to “the extreme divergence in prices from the rest of the world and limited arbitrage opportunity”. This included Bithumb (the world’s second largest exchange in terms of trading volume), Coinone, and Korbit, and resulted in the so-called Ripple Effect. Ripple had been traded in South Korean exchanges in high volumes, often surpassing half of all Ripple’s daily trading volume. So, when Korean exchanges were removed, Ripple lost over $20 billion in market capitalization, fell 30% in price (from $3.28 to $2.26), and was replaced by Ethereum as the second largest cryptocurrency in terms of market cap.

Three days later, on January 11th, the crypto market lost over $106 billion following news that South Korean Justice Minister Park Sang-ki was “basically preparing a bill to ban cryptocurrency trading through exchanges” – a statement that he later softened, assuring reporters that further discussion among ministers still needed to take place, and that enactment of the bill into law could take years. Part of the loss was pared, but the damage was already done: Bitcoin had fallen 12%, from $14,968 to $13,105, and other coins followed suit.

March brought more bad news as Google, Facebook and Twitter banned ads for crypto and ICOs. Bitcoin had dropped 6% that day, approaching the $8,000 level, and was more than 50% down from its all time high of nearly $20,000 in December. Facebook backpedalled on the crypto ad ban (keeping the ICO ad ban) in June, but this was not enough to rescue Bitcoin from the plunge. Valued at $400 Ethereum had lost almost 60% of its peak January price of over $1,000. At the end of March, the market’s losses had surpassed the $500 billion mark and the market cap of all cryptocurrencies lost over $342 billion, making it the biggest loss in cryptocurrencies ever.

By September, Bloomberg was already reporting that the Great Crypto Crash of 2018 had officially outdone the Dot-Com Crash, but November proved we could still go lower. Bitcoin’s market cap fell to $96 billion; its first time below $100 billion since October 2017. This left the market cap for the whole cryptocurrency market at $181 billion. Bitcoin’s prices had fallen more than 83%, bypassing the Nasdaq Composite Index’s 78% plunge of 2000. For perspective: its maximum 2018 price was $16,888 in January, while the minimum was $3,191 in December. Ethereum fell below $100 for the first time since May 2017. Bitcoin Cash has fallen 95% since its highest price, trading under $100 earlier in December, and for the first time since its genesis – although briefly – it even fell behind Ether. On December 15th the overall crypto market was very close to falling below $100 billion, but managed to recovered, in a slightly positive trend that has made some onlookers optimistic for 2019.

What’s more, though the price of Bitcoin has fallen by 80% since January, the number of Bitcoin masternodes has stayed close to 10,000 since – a testament to the health of the Bitcoin ecosystem. This is a pleasant surprise, and it shows that mining is able to generate revenue even in complicated crypto market conditions.

The biggest hack in crypto history

One more bitter pill to swallow before moving on to the year’s successes (yes, there are some): eleven of the largest crypto hacks of the past five years reportedly occurred within the first half of 2018, with around $1 billion in crypto stolen only this year. $530 million of this was syphoned in NEM coins from the Tokyo-based exchange Coincheck, back in January – $80 million more than what was lost to the Mt Gox hack of 2014.

In June, Coinrail (the South Korean crypto exchange) was hacked and lost $40 million in various ERC-20 tokens. Soon after the attack Coinrail moved 70% of its assets to a cold storage.

Then in July, Bancor – an Israeli-Swiss company which claimed to be a decentralized exchange – lost $23.5 million of users’ tokens to a hack. Bancor was criticized by the crypto community for losing customers’ funds and freezing them soon afterwards, as these are tell-tale signs of centralization.

Yes, the market crash and hacks had to be addressed – but there’s no need to make them the emblem of 2018. Now that the elephant in the room has been gently guided out through the door, we can more clearly appreciate all the year’s victories.

Investment, innovation and mass adoption are underway

2018 may have tested currency traders with hard times, but blockchain innovators and investors remain unfazed, their belief in the technology unshaken. While prices were low, 2018 may have sown the seeds for a wider adoption to come in 2019. Take some staple cases that changed the crypto map this year:

· EOS launched its mainnet in June, which offers faster transactions, fewer fees, and a free dapp development platform. The blockchain successfully raised $4 billion (the biggest ICO ever) and stands firmly at #5 on CoinMarketCap.

· Tezos, another ICO champion (raised $232 million back in 2017), launched its mainnet in September after the beta testing phase. Developers claim Tezos is the first self-amending cryptocurrency; a platform controlled entirely by its users.

· TRON, one of the largest blockchain-based operating systems in the world, launched its mainnet at the end of May. TRON has solved some major scalability and speed issues in crypto, handling transactions 80 times faster than Ethereum. Their cryptocurrency TRX is currently positioned at #10 among cryptocurrencies.

· Fidelity Investments – a service that reaches 13,000 institutional advisory firms and brokers –  launched Fidelity Assets, a spin-off institutional platform dedicated to making cryptocurrencies accessible to institutional investors.

· Steve Wozniak co-founded the blockchain-focused, blockchain powered VC fund EQUI Global, which will allow non-institutional investors to trade investments on external cryptocurrency exchanges with Ethereum-based EquiTokens.

Regulatory backlash good and bad

As was to be expected, the advances in adoption made by some institutions were countered by regulatory backlash from others. Notable cases include the United States and Israel, where banks were known to block users’ fiat accounts for depositing liquidated funds from crypto exchanges, often citing AML laws as justification.

Cases like Malta, on the other hand, give traders and blockchain developers hope: the progressive Virtual Financial Assets Act (VFA) and the Innovative Technology Arrangement and Services Act (ITAS) became effective on November 1st. The first act regulates ICOs –  issuers must publish a comprehensible whitepaper, signed by all members of the Board of Administration, to begin with – and the latter regulates the registration of “innovative technology arrangements and innovative technology services” and the issuance of certificates to approved technology providers.

In December the United Kingdom’s tax agency published a guide for crypto asset holders. Her Majesty’s Revenue and Customs claimed that individuals will be liable to pay Income Tax and National Insurance contributions on crypHer Majesty’s Revenue and Customs assets that they receive from employers as a form of non-cash payment, and mining, transaction confirmation or airdrops.

US regulator, the Securities and Exchange Commission (SEC) have announced that digital assets, cybersecurity, and matters of importance to Main Street investors are their top priorities for 2019. “This year, particular emphasis will be on digital assets, cybersecurity, and matters of importance to retail investors, including fees, expenses, and conflicts of interest”, they claimed.

What’s to come?

Despite all the difficulties and odds of the past 12 months, we have reasons to come forth with a positive outlook for the new year. 2018 is being called the “year of correction,” and rightly so. It is important to remember that the strength and crux of this industry is not in market speculation, but in the innovations and life quality improvements that blockchain and cryptocurrencies can offer our societies for the long term. It was to be expected that after a year like 2017 the market would need correction; far from being a catastrophic omen for crypto, the 2018 crash reflects the normal development for disruptive technologies (did dot com disappear after the dot com crash?), and lower prices have brought this tech a step closer to mass adoption.

As Justin Sun, TRON CEO and Founder, claims, the 2018 shakeout had to happen for the industry to mature and get legitimacy: “The gold rush days come to an end, rules get created and people settle down to do real business”.

In 2019, the crypto community will be looking forward to the first legitimate national cryptocurrencies, interoperability standards for optimal communication across blockchains, and more great products for real use cases.

As a side note; Tim Draper, American VC and Founder of Draper Associates, says “Bitcoin will hit 250k by 2022”. A tremendously ambitious prediction that still manages to fall short of the one John McAfee made last year when he promised Bitcoin will hit $1 million by 2020. Those who are not satisfied a positive spin on market corrections may take solace in Draper’s prediction.

What doesn’t kill you makes you stronger. We at HitBTC are looking to 2019 with considerable confidence and enthusiasm, ready for new challenges. We thank you for your support and for using our service, and we hope to meet all of you here in 2019. Happy New Year!