When discussing the prospects of cryptocurrencies, parties restrict themselves on price performances by default. This is because cryptocurrency holders view them as assets and not currencies. Hence, they speculate on possible interests and invest accordingly.
On the other hand, it is also correct to say that some holders of cryptocurrencies invest in digital assets. They use them as currency because of the many benefits that they proffer. These pros include privacy, security, peer-to-peer transactions, Blockchain-based mining, etc.
In 2018, cryptocurrencies underwent a turbulent time amid prolonged bear cycles and subdued bull runs. Aggregately, according to data from Coinmarketcap.com, the total market cap started the year (Jan.1) at $600,433,000. It closed the year at $127,470,000. The peak crypto market performance was evident Jan. 7 when market capitalization hit the yearly high of $813,871,000. So, what kind of outlook can we expect in 2019 as far as price performance is concerned? What if we consider the following parameters as well?
1. More Pro-Growth Regulations
In 2019, the government will begin to regulate cryptocurrencies. However, the regulation will be different from the usual bans and restrictions. This year will see regulatory policies that seek to develop cryptocurrencies rather than impede their growth.
One of the institutions that will herald the new change is Japan’s Financial Services Agency (FSA). The FSA will regulate crypto exchanges more to ensure clients trade the cryptocurrencies according to the highest standards. In doing so, the FSA hopes to mitigate risks to clients.
The U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are working with cryptocurrency entities. They hope to create pro-growth policies.
Mark Carney, the Royal Bank of England governor, has also hinted that the United Kingdom might start regulating cryptocurrencies. The government will use strategies that will make the U.K. a leader in cryptocurrency adoptions, innovations, and deployment.
In addition, the European Union is also planning to enact policies to govern the use of cryptocurrencies. The purpose is to encourage the adoption of digital currencies and Blockchain technology. It is important to note that on country levels, most governments are planning to regulate cryptocurrencies in 2019. The common aim is to promote cryptocurrency adoption, as well as root out unethical practices in the nascent industry.
2. Cryptocurrencies Will Be Classified as Assets, Not Currencies
In March 2018, central bank governors and finance ministers from the 20 richest countries discussed classifying cryptocurrencies as assets. This goes against Satoshi Nakamoto’s vision that all cryptocurrencies will be substitutes to fiat money. Satoshi Nakamoto is the name given to the person or persons responsible for developing the technology.
At subsequent summits in Buenos Aires, Argentina, the central banks drew a consensus that reaffirmed that cryptos are assets. Therefore, it is highly possible that policymakers will start treating cryptocurrencies as assets. Christine Lagarde, the International Monetary Fund chief, reiterated that cryptos are assets. She made the statement while speaking at the October IMF summit in Bali, Indonesia.
There will be a World Economic Forum summit from Jan. 22 to 25 in Davos-Klosters, Switzerland. Most likely, the summit will strengthen this position and call on governments to treat cryptocurrencies as assets.
In conclusion, most governments will start to treat cryptocurrencies as assets in 2019. As a result, ensuing regulation might involve imposing capital gains taxes on investments of digital assets.
3. Central Banks Will Create Their Own Cryptocurrencies
Lagarde has been calling on central banks to delve into the cryptocurrency world to compete with the private sector. If this comes to fruition, CBDCs deployment would spur innovation and legitimize digital assets.
Central banks will start to issue their Central Bank Digital Currencies (CBDCs) in 2019. This comes after the positive sentiments about the “rebel technology” — blockchain technology — by Lagarde and other economic experts. The IMF chief is appealing to central banks to consider the advantages of issuing cryptocurrencies. These advantages include safety, instant transactions, privacy, and low-costs. These have a potential to revolutionize the financial industry.
According to experts, this would leverage the advantages of Blockchain technology to support cashless transactions that are already popular. These include MPESA in Kenya; PayPal in North America; Venmo in Europe; Paytm in India; and WeChat in China. Hence, CBDCs will give central banks full control of these cashless money platforms. It will also enable the regulators to compete with the fast-growing cryptocurrency-based payment solutions, such as Wirex, Coinbase, and Bitpay.
Canada, Uruguay, and China are already in the late stages of creating and deploying their own CBDCs. The IMF has ratified the projects as “ideal for enhancing positive change.”
4. Crypto Custodial Services Will Be Integral in Cryptocurrency Trading
On Nov. 25, Hong Kong’s Securities and Futures Commission (SFC) enacted a policy to govern cryptocurrencies. In the new set of laws, all cryptocurrencies held and managed by exchanges and portfolio managers have to have insurance. The indemnity coverage can be either through comprehensive third-party custody services or through self-custody solutions on hot wallets.
This move saw the rolling out of Invault custodial services in the region to offer third-party custody services.
From a wider perspective, cryptocurrency custodial services will become integral in the industry. They will guarantee the security of digital assets, which is something that has hampered the growth progression through mass adoption.
Therefore, in 2019, leading custodian services, such as BitGo, itBit, and G4S, will participate in the adoption of cryptocurrency.
5. Increased Cryptocurrency Adoption
Last year was, arguably, a bad year for cryptocurrency holders who were eying short-term gains. However, to long-term investors, the future holds massive gains. Despite this scenario, cryptocurrency users almost doubled in 2018, according to a study by the Cambridge Centre for Alternative Finance. The data show that, toward the end of 2017, there were 18 million cryptocurrency holders. This number rose significantly (94 percent) in 2018 to stand at 35 million users worldwide. This came despite the bearish cycle. The cycle saw a market capitalization loss from a peak of $813 billion to the current $127 billion.
Therefore, there still remains a high probability that cryptocurrency usage will surge exponentially because of nonperformance-related factors. These catalysts include an increase in marketing campaigns by blockchain enthusiasts and peer campaigns.
Moreover, crypto exchange platforms will become mobile-based and integrated with the mainstream financial system. This will enable users to buy and sell fiat-based cryptocurrency pairs. As a result, this will further allow more people to adopt cryptos.
Additionally, institutions will trust cryptocurrencies because of better policies, security, and enhanced support platforms. Examples of these are custodial and crypto assets managing services. As a result, more institutions will invest in cryptos in 2019.
Conclusion: Increase in Prices Will Be A Result of All These Events
Conclusively, when there are pro-growth policies governing cryptocurrencies, there will be more interest in cryptos. And, this will lead to an increase in purchase demands vis-a-vis sell-offs. This, in turn, will trigger a high RSI, which may exceed 50 as 2019 progresses. Therefore, the events will trigger a crypto market recovery like that of 2017.
From the standpoint of cryptos as currencies, more merchants will be accepting crypto payments. There will be more ATMs and OTC points for easier access to crypto-based transactions. This will further define cryptos in 2019 and change the outlook of the industry.
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