BY: Kunal Nandwani, Founder & CEO, uTrade Solutions 

The year 2016 was a black swan period, with key unexpected events including Brexit, the election of Donald Trump as President of the US, and demonetization in India.

The year 2017 clearly belonged to Bitcoin. Who would have thought in January that $1,000 virtual coin would become worth $20,000 before the end of the year, and the market cap of cryptocurrencies would increase from $18 billion to $600 billion? These stats show why we are all talking about cryptos and trying to predict where things may go from here. Like it or hate it, you were involved in Bitcoin debates, and somewhere deep down, you also feel you missed investing early.

Check out our actual Global Market Cap visualization! #bitcoin #btc #bitcoinprice #blockchain #cryptocurrency #crypto #bitcoins #digitalcurrency #litecoin #ethereum #stockmarket #exchange #bitcoincash #ripple #dash #iota #cardano #monero #ethreumclassic #bitcoingold #neo pic.twitter.com/i7tY8nzzVX

— CryptoCurrency (@cryptocurrency) January 24, 2018

Unfortunately, though, the spotlight on Bitcoin is not so much for its potential use as a global decentralized digital currency, but mainly as an investable asset. That has led us into a virtuous circle: the more cryptocurrencies rise in value, the more people invest in them, and the more they rise in value.

Before we move on to predictions for the rest of this decade, it’s worth remembering that Bitcoin as a concept started as a way to get away from the existing world of centralized financial services, towards a decentralized, peer-to-peer, community-driven immutable system.

How Bitcoin has evolved so far in this decade

Bitcoin was adopted first by hobbyists and geeks between 2010 and 2013, and then by other early adopters including tech companies in 2014-2015. In 2016, it became the talk of the world, thanks to the potential of Blockchain. Last year, the major inflection points for the growth of cryptos were:

Japan legalizing Bitcoin as a currency in April 2017, which led to massive growth through the year.

The involvement of financial institutions (120+ crypto hedge funds cropping up in the year) led to the institutionalizing of all cryptos.

Several Initial Coin Offerings (ICOs) raising huge amounts of capital, especially in Q3.

Cryptos will continue to grow the “parallel” financial world in 2018, creating some friction, synergies, as well as fundamental challenges to their existence. Below, I try to take a peek at the string theory of the parallel-decentralized world meeting the existing imperfect but well-understood centralized world, through a black hole called the future.

What may happen between 2018 and 2020

1. Bitcoin will stay. It will continue to be a part of the growing cryptos market for the foreseeable future. Its value may fluctuate, but even in the case of a crash, it will be worth a few thousand dollars for sure. And in case of a bull run and a supportive external environment, it could touch $50,000 soon.

Bitcoin’s efficiency in dealing with the transactions load will improve with relevant community-driven changes and forks.

For other cryptos, typically the risk of survival remains when their value is a few dollars (assuming limited supply of a few millions), once they break $100 value mark, and have a sustainable strong reason to exist, they can continue to grow and create value for all stakeholders.

2. Institutionalization of cryptos will catapult their valuation growth. As more banks, fund managers and other institutional investors get involved, the valuation of cryptos will continue to rise. The listing of Bitcoin futures on CME, and possibly the adoption of other cryptos on exchanges, will catapult investors’ access to cryptos.

However, there could be short-term conflicts between the decentralization thesis of cryptos, and involvement by the traditional centralized world of financial services. For instance, CME Bitcoin futures are regulated, while Bitcoin trading as a financial security is not. And fiat currency conversions from crypto currencies is challenging, as several banks have adopted the overly cautious approach of discouraging such transactions.

But such challenges provide opportunities for newer business models, too. New OTC brokers, exchanges, fund managers, ICO platforms, and more efficient tokens will emerge and present great growth opportunities.

3. Governments will make failed attempts to ban or regulate cryptos. The whole idea of Bitcoin was to get away from centralization, including government control. If governments try to regulate cryptocurrencies in a coordinated fashion to retain control over the financial system, they will certainly fail. I share some related examples and factors below.

Europe tried for decades to make and grow Europe. Brexit is a classic example of how Europe is failing, trying to keep “only” 25-odd countries together. And Estonia is already an outlier in European country adoption of cryptos on a large scale.

Japan and Belarus have also challenged the status quo.

The US dropped out of the climate change convention, which is possibly the biggest threat to humanity on Earth. So getting several countries to agree on global cryptocurrency regulation will be a challenge.

So attempts by governments to crack down on decentralized currencies and tech platforms will not work.

4. Globally fragmented regulations around cryptos and ICOs will continue. Since all countries are still trying to understand cryptos and ICOs, their regulations will continue to be fragmented.

Cautious or full support, with regulation: Australia, Canada, Japan, and Switzerland have been more positive in opening up to ICOs. Japan has accepted Bitcoin as legal tender, and has made Bitcoin transactions tax-free, which made it the country with the largest Bitcoin trading volume in 2017. Several of these countries have cautiously started giving ICO approvals as well, through their regulatory frameworks, sandboxes, and new regulations.

Countries with limited or no support. The US allows Bitcoin investment, trading, and use as a currency (as along as it is used for legitimate purposes). At the same time, it has warned ICO issuers that if someone in the US invests in their offering, and if their token seems like a security, then strict US securities laws would apply. As a result, many ICOs are banning US investors. Countries like India, too, fall in this category.

Ban. China banned ICOs in September, after a major surge in Chinese ICOs. China has pushed crypto exchanges out of the country, too.

5. Enterprise Blockchains (without decentralized control / consensus) will die. Blockchain has been overused in thousands of use cases where it is not needed at all, as there is no requirement for any consensus mechanism, crowdsourcing, or decentralized workflow. Such Blockchains will perish gradually. The Blockchain consortium R3 saying they don’t need Blockchain as such, or Hyperledger losing its members, are early signals of this process. And no PoC will lead to any real live scalable project, and rationality would prevail.

6. Litigations around ICOs and crypto-related matters will rise dramatically. As cryptos go mainstream, the legal issues surrounding the business and civil matters will become challenging.

An Ethereum smart contract will not hold as a business contract in the court of law.

Funds raised via ICOs not giving ample returns, or turning out to be scams, will continue to drive lawsuits against ICO-funded companies.

7. ICOs will show potential to be a better alternate corporate structure, co-existing with the current one for a while. An ICO is the advance sale of a platform’s cryptocurrencies or tokens, to fund the development of the fund-raising company’s platform and product. These tokens can be easily sold and traded on all cryptocurrency exchanges depending on their demand, providing liquidity to investors and vital early-stage funding for entrepreneurs. These tokens are essentially the incentives for several market participants to use and grow the platform in a decentralized manner. Such incentives are paramount in making a decentralized ecosystem operate sustainably.

8. Crypto platforms usage will become easier and secure (maybe like Paypal or WhatsApp, leading to big adoption). Currently, it is hard for an amateur user to open a crypto wallet, secure its private keys, and carry out transactions. This is likely to get easier with simpler UI, but secure mechanisms.

new killer apps and platforms will emerge

keep it simple” UI will emerge

privacy / security standards will improve

global protocol standards will begin to emerge

9. Some governments like Canada and Japan may use Blockchain to decentralize wider consensus on several decisions by engaging their public / communities. Inspired by cryptos, some countries may use similar technologies to truly crowdsource consensus mechanisms in various decision-making processes. Governments on Blockchain and crypto currencies run by central banks are some of the themes we will witness, though it’s debatable how much value will they create, especially if control is centralized.

10. At least 5 firms in the crypto-Blockchain-ICOs space will reach billion-dollar valuations. These firms may include:

Crypto investment fund

Crypto exchange / wallet

ICO-led community project

Blockchain-driven security, identity, or other internet tech platform

Blockchain platform allowing for easier development of applications

Happy cryptos 2018!

The original version of this article appeared here earlier this month. Adapted and used here with permission.