Facebook Libra, the SEC and major governmental bodies changed the dialogue for blockchain trends and technology over 2019.
2019 was a formative year for blockchain. Bitcoin prices soared once again, while the Libra whitepaper fundamentally altered the discussion on cryptocurrencies.
Along with this, enterprise applications for blockchain became more viable with Maersk (CPH:MAERSK-B), Walmart (NYSE:WMT), Starbucks (NYSE:SBUX) and IBM (NYSE:IBM) integrating supply chain and transparency applications into their operations.
“This year, we saw technology investors coming back to industrial and enterprise blockchain applications,” Jeff Koyen, chief strategy officer at Codebase Ventures (CSE:CODE), told the Investing News Network (INN). “There’s still plenty of speculation in the crypto markets, but long-term money is looking at blockchain as a fundamentally new technology where it’s still early.”
As enterprise applications and crypto picked up over the year, scalability and principles of decentralization still remained key challenges in the blockchain ecosystem.
“Achieving decentralization, consistency and scalability simultaneously, without trade offs, is still one of the most important mountains to climb for the industry,” Max Thake, head of marketing at Advanced Blockchain, told INN.
As the year comes to a close, INN is reviewing some of the top trends that took place across both the blockchain and digital asset spheres.
Blockchain trends 2019: Bitcoin soars, altcoins flat
It’s easy to forget that bitcoin started the year at US$3,500, since prices had ascended over threefold to US$13,000 by June. “There was the US$100 million buy order that kicked off the rally on April 1 and then bitcoin didn’t look back,” David Martin, chief investment officer at Blockforce Capital, told INN.
This has been evidenced by bitcoin’s continued demand, Cathy Yoon, special counsel at Katten, told INN.
“We witnessed the staying power of bitcoin. We just reached the 11 year anniversary of bitcoin, and that’s a huge testament to its resilience, brand and dependability,” Yoon said.
Where crypto countered expectations was that altcoins didn’t follow the same price trajectory.
“I think that’s definitely a narrative people weren’t expecting; that bitcoin would be reigning supreme and altcoins wouldn’t participate in the rally, outside of a very small handful like the Binance coin,” Martin explained.
Blockchain trends 2019: Futures trading and volatility
As institutional investment in digital assets continued in 2019, so too did institutional investment in bitcoin futures. Although the September launch of Bakkt — a futures market for bitcoin developed by the Intercontinental Exchange — was largely underwhelming, Martin said that open interest in bitcoin futures is showing signs of growth.
“You’re seeing a positive sloping curve for institutional adoptions of futures,” Martin added.
Additionally, Wayne Chen, CEO of digital currency platform Interlapse Technologies (TSXV:INLA), told INN that the success of crypto exchanges is directly linked to trading volume. He also said that security and custodial problems continue to be critical issues in crypto.
“I think the biggest challenge is really the volume, in short, and security,” said Chen.
While futures volumes on bitcoin hit a peak in June, trading volumes averaged around 10 million daily in the second half of the year, Martin explained.
Along with this, Martin added that the futures market impacts another feature of bitcoin’s price: volatility.
“I think one of the things that is often overlooked with the futures market — and it’s impacted crypto — is that with institutional players coming in and having these vehicles, it will continue to limit the volatility of the asset class in the long term,” said Martin.
Blockchain trends 2019: Facebook Libra
In June, the Facebook (NASDAQ:FB) Libra whitepaper was published. In it, a consortium of corporations and non-profit organizations supported the Facebook Libra coin, a coin that Facebook CEO Mark Zuckerberg has stated will bank the unbanked and disrupt existing financial systems.
Yoon explained four key trends that emerged in the public sphere as a result:
- People started to learn more about blockchain and cryptocurrency;
- People started talking about blockchain and cryptocurrency;
- US Congress reacted quickly and swiftly and learned more about blockchain and cryptocurrency than it probably would have if it weren’t for the announcement;
- Central banks are talking about their own central bank digital currencies, perhaps in reaction to the Libra announcement.
“Are stablecoins the answer? If so, government issued, private or decentralized? You’ll have a different answer to that depending on which side of the fence you’re on,” Thake said.
Ultimately, the impact on public discourse from the Libra whitepaper was undeniably profound.
Blockchain trends 2019: China endorses blockchain technology
Similarly, NEO, a blockchain platform in China, witnessed its highest daily trading volume since January 2018, reaching US$1.3 billion. However, Xi made it clear that he is focused on blockchain technology — not bitcoin or other cryptocurrencies.
“China has been extremely public about what they want to achieve with this new technology, but that technology and their endorsement of blockchain is not an endorsement for bitcoin or any other crypto,” Martin said.
Instead, Xi endorsed the development of research and innovation in blockchain technology for the purposes of competitive advantages in industrial operations.
Blockchain trends 2019: Regulation continues to lack clarity
At the beginning of the year, expectations circled around having more regulatory responsiveness from the US Securities and Exchange Commission (SEC) and government officials. While the SEC published a framework for security tokens in April, it left a considerable lack of clarity for the digital asset space.
“While not a surprise that there is still no real regulatory clarity for businesses to take off, it is a little frustrating that we saw a number of enforcement actions and legal action taken by the SEC, which adds further uncertainty,” Yoon said.
In spite of this, a number of actions were taken against ineligible exchanges or tokens such as TON Blockchain, which raised US$1.7 billion in investor funds for its tokens, also referred to as “grams.” The SEC filed an emergency action to halt its token offering in October.
Similarly, in September the SEC sued ICOBox over its US$14 million security offering. In a press release, Michele Wein Layne, regional director of the Los Angeles Regional Office, said, “By ignoring the registration requirements of the federal securities laws, ICOBox and Evdokimov exposed investors to investments, which are now virtually worthless, without providing information that is critical to making informed investment decisions.”
Blockchain trends 2019: Investor takeaway
As blockchain technology advances, it is attracting governmental, institutional and enterprise support across finance, manufacturing, shipping and several other industries. Unsurprisingly, education on its technology will be an important part of its progress.
“Education also continues to be an issue,” said Thake. “Not because people aren’t educating themselves, but because of two main factors: the speed at which the technology is changing and advancing, and the nature of the technology being a ‘toolbox technology,’ where each chain is different to the next.”
Decoupling blockchain from bitcoin, as Koyen explained, will continue to be important. “Some blockchain innovations have absolutely no cryptocurrency components, and some crypto projects are building incredible blockchain networks.”
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Codebase Ventures is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.