This year has not been kind to the Crypto industry. Despite an overall downturn, the last quarter of 2018 has been particularly difficult. Part of this was a necessary correction for the irrational exuberance of the 2017 but contagion in the financial markets, unfavorable international regulations and the SEC crackdown on Crypto companies has certainly not helped.
The downturn in the ICO market not unrelated to general instability in global financial markets. Investors have long suspected that Crypto was susceptible to contagion and given the overall economy a crypto downturn seems downright predicable. Public debt in advanced economies has ballooned by more than 30% GDP and by the second quarter of 2018 global debt had already ballooned to $250tn. So concerning were these developments that in October the IMF warned that the world economy was at risk of another financial crisis and a glance at global commodities, forex and stock markets certainly indicate this could be coming to pass.
While there have been some encouraging regulation coming out of countries like Malta; India and China seem to have taken a markedly different approach to ICOs and Cryptocurrency. 2018 has seen India arrest the operators of Unocoin (makers of India’s first Crypto-ATMs ) and the government has signaled a complete ban on crypto is likely. Just over a year into their ban on ICOs the Chinese government too has stepped up pressure on domestic cryptocurrency activity in the last few weeks. All this comes amid a steep crackdown on ICOs by the SEC. Billion-dollar fund Pantera Capital has warned that almost 25% of projects the fund has chosen to invest in could be considered securities under US regulations — refunds are likely.
Winter is here
Considering the above its perhaps unsurprising that Bitcoin is now hovering around the 3000$ range and Ethereum recently saw a flash crash to 14$ (although it has since stabilized in the higher double digits). Many post-ICO companies that chose to HODL their funds in Ether are looking at their war chests heavily diminished, many are laying off employees or freezing new hires.
Santa Clause rally
It’s not all doom and gloom though — a Santa Clause rally will give BTC and other cryptocurrencies a slight pop at the end of the year. Assuming nothing terrible happens, we could see green shoots as early as April but at least by June next year. On balance, the market correction will allow the cream ICOs to rise to the top and we hope 2019 ICOs will come out from this experience, stronger and better prepared.