2018. Crypto winter. What a year. Many saw it coming. Many did not. It was a tough year on many fronts and I could go on here about how tough times make you stronger and blah blah blah but I’ll save that for the more spiritually inclined. I won’t be saddened to see 2018 in the rear-view mirror and I know I am not alone in my sentiment.

It’s not just the crypto markets spiraling downwards, the stock market is also on a spiral, out of control train wreck, having lost all it’s gains for 2018 with tech giants like Facebook, Netflix, Google, AMAZON, etc leading the plunge.

Many market indicators are still showing signs that it could get worse before it gets better. With uncertainty on many fronts, everything from higher interest rates, falling oil prices and of course, trade wars — the USA vs everyone, predominantly China, it looks like we are looking at more pain before any gain.

Nomura, an Asia-headquartered financial services group in an article titled Global market predictions for 2019: The 9 grey swans — predict that 2019 could see ‘the big market quake’.

A grey swan event is one that ‘could’ happen and if it does happen the outcomes can be far more devastating than those expected or predicted. They point to market liquidity conditions worsening, Fed hikes, trade wars, Brexit effects and other signals that could potentially lead to the ‘big one’.

A colleague of mine, Andy Serrano, AndySerrano.com, who always has colorful and fairly accurate commentary on the markets, had this to say:

“Everyone who has followed me online and in person knows I accurately forecasted the 2008 stock market debacle. In 2008, I had literally put all my liquid assets into shorting the major indexes with double and triple leverage. At that time, the clues consisted of eleven months of falling housing starts, falling shipping, declining iron ore production, and, of course, unsustainable collateralized debt obligations for home loans. My specialty is economic history and history tends to repeat itself in principle, but not exactly in execution .

Since 2015, and becoming more strident throughout 2017, I had been posting that the stock market was going to implode in a big manner. The impending crisis had its seeds in the 2008–2017 recovery. Following the 2008 implosion, President Obama repeatedly asked Congress to authorize fiscal stimulus to get the economy going again. In the end, Congress only authorized a miserly amount of fiscal spending. Many Conservatives dragged their feet at authorizing anything at all, and did it with great reluctance while citing their individual professed hatred of deficit spending. Yet, a recession is the correct time to engage in massive government spending according to Keynesian theory. Conversely, according to Keynes, government should run surpluses during boom times, which the government at the time under Bush, failed to do.

Hence, with the government doing little about the recession, the bulk of the stimulus problem was dumped into the hands of the Federal Reserve to “do something about it.” All the Fed could do was lower interest rates and inject liquidity into the economy by buying bonds. Meanwhile, Congress gleefully tossed money at the banks and bailed them out.

As the pseudo-recovery progressed, the US Fed and the world’s central banks provided cheap interest rates. Sovereigns and corporates engorged on these rates, engaging in legitimate investments and marginal boondoggles as well. Sovereign and corporate debt swelled several trillion Dollars beyond what debt had ever been held before. Individuals began maxing out their credit cards, student loans hampered an entire generation with 10 percent defaults, auto loan defaults also reached 10 percent, and ten percent of corporations became zombie entities that kept on rolling-over their debt from year to year to keep from failing. The party would last only as long as interest rates stayed low.

All parties must come to an end. When interest rates began to rise, it was evident to me that corporate entities would have increasing difficulty rolling over their debts and bankruptcies would begin to ensue. A domino effect would eventually come into being. As central banks began selling their bonds and sopping up liquidity, it would only become a matter of time before lending would seize just like it did in 2008.

I believed, the market should have begun caving-in around 2017–2018. However, the day-of-reckoning, was postponed by GOP tax cuts. The tax cuts propelled the markets to yet higher highs. It was a sugar-high because most of that money was utilized to buy back stocks and, thus, gain bonuses for the managers. There was little money for actual plant investment and economic expansion.

This headline from the December 17, 2018, Financial Times, ‘ US credit markets dry up as rate rises and volatility rattle investors,’ is almost a complete copy of one from 2008 at the start of the financial crisis. There are plenty of people running around crying, “fire!” including myself, but people are ignoring the smoke.” — Andy Serrano

Cryptocurrency Markets 2018

From a record-breaking high of $19,346 last year to $3,364.05 as of this writing Bitcoin has seen better days in terms of its dollar value. According to a report from Coin Market Cap, cryptocurrencies have lost 80% of their market value to date. Bad press in the industry, ICOs, security issues, stringent regulation, the Bitcoin Cash fork and renewed centralization concerns, etc have affected the market for all cryptocurrencies.

ICOs – Initial Coin Offerings

ICOs — Initial Coin Offerings, used by blockchain start-ups to raise money to develop their projects, for the most part, have been wiped out. Many of these projects were, unfortunately, scams, others were poorly managed and just couldn’t deliver on the product.

Many are not surprised the ICO crash happened and are in fact glad that it did believing it wiped out most of the bad projects. The media attention around bad projects was hurting good projects and keeping traditional investors on the side-lines. Regulation started to take hold in 2018 and that hold will continue to strengthen moving forward; hopefully keeping bad projects at bay. Many feel the crash is part of a natural ‘life cycle’ and now that the hype is gone projects moving forward will function on creating real world use cases and delivering on real value.

“The recent crypto market blood bath really shows that if we take away the hype from the current products, there is no real uses to support their value. For new projects to succeed, we need to first solve the fundamental problems of scalability. We are going back to basics with the Teller protocol to make sure that the foundations for next layer of entrepreneurs are strong.”

Jeevan J. Singh CEO, Teller

Unthawing Crypto Winter — Regulation, Custodian Solutions and Security Tokens

The crypto space is shifting. Regulation is taking a stronghold, stronger infrastructure is strengthening core businesses, more compliant custodian solutions and traditional financial giants are entering the market and security tokens are helping to bring value to the space.

Security tokens started gaining hype at the end of 2017 and all through 2018. STOs are, to many in the industry, an exciting addition to the token environment because they can overcome the negative drawbacks of ICOs. Security tokens are subject to federal regulation are backed by a real-world asset such as equity, shares of a limited partnership company, or commodities. Security tokens holders can be granted ownership rights or shares of a company. They are, in a sense, a traditional initial public offerings (IPOs) built and executed on top of blockchain technology.

There is a lot of benefit in merging current stock/financial markets with the crypto world via security tokens including increased liquidity as tokens can be sold and traded internationally and projects can attract a larger pool of investors globally. One can invest in them with a general expectation of returns based on the business model of the STO.

Security token offering registrations were on a steady trajectory upwards for most part of 2018 and many in the industry believe 2019 will be an incredible year for such offerings.

2017 crypto soared with a huge cap between valuation and the true underlying value of cryptocurrencies — a bubble that would have to burst at some point. What has happened is very similar to what happened in the dot com bubble.

What will be interesting to observe going into 2019 is what will happen to the value of the top performing cryptocurrencies if the stock market continues its downward trend. When equity markets crash investors look for alternative asset classes to invest in. Bitcoin is easier to spend than gold — both alternative asset classes. And millennials that make up more than 35% of the workforce and they prefer cryptocurrencies over gold.

Mike Kayamori, CEO of Quinone, a Japan-based cryptocurrency exchange platform expects a rebound in 2019, believing that the arrival of Fidelity Digital Asset Services, Bakkt, etc will help Bitcoin recover.

2019 and Beyond — Blockchain and Distributed Ledger Technology

“2018 saw a huge rude awakening for cryptocurrencies, but for a handful of great projects it was a stellar year — it was an even bigger, breakout year for CryptoChicks. We have attracted hundreds of women into blockchain technology, educated and mentored them. CryptoChicks’ mission this year was to make people to look differently into blockchain, not to use it as an investment vehicle, but rather focus on the technological benefits of this emerging space. Our plan for next year is to widen our horizons and marry Blockchain and Artificial Intelligence for our audience including during educational hackathon events we have slated for Pakistan, Switzerland, Toronto, USA, etc. We have seen a lot of projects during our hackathons that tied both of these technologies together. Now it is the time to educate women worldwide in both and take this duo to the next level. The technology will disrupt regardless of what is happening currently in the markets. There are too many incredible projects and developers coming up through the space to be stopped.”

Elena Sinelnikova, CryptoChicks Founder and CEO

More and more every day we seem to be living in a borderless world yet financial transactions are still restricted by borders and limited by geography with many emerging economies still lacking access to basic financial services, financial inclusiveness and access to global capital.

Blockchain technology and DLTs offers a secure way to complete financial transactions. They are peer to peer requiring no third-party intermediary like a bank. In addition to blockchains financial transaction ability, it can also be beneficial to use for securing personal records like birth certificates, land rights, land titles and for tracking and executing contracts.

“Blockchain is rewiring commerce and rewiring business, from the back office to the front office.”

— Scott Likens, PricewaterhouseCoopers

“Cryptocurrencies will grow at a measured upward pace with the Bitcoin brand leading the way, but the year’s focus will shine most brightly on protocols and their AI/IoT secure capabilities.

By the end of Q1 I expect significant blockchain penetration in the nature of financial services correspondent and clearing networks to create efficiencies for both private and public networks. Security, Marketing and Legal firms will combine with blockchain vendors to consume technology spending and help justify the capital push for DTL.

Complimenting this traditional financial services firms push into the Blockchain space will be the transformation of the top crypto exchanges to entice institutional investors with more full-service offerings and infrastructure integrations. This transformation will be a great boon to the creation and trading of traditional and crypto currencies as well as new non-currency assets — a true start to Token economics and decentralization.”

—Randy McGuire, Co-founder CodingFly

“Blockchain as a technology is poised to result in a fundamental re-architecting of the world’s financial system. In the world of fintech, we now have digital currencies, digital commodities, tokenized assets and we now have digital resource tokens which can provision things like file storage, and computing power and other real-world assets and resources.

The scarce digital resources that are created through tokenization and cryptographic techniques represent real economic value. And these assets of real economic value can be securitized, and collateralized by using level 2 technologies like smart contracts to securitize and collateralize financial obligations. 2019 heralds the beginning of a new age of prosperity which will come about as a result of the deployment of blockchain technologies towards solving the big challenges of this century.”

— Arunabh Das, CTO, App Liaison Inc.

Blockchain and Distributed Ledger Technology address the issues of trust, transparency, transactional freedom, decentralization and data security. How we operate day-to-day was drastically changed with the birth of the internet. The same will happen with blockchain technology, regardless of market conditions.

Welcome, 2019!

**I am raising money and awareness for homeless and trafficked youth by sleeping out on the streets of Toronto in April 2019.**

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Original article posted on the Data Driven Investor – Cryptocurrency & Blockchain 2018/2019

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