Despite the fact that cryptocurrency total marketcap is at a much higher level than a year ago, for many year 2019 ended not as they had imagined. In hindsight, 2019 could have been disappointed a bit, but it wasn’t bad year per se. What is needed to see the current state of affairs in crypto world is a broader look. It’s not like nothing significant happened in 2019. We need to understand that achieving and pushing adoption further is not a fast process and from what we can see the crypto ecosystem grew a lot of work in the past 12 months and it’s might be a time to slowly collect its crops.
There are plenty of factors that fuel interest in cryptocurrencies. The two main dynamics are: market instability (potential to rapid price growth) and examples of mainstream adoption. But none of these aspects could be seen on the market when the industry entered the new 2019 year: the largest cryptocurrencies went into stagnation, and volumes hit historical bottoms. If we think back to the beginning of 2019 and the tenth anniversary of mining the Bitcoin genesis block. The cryptocurrency market had little to celebrate back then. Prices have fallen to new lows, while startups and even some important players in the industry have started to feel pressure. Wall Street companies such as Goldman Sachs and Morgan Stanley quietly shelved plans to offer cryptocurrencies to their institutional clients. People just seemed to stop caring about digital resources. Now that we have entered 2020 we have new expectations as we can see some positive trends forming – there is a very high chance that interest in cryptocurrency will be higher this year than ever before.
2019 was a year of blockchain. Major business players finally seemed to notice its potential. The popular sportswear manufacturer New Balance began to use the Cardano Blockchain in its global supply chain. Kodak started developing a Blockchain system for tracking intellectual property right and payments to photographers. Samsung is working to incorporate Blockchain systems usable in public safety an transport. Bank of France announced that it will start testing the digital currency at the beginning of 2020 and many other countries are working of digital version of their national currencies, the most known example is Digital Yuan.
There has been an explosion in the size and availability of financial products based on cryptocurrencies. Big players such as Binance, Huobi and OKEx offer futures contracts and even options for high-capitalization cryptographic assets. Looking at BTC Futures, we can see how the market is becoming more competitive as large stock exchanges begin to expand their financial product portfolio. It can be predicted that this trend will only strengthen in 2020, as the dominant exchanges direct their business reach to expand the derivatives market.
The total value of DeFi projects capitalization has almost tripled to over $650 million this year. The use of new decentralized technologies for the reliable and secure portfolio of financial services means that completely new possibilities for lending and trading margin deposits - completely unthinkable just a few years ago - are now available. Furthermore, with decentralized financial product companies can offer financial solutions to customers much faster. Not to mention, concentrate on real use cases – all because we eliminate the main problem of standard FinTech companies – the need of being officially approved by lawmakers, and we all know how long can process time of legitimization last.
In 2019, the industry has worked hard to solve some of the problems plaguing cryptocurrencies. The new fail-safe solutions not only help companies and individuals with high net worth to protect their cryptocurrencies from hackers. What is more we now have services such as stacking platforms, which means that owners can secure and help the network and at the same time get passive income without risking losing cryptocurrencies.
Overall, a lot of work has been done to establish best practices in the cryptocurrency ecosystem. Industry regulators, such as Global Digital Finance, have worked with members to promote a common set of professional standards that include a commitment to comply with applicable laws. Significant progress has been made worldwide in terms of regulation, encouraging financial market institutions to pay attention to the potential of digital assets and Blockchain - both in terms of their ability to change the economic landscape and an uncorrelated class of investment assets. Companies such as JPMorgan are working on research and starting to implement their own digital currencies, and it is quickly becoming clear that even the biggest initial critics of the cryptocurrency based digital markets recognize potential of blockchain.
A significant increase in interest in cryptocurrency based markets occurred in June 2019 after Libra's announcement from Facebook. Also futures contracts on BTC from CME Group recorded the highest level of interest in history. One day 5,311 contracts were exchanged with a total value of 26,555 BTC or approximately $260 million (BTC price as of February 7, 2020).
We have to mention that interest in crypto currencies are not limited only to institutional players. Governments and nations are signaling even more engagement. The Chinese government has gone from almost-banning citizens for buying cryptocurrencies until announcing in October that China has fully supported Blockchain technology and is developing its own state-supported digital currency.
Also in the United States, Politicians and Regulators have eased their position, and Federal Reserve Chairman Jerome Powell has even suggested releasing the digital dollar. Finally Politicians and Economist noticed that cryptocurrencies can also play an important role in strengthening the economic supremacy of nations, and most likely will be a key factor in the future.
The launch of Bakkt Bitcoin options on futures was a big step towards providing institutional investors with exposure to the original cryptocurrency. And CME, which first launched its BTC futures in December 2017, introduced options in early 2020, as did Bakkt.
No everything has been done here, Bitcoin ETF may not yet available, but institutional investors can enter crypto market using alternative instruments. The most notable one is Grayscale Bitcoin Trust, the largest asset manager of cryptocurrency scene, that can help institutional clients navigate digital currency investing.
Cryptocurrency is not something that will go away, it’s not a one-minute fashion. But it’s still a quite young technology and manipulation of the market might happen. But let’s be clear - not on the Blockchain level, this avenue is totally transparent. But for example to exchanges volume. To battle this issue various analytical system has been incorporated. We are noticing that industry have woken up with the problem of "false" volumes and the lack of transparency of crypto related satellite services. Thanks to more detailed indicators available to assess honest and dishonest exchanges, the market is better prepared for making business decisions and higher level of trust has been achieved.
Looking back over the past 12 months, digital asset markets have been more diverse and are constantly growing. New trading opportunities allow for more sophisticated strategies because new service providers are changing the status of cryptocurrencies from a marginal asset class at the fintech innovation center. Important market infrastructure and products tailored to more advanced investors base are now readily available, encouraging traditional companies to enter the cryptocurrency investment market.
The regulatory framework of digital assets, although it’s still lacking for the most part, is being discussed and implemented. For the most part it provides greater clarity to participants of crypto-based economy. We're still far away from reaching new All-Time-High for BTC, but the cornerstone is ready. Cryptocurrency already entered the second decade, mainstream adoption of digital assets has already begun. Progress won’t happen overnight, it takes time. As my closing words I want to remind you what we often forget - credit card technology was introduced first in 1958. Yet how many years passed till this method of payment became industry standard? In digital era of Internet and instant information flow the time new technologies are adopted is becoming significantly shorter, but nonetheless time is still the most important factor to consider, if we are discussing prospect of mass cryptocurrency adoption.
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