The market for digital assets has undergone significant changes over the last few years. From the 2017 bull run to the 2018 crash, crypto has been hit hard by market sentiment, scams, and plain old distrust. With 2019 well underway, what do the markets hold for crypto? Are we going to see more price volatility or an uptick in ICOs?

While it is impossible to predict the future, we can estimate what will happen. Jason Meyers, founder of Auditchain, is leading an initiative that focuses on digital asset transparency. Jason comes from the finance and investment banking sector and gives his thoughts on current trends in cryptocurrency.

Lower Price Volatility

Over the last three years, cryptocurrency has experienced tremendous volatility. 30%-200% price movements each day are virtually unheard of in any other market. Volatility decreased significantly in Q1 2019 as prices seemed to have bottomed out. Crypto Spring may have arrived, says Jason Meyers. Retail investor behavior, the primary driver behind all the volatility in 2017, has been reined in. Jason Meyers predicts that in 2019, cryptocurrencies may experience a steadier path as institutional infrastructure and a somewhat clearer regulatory environment takes hold.

Growing Interest from Institutional Investors

Institutional investors have been skeptical, and rightly so. There are still issues of custody, tax and accounting as well as liquidity and a lack of assurance and disclosure. When investing in any security, institutional investors don’t just look at the upside, they look at the ability to hedge. As the crypto market becomes more stable, says Jason Meyers, institutional investors will begin to make inquisitive forays into the market. However, what Jason Meyers does not expect to see, is institutional investors jumping into the crypto market feet first and bailing out retail investors. Instead, he sees them participating in the evolution of a maturing market infrastructure, either in joint ventures or as part of a consortium.

Increasing Consolidation

As of August 2018, there were over 1600 cryptocurrencies. Many of these were created as a result of initial coin offerings or ICOs. As the market matures, most of these coins will suffer from a lack of development follow through or will die off as the result of in-feasibility. Some of these projects had no intention of building anything. In 2019, says Jason Meyers, we expect to see increasing consolidation in the market as many coins wither on the vine and interest focuses on a fewer number of more mature and promising projects.

Scalability Still an Issue

Scalability is an issue that has dogged the space since the initial Bitcoin whitepaper was published in 2008. The issue has always been the block size and the block weight debate along with other improvement proposals. Although advances in off chain transactions and state channel methodology such as the Lightning Network, hold great promise, expect to see this issue persist in 2019, says Jason Meyers. Because of this limitation, Jason expects that cryptocurrencies will not reach mainstream adoption in this year. With progress needed in making cryptocurrency transactions fast, barriers still remain, especially in areas that require fast transaction rates like banking and e-commerce.

From ICOs to STOs to IEOs

ICOs are plagued with a major challenge — they are easily used to scam investors because they are backed by nothing more than the word and goodwill (or not) of those issuing them. The SEC has stated that most, if not all ICOs are securities offerings. To the extent that they remain securities is dependent on the extent to which they become sufficiently decentralized. The CFTC now asserts jurisdiction over fraud cases regarding digital assets in the United States. As quickly as security tokens emerged, the realization that there are no registered exchanges to trade them has cooled STOs. Security tokens will gain traction in 2019, says Jason Meyers, because they are either backed by assets, entitled to dividends or represent a percentage ownership in an enterprise but they need assurance and disclosure just like securities that are made out of paper. In addition, it is expected that the number of venues properly licensed to trade digital assets will rise in the next 12 months. A security token is just a security that is made out of bits, as opposed to atoms. IEOs or Initial Exchange Offerings, on the other hand, are experiencing a surge overseas, specifically in Asia. An IEO is a hybrid of an ICO and a best efforts IPO that is offered on an exchange and listed immediately thereafter.

Transformation of Assurance and Disclosure

One of the critical aspects to mainstream adoption of digital assets is the need for tighter and more frequent disclosure. Jason Meyers stated that digital assets by their nature are transparent if you know where and how to look. The average person will not use a block explorer to comb through transactions on a blockchain. Jason Meyers believes that continuous audit and real time financial reporting will reconcile with the material public statements that digital assets now make on a blockchain. Without US GAAP or IFRS financial reporting context, public transactions made by digital assets and blockchain projects could spell additional trouble for issuers. The New York State Attorney General’s accusations against Bitfinex and its Tether stablecoin illustrates a major case in point. Digital assets need continuous assurance and real time financial disclosure.

Not Yet Ready for Prime Time

There exists a common trend — the crypto market is maturing from the days of the wild west moonshots, to a steadier trajectory into the “part of life” era, which will bode well for anyone interested in investing in crypto. What is clear, however, is that digital assets still have a way to go before becoming the currency of the future that he believes it to be.

DCARPE Alliance

If you are a Certified Public Accountant or a Chartered Accountant you are encouraged to join the DCARPE Alliance. For those interested in participating in the transformation of assurance and disclosure and/or educating the public on the benefits of real time assurance and financial disclosure, please apply for membership in the DCAPRE Alliance by visiting https://dcarpe.org/join or email membership@dcarpe.org.