At the outset of 2019, the international digital assets market was still in the grip of “crypto winter”, as the speculative boom which saw the market grow more than 44 times in size over the course of 2017 ended in a market crash and subsequent market correction.
Around 2,000 global cryptocurrencies lost a total of 80 per cent of their aggregate market cap in that time, as speculative investing dropped well below previous price floors. Trust in the digital assets industry had reached a new low as well, and the former glory days of bitcoin trading at US$20,000 seemed long past.
2019, however, has turned out to be a better year for the digital asset industry. Confusion and uncertainty in traditional markets this year led to increased investor interest in diversifying their portfolios, and in the process, digital assets gained newfound acceptability in the eyes of retail and institutional actors.
This increased investor interest seems set to continue as we enter 2020, as the result of unresolved political and economic tensions that took place this year.
Trade ties between the US and China are still unsettled despite a tentative deal on the table, and while the results of Britain’s recent general election may put it on firmer ground to achieving a Brexit deal, its future relationship with the European Union is still unclear.
Throughout Asia, the political situation remains uncertain in Hong Kong, while Japan and South Korea struggle to recover from deteriorating relations.
Breaking the ice
In reaction to the economic and political upheavals of the past twelve months, retail and institutional investors have been looking outside traditional financial markets, and finding new appeal in “recession-proof” asset classes such as gold and digital assets.
Bitcoin received a boost in investor confidence this year, as it joins the ranks of gold as a safe-haven asset. In fact, there is a striking correlation in the market trajectories of bitcoin and gold over the course of the year, as the two reached almost perfect lockstep in the summer months.
As a wider class of investors turn to cryptocurrency as a dependable store of value unaffected by the fluctuations of centralised, traditional markets, we can expect to see other digital assets to see increasing investments over the coming months.
Also read: Initial coin offerings: the next-gen startups that never were
Where cryptocurrencies were once derided and criticised by institutional actors, we have seen major consumer tech and financial players moving into this space.
Facebook announced its Libra project to mixed response, and JP Morgan launched its own digital token earlier this year, against the backdrop of continued rumours of the development of a state-backed digital currency in China.
As a result of the renewed popularity of digital assets, regulators across the world have been offering more clarity on how they intend to treat this new asset class in the future, reducing some of the uncertainty in investing in fintech solutions.
If the global crypto industry crash was a “crypto winter”, then perhaps we are now seeing a budding “crypto spring”, bringing with it a period of healthy growth, institutional adoption, and widespread acceptance by mainstream consumers.
New year, new obstacles
Taking the renewed optimism of investors and digital assets’ enhanced legitimacy in stride, a vista of opportunities awaits the industry in 2020, as institutional and retail consumers increasingly begin to adopt fintech and digital assets in recognition of their benefits.
Improved trust in cryptocurrency exchanges and wider acceptance of digital assets as a form of payment will lend increased liquidity to the market, decreasing volatility in the long-run. As we move beyond the early days of “crypto spring”, however, there are still obstacles that will need to be overcome if we expect to meet the needs of a more diverse group of new users.
In particular, the user experience in buying and trading digital assets will need to be improved if it is to match the smooth usability and slick interfaces offered by the likes of Spotify, Netflix, and Amazon—which consumers have come to expect.
The most successful cryptocurrency exchanges and fintech platforms will be those that can deliver a streamlined experience, without compromising on security and user safety.
Also read: 5 developing trends that will define fintech in 2020
A shift towards client-mindedness and user experience seems imminent if the industry is to achieve mainstream adoption, and educating investors on decentralised technology and digital assets should be a priority.
2020: A maturing ecosystem
After an extended “crypto winter”, spring is in the air for the industry going into 2020. As the world continues to experience economic and political uncertainty, the future for digital assets is bright as the market rebounds and gains enhanced legitimacy as an asset class for retail investors and institutional actors looking beyond traditional financial markets.
With more capital flowing into the space in the new year, regulation will surely follow. As institutions such as Facebook and JP Morgan entering the blockchain sector, regulators are sure to take note.
Going into 2020, there is, therefore, a greater incentive for major players within the industry to establish an open dialogue with lawmakers, ensuring that they have a say in any regulatory framework applied to the digital assets sector.
The industry has weathered some difficult times in the past year, but we have undoubtedly emerged better and stronger for it. Now on to the next one.
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