5 Things Crypto Investors Need to Watch in 2018
Cryptocurrency market has seen an incredible raise during 2017. Bitcoin became an alternative investment, the ICO market rose over $4 billion dollars for blockchain startups. And by the end of 2017, it seemed like every person wanted to join crypto market.
In this article, you will be introduced to five key aspects that digital currency investors will need to look out for in 2018.
1. Regulatory Changes
As bitcoin showed an magnificent raise, it gave a signal to regulators and lawmakers that the time has come to introduce legislation and regulations that cover the use of digital assets. This action has started in 2017 and will continue this year as there was an announcement by regulators from Europe, UK and other states that a regulatory framework needs to be put into place for covering virtual currencies.
In major bitcoin economies such as China, South Korea, Japan and the U.S. the rule changes could also take an influence on asset prices — so there comes out that cryptocurrency investors keep a close eye on regulatory developments at home and abroad.
2. User Verification
Most large digital currency exchanges require users to fully verify their identity to comply with KYC/AML regulations. This is especially the case if users want to withdraw fiat currency from exchanges. However, not all exchanges require user verification yet. This will likely change in 2018 as more and more regulators are honing in on bitcoin exchanges in an attempt to prevent money laundering, terrorist financing as well as tax evasion through the use of digital currencies.
Hence, when signing up to an exchange it will be best to also fully verify oneself to prevent withdrawal limitation or a potential freezing of funds should KYC/AML regulations in the exchange’s jurisdiction suddenly change.
3. ICO Slow Down
The initial coin offerings market slowed down during 2017. Blockchain projects managed to raise over $4 billion through this new form of startup financing and investors in many newly-issued ICO tokens were rewarded with several hundred percent returns on their investments. In the fourth quarter of 2017 the ICO market started to move down, as the projects were no longer interesting for investors.
The recent Deloitte study stated over 92 percent of launched blockchain projects. It never led to a product or service, because of that more investors are moving back to “blue chip”, escaping from ICO tokens considering it a risky business.
The tax authorities also will be alive to get their dividends from crypto space in 2018. In relation to the taxation of cryptocurrency investment more detailed guidance and legislation will likely become a fact of life in 2018 and people trading on cryptocurrencies will be expected to announce their annual gains for tax returns.
Several tax authorities, such as the U.S. Internal Revenue Service and the South African Revenue Service already informed about using blockchain tracking system to locate those traders who are escaping from tax reports.
5. Institutional Investor Inflows
Finnaly the most important thing will be the institutional funds entering the cryptocurrency market this year. . In 2017, over 75 digital currency-focused hedge funds have been launched and private banks and brokerages have started to offer bitcoin as an investment. After that bitcoin futures were launched by the two biggest exchanges in USA, such as CME and CBOE. This action opened a way for institutional investors to purchase bitcoin futures.
Furthermore, since bitcoin futures contracts have been approved by the U.S. CFTC, the potential regulatory approval of bitcoin ETFs is now also back on the table.
While a price of bitcoin at $16,000 and ether at $1,000 might seem expensive to investors today, by the end of 2018 these could turn out to have been cheap entry levels if institutional investors decide to really jump into crypto over the next twelve months. And in light of cryptocurrency returns compared to stock, bonds and commodity returns in recent years, this is a likely scenario.
The prices of Bitcoin and Ethereum appropriately $16,000 and $1,000 might seem expensive for investors at this time, but could turn into cheap if institutional investors decide to enter the crypto market during 2018.