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What To Learn From 2019: Cryptocurrency Yearly Review

Author: nicolas tang

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While a holiday lull has fallen upon Bitcoin, now stagnating in the $7,000s, the past year has been filled with a flurry of triumphs and disappointments for the cryptocurrency and blockchain space. Not only has the crypto market seen its fair share of ups and downs, but so too has the underlying industry, which continues to gain traction despite a dramatic Q3 and Q4 downturn in the price of Bitcoin and its ilk. Here’s Phemex’s recap of this tumultuous year for cryptocurrency, both in terms of the market’s price action and fundamental trends in the industry. If you weren’t following the industry closely in 2019, here’s a tell-all. If you were here through it all, here’s a recap.

How Did Bitcoin’s Price Trend in 2019?

Bitcoin hasn’t done all too well in the past few months, falling from $14,000 in June to as low as $6,400 in December 18th, just a week out from Christmas. This meant that at the bear trend’s worse, Bitcoin was down 55% from the June peak. Sure, there were a few bullish moments here and there — for instance, Bitcoin in a single day at the end of October surged by 42% from the low $7,000s to $10,500 on the back of an endorsement of blockchain technologies by China’s leader, President Xi Jinping — though the trend has been decisively negative ever since Q3 began.

The thing is, the recent downturn in the cryptocurrency market hides an optimistic truth: year to date, Bitcoin is still up 96%, having traded around $3,700 on January 1st, 2019. So, don’t heed the calls by individuals like hedge fund manager Mark Dow and gold proponent Peter Schiff that Bitcoin is in an “echo bubble” and “on its way to $1,000 or lower.”

Bitcoin’s 96% performance in the past 12 months means that the cryptocurrency is the “best performing asset class by a wide margin,” as put by Travis Kling, former portfolio manager at Wall Street household name Point72 Asset Management and current chief executive of crypto fund Ikigai.

Indeed, founder and chief executive of Compound Capital Advisors Charlie Bilello found that Bitcoin easily outpaced every mainstream asset class: the Nasdaq 100 is up 40% on the year; the price of oil, 34%; Vanguard’s real estate investment trust index, 28%; and gold, 17%. This accentuates the cryptocurrency market’s characteristics of being more volatile and offering more asymmetric investment potential than traditional markets.

And although 2019 could have gone better in the eyes of some investors, the gains seen over the course of the past year mark a solid ending point for Bitcoin’s jaw-dropping decade, which brought it from existing as a fringe experiment in the doldrums of irrelevance into one of the world’s hottest assets, mentioned by individuals like Tesla’s Elon Musk, Jack Dorsey of Twitter, nearly all PayPal co-founders, Warren Buffett, and many more.

Record Year for Bitcoin Network

It really shouldn’t be a surprise that Bitcoin performed so well in 2019. You see, price fluctuations aside, the blockchain itself saw a record year.

According to statistics published by TradeBlock, a cryptocurrency research and data firm, Bitcoin “has had a record 2019 with transaction count and transaction volume (on a USD equivalent basis) reaching new all-time highs this past year.”

That’s not to mention that the hash rate — the amount of computational power processing transactions for the Bitcoin network — has surged by over 150% since the start of the year, recently hitting 110 exahashes per second, or 110 with 18 zeros after it.

These statistics accentuate that Bitcoin is not only functional as a secure, global, and decentralized network for value transfer but is growing in this purpose as well, boding well for this industry’s long-term directionality.

Altcoins Didn’t Do As Hot as Bitcoin

Bitcoin may have had a great year from an objective, top-down perspective, though altcoins haven’t done too well. In fact, non-BTC crypto assets saw a harrowing year, despite technical developments and new products and solutions from blockchain companies not dealing with Bitcoin.

Case in point: data from CoinMarketCap shows that Bitcoin dominance — the percentage of the cryptocurrency market made up by BTC — has rallied from 51.5% at the start of the year to 68.3% now.

The price performance of altcoins reflects this trend. Jimmy Song, a prominent Bitcoin educator and programmer, recently noted that while BTC is up nearly double on the year, Ethereum has fallen by 18% since January 1st, and XRP has collapsed by 47%. Yes, both the Ethereum and XRP ecosystems have been graced by positive news events, though due to institutions’ focus on Bitcoin coupled with overall market cycles, BTC has taken center stage.

Market data corroborates Bitcoin’s primacy. The Block’s head of research, Larry Cermak, recently remarked that according to CoinPaprika data, “95% of cryptocurrencies currently have no liquidity and another 2% very little liquidity… There are currently 351 cryptocurrencies that have less than $10k of combined orders; 94.6% of all cryptocurrencies are currently illiquid.”

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The Year’s Top Fundamental Crypto & Blockchain Developments

With price action out of the way, it’s time to take a gander back at 2019’s positive events that have transpired the cryptocurrency space.

One of the biggest events or trends seen in the past 12 months was the entrance of institutions into the cryptocurrency space.

Fidelity Investments — the Wall Street financial services giant with over $2 trillion under management. The firm, which unveiled the Fidelity Digital Assets division in 2018, began to roll out a Bitcoin custody and trade execution this year. It began with a pilot rollout, with the company only offering Bitcoin-related services to a select set of clients. But just a month or two ago, around the time Fidelity Digital Assets secured a New York license that allowed it to serve clients in that state, the service has been released to all eligible clients.

Bakkt, the cryptocurrency infrastructure startup backed by Microsoft, Starbucks, and the Intercontinental Exchange, also launched this year, rolling out its Bitcoin futures contracts in September. The derivatives have since seen strong adoption from institutions, resulting in Bakkt launching other financial products such as cash-settled Bitcoin futures in Singapore and BTC options. The company intends to launch a cryptocurrency payments application in 2020, though the details on this venture remain sparse.

Aside from financial services, a number of banks have begun to use blockchains, namely the public Ethereum chain, to issue financial transactions and enact other certain processes. Spanish banking giant Santander, for instance, recently issued a $20 million bond all through the Ethereum blockchain’s contracts and ERC-20 tokens, while financial ratings and research company Morningstar began an initiative to migrate some of its services over to the Ethereum blockchain.

That’s not to mention that this year, Microsoft — yes the trillion-dollar technology giant that everyone knows of — launched in May of this year an open-source project called Ion that is built on Bitcoin to offer decentralized identity solutions to companies and individuals.

Another trend seen was the development of centralized digital currencies.

It began with JP Morgan, one of the world’s largest financial institutions whose chief executive branded Bitcoin as a “scam” on its way out the door in 2017. The bank and investment firm unveiled “JPM Coin” at the start of the year, revealing that this digital form of money would be based on Quorum, a private version of Ethereum’s stack.

JPM Coin remains in a pilot state, being used to transfer value between JP Morgan branches; executives claim that the digital currency, tied to the U.S. dollar, is only being used for a small portion of its transactions. While still in its earliest stages, Jamie Dimon, chief executive of the bank, has claimed that the digital currency could find its way into brick and mortar stores in the future, though he didn’t give any concrete details or a timeline on that.

A few months later, Facebook unveiled Libra, slated as a “new global payment system,” along with the proposed Libra wallet known as Calibra, after months of internal development by over 100 employees as the social media and internet giant. The project, now operated by a Switzerland-based group relatively independent of Facebook called the Libra Association, was launched with the support of Visa, Mastercard, Spotify, PayPal, Uber, amongst an array of venture capital companies, blockchain upstarts, and retail firms. Though, due to regulatory pressure, some of Libra’s most prominent backers — namely Visa, Mastercard, and Paypal — felt it wise to abandon ship, claiming that they couldn’t withstand the pressure from governments though is still open to collaborating with Facebook on digital money and fintech in the future.

While Libra has suffered this blow, the project is still functional, with reports indicating that the blockchain has a testnet that has processed thousands of transactions. Though, the threat of regulatory resistance looms, meaning that Libra remains somewhat dead in the water, with there being little information as to how and when the blockchain and its fiat currency-backed cryptocurrency will launch.

Then finally, reports popped up in Q4 of this year that China’s central bank, the People’s Bank of China (PBOC), was on the verge of launching the Digital Currency Electronic Payment or DC/EP system after at least five years of technical progress.

While many reports claiming to have details about the DC/EP were proven to be false at first, Mu Changchun, head of digital currency research at the PBOC, has been quoted as saying that the digital currency will simply be a digital version of the yuan, and will not have a speculative market like Bitcoin. Mu added that the PBOC’s next steps will be to roll out the pilots of the projects, which Chinese media Caijing reports will be based in the city of Shenzhen.

The report came shortly after Chinese leader Xi Jinping claimed in a meeting with the Chinese Community Party’s Politburo that blockchain should be adopted in the nation as a “core technology” benefiting industries from healthcare and education to commerce and finance. This immediately led to a blockchain frenzy in China, which has culminated in mass support of blockchain and technologies like it by state media, companies, and individuals.

This year was also big for crypto charity, despite the fact that the market is far from where it was trading in 2017/2018, at the peak of the previous cycle.

Just look to the Unknown Fund, an anonymous organization established in November that claimed it wanted to donate $75 million in Bitcoin to startups “which directly or indirectly support the idea of anonymity.” Since its launch in November, it has purportedly donated its entire fund to a number of startups in the blockchain and technology space, which will remain anonymous.

In terms of more mainstream crypto-related charity, the United Nations’ Children’s Fund (UNICEF) began accepting Bitcoin, Ethereum, and a number of other digital assets. Henrietta Fore, UNICEF Executive Director, said on the new charity offering:

“If digital economies and currencies have the potential to shape the lives of coming generations, it is important that we explore the opportunities they offer. That’s why the creation of our Cryptocurrency Fund is a significant and welcome step forward in humanitarian and development work.”

Contributions made to the UNICEF Cryptocurrency Fund will benefit those without access to basic needs, rights, and resources.

The United Nations intends to expand on its involvement in cryptocurrency by migrating more of its processes over to blockchain-based applications. United Nations secretary-general António Guterres, according to Forbes, said that the multinational organization should adopt blockchain to accelerate its goals:

“For the United Nations to deliver better on our mandate in the digital age, we need to embrace technologies like blockchain that can help accelerate the achievement of Sustainable Development Goals,” the world leader said, referencing the United Nations’ 17 underlying goals to eliminate poverty, stem climate change, and much more.

Although there was a lot of good displayed by the industry over the past 12 months, we at Phemex would be remiss not to mention 2019’s greatest crypto-themed disappointments and shortcomings.

Not All Went Well

So with all the positive developments out of the way, what hurt the cryptocurrency space this year? What were the events and statements that may have sullied the otherwise rather cheery year?

Well, there are a few:

BitMEX leaks thousands of emails: In November, popular Bitcoin margin exchange BitMEX accidentally leaked the emails of a large portion of its clients, forgetting to apply the blind copy protocol to its mass emails due to “an error in the software used to send emails.” Some users of the exchange claim that some of their accounts were hacked in the wake of this debacle, as the leaking of the emails acted as a “doxing” of users of the Bitcoin exchange.

Bitcoin ETF still hasn’t launched: For years, crypto financial services firms across the U.S. have been trying their hand at issuing publicly-traded Bitcoin funds (ETFs). Unfortunately for these hopefuls, the U.S. Securities and Exchange Commission (SEC) has long not agreed with these firms’ assertions that the Bitcoin market is ready for its own regulated, tradable fund. This trend has continued into 2019, with the SEC rejecting all proposals pushed its way by crypto companies, despite the fact that this market is more liquid and regulated than ever before.

Donald Trump bashes cryptocurrency: After Libra launched, President Donald Trump took to Twitter to air his concerns, writing that he “isn’t a fan of Bitcoin and other Cryptocurrencies.” As to why, Trump quipped that he doesn’t believe that digital assets are money, adding that they are also known to be very volatile and “based on thin air.” He added that he doesn’t like how digital assets can be used to facilitate “unlawful behavior.”

Positive Year Ahead

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Whatever you thought of this year in cryptocurrency, a flurry of analysts and investors are certain that 2020 will be much better for the industry than 2019, despite the past year already hosting an array of positive developments conducive to the long-term success of the industry and the underlying market.

Around the middle of next year, in May, Bitcoin will see what is known as the “halving” or “halvening,” which is when the number of coins issued per block in the blockchain gets cut in half from 12.5 BTC to 6.25 BTC. In layman’s terms, the inflation of BTC will be cut in half immediately to approximately 1.9%, driving up the cost of mining each coin.

Previous halvings marked the beginning of bull markets that brought Bitcoin to orders of magnitudes higher than where it started, meaning the time to invest — be it on a platform like Coinbase or Phemex — may be approaching once again.

Indeed, there is hard data and anecdotal evidence to suggest the Bitcoin halving will have a decidedly positive effect on the market.

PlanB, a pseudonymous quantitative analyst from the institutional investment industry, published a number of articles and charts earlier this year that indicate that Bitcoin’s value can be related to the cryptocurrency’s scarcity. His model, backtested to a 95% R2 (statistical lingo for extremely accurate), suggests BTC will be fairly valued at $55,000 to $100,000 after the May 2020 halving. PlanB’s research has been corroborated by a state-backed German bank, which supports the lofty predictions he proposes.

From a more fundamental perspective, countless industry executives and analysts expect for 2020 to be a large growth year for blockchains and firms dealing with these technologies.

Changpeng “CZ” Zhao, the chief executive of cryptocurrency exchange and ecosystem Binance, was quoted as saying in a recent interview with Global Coin Research, that he and his team believe that “blockchain will have a bigger impact on society than the internet,” before adding that the involvement of institutions in the crypto market indicates growth is on the menu for 2020.

This has been echoed by Andy Bromberg, co-founder of CoinList. Speaking to Bloomberg, the industry executive said that “we are seeing a level of building that has happened in 2019 [which makes it feel like] we’re in the moment of everyone is putting on their jumpsuits, ready to take off,” referencing the fundamental developments that Bitcoin, Ethereum, and other blockchains have seen. Bromberg added that this level of building hasn’t been seen since 2017, boding well for prices in the future.

Although some bears may not agree with these analyses; the consensus among the top executives in the cryptocurrency space and technologists. Even Elon Musk, is that cryptocurrency’s surge to the mainstream as a usable technology is not done yet.

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