In what was undoubtedly one of the most eventful years for the cryptocurrency industry, investors and enthusiasts have witnessed the rise and fall of a plethora of new projects, as well as the shocking decline in cryptocurrency valuations and market volume.Despite the losses seen by Bitcoin (BTC) and many other cryptocurrencies, the vast number of promising developments in 2018 paint a bright future for blockchain technologies and cryptocurrencies, as many new projects begin to find their way. Although it cannot be said that the cryptocurrency market finished the year on a high, there are indeed signs of recovery in sight and it appears likely that the best is yet to come. On this note, let us take the time to reminisce on what has been a tense, action-packed year for cryptocurrency and blockchain and look back at some of the biggest stories of the year.
The 2018 ‘Crashening’Following an explosive 2017, the vast majority of cryptocurrencies reached their all-time peak values in January of this year before the market took a spectacular turn for worse and began a correction that has so far lasted the entire year. Over a period of 12 months, practically every cryptocurrency in the top 100 by market capitalization witnessed staggering losses. Bitcoin alone lost more than $250 billion since January, while Ethereum (ETH) tumbled out of 2nd position after losing more than 90 percent of its value. Although BTC lost over 80 percent of its value throughout the year, it was still one of the strongest performers in 2018 for those looking to salvage their damaged investments. At the same time, Bitcoin grew in dominance as the year drew to a close, growing to as high as 57 percent, despite starting the year under 40 percent. During this period, ether fell below $85 for the first time since May 2017, Ripple (XRP) lost as much as 93 percent of its value, and NEO lost 96 percent of its market capitalization and was overtaken by several other cryptocurrencies. In 2018, it was practically impossible to read the news without seeing reports on how poorly the market was doing, or how much money you were losing by the minute. Because of this, 2018 will forever be known as the year the crypto markets took a beating but lived to tell the story.
Coincheck Hacked2018 also bore witness to what is arguably the largest cryptocurrency theft in history, as the Coincheck exchange had more than half a billion dollars in cryptocurrency stolen. At the end of January 2018, Coincheck, one of the largest cryptocurrency exchanges based in Japan had its hot wallet breached, and a total of 500 million NEM tokens, valued at $530 million at the time of the attack, had been stolen. The hack was the result of flawed security procedures at the exchange, where the entire NEM balance was stored in a poorly protected hot wallet, which was easily emptied by the hackers. Following the hack, the NEM development team refused to implement a hard fork to reverse the losses but did create a tracking system to mark wallets receiving tainted funds from the 19 addresses that received NEM as a result of the breach. After being hit by the biggest cryptocurrency heist in the history of the world, Coincheck was acquired by Monex Group for less than $34 million in April. Since then, Coincheck has managed to turn things around, reimbursing all lost funds out of its own pocket and winning back the trust of its users as it continues to recover.
Bitcoin Cash ForkedBitcoin Cash (BCH), currently the largest and most popular cryptocurrency to ever fork from Bitcoin suffered a similar fate in 2018 as it underwent a fork of its own, splitting off into two variants of the Bitcoin Cash protocol on November 15. Generally, Bitcoin Cash implements a fork twice a year to update the network, implementing any new features that have been developed throughout the year and preparing the blockchain for future upgrades. However, in the leadup to the fork, a failure to achieve consensus between two of the major development teams lead to a hostile fork that yielded two separate blockchains based on Bitcoin Cash. These new chains were named Bitcoin ABC and Bitcoin SV (Satoshi’s Vision). The fork was caused by differences in opinion over the future of the Bitcoin Cash blockchain. nChain — on one side of the fence, argued that in order to comply with Satoshi’s original vision, Bitcoin Cash must scale on-chain through block size increases, increasing this limit to 128Mb. Bitcoin ABC however, opted to include Canonical Transaction Ordering (CTOR), changing the way transactions are ordered within blocks, also making Bitcoin ABC compatible with Wormhole, a technology looking to bring smart contract capability to the blockchain. Since the fork, Bitcoin ABC and Bitcoin SV have been engaged in a hash war, with Bitcoin ABC maintaining a higher hash rate and blockchain height for a majority of ther lives. As 2018 draws to a close, it appears that both blockchains will remain viable for the foreseeable future.
Tether Doubts ContinuedIn 2018, the controversy surrounding the world’s most successful stable coin continued as Tether (USDT) faced mounting doubts over whether its token is actually backed by the U.S. Dollars it claims to have. Tether officials claim that Tether is backed 1:1 with USD, with the entire market capitalization of Tether, accounted for within the company bank account, and typically stacked with more than $1 billion. In the same year, Tether announced the formation of a new banking partnership with Deltec Bank & Trust Limited, a financial institution headquartered in the Bahamas, who also confirmed that the value of Tether Limited’s assets exceeded that of the USDT market cap. As of yet, Tether Limited has still not substantiated their claims of 100 percent backing through an audit of their reserves. However, a report by law firm Freeh, Sporkin & Sullivan LLP (FFS) released on June 20, 2018, claims that Tether does indeed back their tokens as stated. It appears that even in 2019, disputes over Tether will continue as Tether Limited has stated that a full audit is likely impossible. The infamous stable coin was also at the center of price manipulation allegations as the U.S. Justice Department began investigating whether the huge Bitcoin bull run seen in 2017 was the result of traders using USDT to artificially inflate the market.
Bakkt Was Announced and then DelayedBakkt is possibly one of the most hyped projects of 2018, and has been predicted to be a game changer for the cryptocurrency world. Billing itself as an open and regulated global ecosystem for digital assets, Bakkt hopes to be the go-to custodial service for institutional investors. In addition to mainstream adoption, the ability to attract institutional investments into the cryptocurrency market is widely considered to be one of the holy grails of the industry and is something that Bakkt might just be set to achieve. The New York Stock Exchange backed Bakkt hit the headlines earlier this year as it promised to launch its first Bitcoin futures contracts by the end of the year. However, in December, the Intercontinental Exchange announced that its Bakkt Bitcoin futures contracts would be delayed until January 24, 2019. Bakkt also made headlines this year after announcing its partnership with the American coffeehouse Starbucks, spurring rumors that the company may begin accepting cryptocurrency in its stores. These rumors, however, turned out to be false as Starbucks later clarified that this is not the case.
Bitcoin ETFs Rejected and DelayedIn short, exchange-traded funds, or ETFs are a type of investment vehicle that allows investors to diversify their investment portfolio without actually holding the asset that the fund tracks. In the case of a Bitcoin ETF, investors with little knowledge of cryptocurrency would be able to invest in the fund without having to actually purchase or hold any Bitcoin. Throughout 2018, there were several ETF proposals put forward to the U.S. Securities and Exchange Commission (SEC), including those from Direxion, GraniteShares, and ProShares. All of these were quashed by the SEC who disapproved nine different proposals from the above companies, citing a failure to comply with Exchange Act Section 6(b)(5), which requires that a national securities exchange be designed to prevent fraud and manipulation of its assets. Just a month prior, the Winklevoss Twins’ BATS BZX Exchange appeal was rejected in a 3-1 vote, despite arguments that the twin’s Gemini exchange is uniquely resistant to manipulation. Finally, the VanEck-SolidX ETF ruling was repeatedly delayed by the SEC, being postponed until February 27, 2019, as the SEC continues to scrutinize the proposal. This time, it appears there is no more room for delays, as the SEC must issue its decision within 180 days of application.
The Rise of the Stable CoinIn what was previously a market dominated by Tether (USDT), 2018 saw additional stable coins join the market. One notable example being Circle (USDC), a USD-pegged cryptocurrency formed by a joint venture between Coinbase and Circle Trading LTD. Stable coins are cryptocurrencies designed to have minimal price volatility due to being backed by real-world assets or fiat currency. Besides Tether (USDT) and TrueUSD (TUSD), there was little variety in the stable coin arena until Circle joined the action. The Goldman Sachs owned cryptocurrency first hit the headlines in October as the digital dollar was listed on Coinbase — marking the first time Coinbase offered support for a stable coin. Besides Circle, Tyler and Cameron Winklevoss — founders of the Gemini cryptocurrency exchange also launched their own stable coin known as the Gemini Dollar. According to Gemini, the Gemini Dollar is fully compliant with regulations and is the first stable coin to secure all dollar deposits at FDIC-insured banks.
Coinbase Makes the News (A Lot)If there is any name that appeared to be almost ubiquitous in 2018, it was Coinbase. The U.S. based cryptocurrency exchange made more headlines than we can count and certainly had an extremely eventful year. In 2018 alone, Coinbase raised an additional $300 million in funding as the exchange moved to improve its offerings and expand globally, particularly setting its sights on the European markets in the near future. This latest funding round saw the value of Coinbase swell to over $8 billion, making the exchange worth more than the vast majority of cryptocurrencies. Besides this, Coinbase made what is widely considered to be the largest cryptocurrency transfer in history, moving more than $5 billion worth of Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) towards the end of the year. It also became one of the only cryptocurrency exchanges to offer withdrawals to PayPal without fees. Coinbase also added several new digital assets to its platform in 2018, including Basic Attention Token (BAT), Stellar (XLM) and Zcash (ZEC), helping it to catch up with competing exchanges that currently list dozens of cryptocurrencies and utility tokens. What do you think was the biggest news story of 2018? What are your predictions for 2019? Let us know your thoughts in the comments below!
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