5 points, which crypto investors should pay attention to in 2018
2017 was an incredible year for the cryptocurrency market. Bitcoin has become one of the main options for alternative investments, and ICO has in total raised more than $ 4 billion for blockchain-startups. By the end of the year, it seemed that everyone wanted to have time to jump on this cash crypt train. 2018 will bring new opportunities, but also new challenges for crypto-currency investors.
In this article, you will get acquainted with five key aspects that investors in cryptocurrency need to consider in 2018.
1. Regulatory changes
In the light of the rapid growth of the cost of bitcoin and other cryptocurrency, regulators and legislators believe that it is time to introduce laws and regulations that will cover these digital assets. This trend appeared in 2017 and will certainly continue in this, as legislators in the UK, Europe, and other regions have already announced the need to create a regulatory framework that could cover decentralized digital currencies. In the most extreme case, a sudden ban of all cryptocurrencies may occur, then traders will suddenly find themselves on the other side of the law.
Regulatory changes in countries with a strong crypto-currency economy, such as China, South Korea, Japan and the United States, can also affect prices, so investors will need to properly monitor their affairs and closely monitor the legislative environment both at home and abroad.
2. Identification of users
Most of the major cryptocurrency exchangers require users to fully verify their identity in accordance with KYC / AML rules. Especially if users want to withdraw the currency from these exchanges. However, not all exchangers require user identification. This is likely to change in 2018, as more and more regulators are honing their measures and laws for cryptocurrency exchangers in order to prevent money laundering, terrorist financing, and tax evasion through the use of digital currencies.
Therefore, when registering with the exchanger, it is better to immediately confirm your identity to prevent potential withdrawal or freezing of funds if the KYC / AML rules in the Exchange’s jurisdiction suddenly change.
3. Slowing ICO
For the primary placement market for tokens, 2017 was that year. Blockchain projects managed to attract more than $ 4 billion from this new form of financing start-ups, and those who invested in some newly created ICO tokens received several hundred percents of the profits from their investments. Nevertheless, the ICO market began to slow in the fourth quarter of 2017, as it was increasingly filled with very mediocre projects that no longer succeeded in attracting investors, moreover, in many cases, such startups eventually did not even have a finished product.
In the light of the recent Deloitte study, which stated that more than 92% of the launched blockchain projects never ended with a real product or service, more investors are returning to first-class currencies and moving away from ICO tokens where there is a huge risk.
This trend is likely to continue in 2018 as well. The projects, with the ICO, will, for the most part, try to get as close as possible to the staggering sums earned in 2017. But in addition to the disappointing work of the ICO market, filled with mediocre projects, the growth of bitcoin and other cryptocurrencies will also play a big role in making investors turn their backs on the ICO. In the end, if stable crypto-currencies such as dash, Ethereum, and Litecoin brought 1000% profit for the year, then why should investors risk investing in low-end tokens that can easily depreciate if their startup producer does not keep promises?
In 2018, the tax authorities will also try to snatch a piece of the crypto-pie. More detailed guidance and legislation regarding the taxation of profits from crypto-currency investments is likely to become commonplace in 2018, and crypto-currency traders will indicate this profit in their annual tax returns.
Tax authorities such as the US Internal Revenue Service and the South African Revenue Service have already announced that they are using tracking software for blockchain to find cryptocurrency traders who do not declare their income properly.
After clear instructions are introduced, tax authorities will receive more income from crypto-currency investments, since investors in crypto-currencies will have to report their earnings as well as with conventional investments in standard assets.
5. The inflow of institutional investors
The last in the list, but the first most important is that potentially a wave of institutional funds, which seems to intend to enter the crypto-currency market this year. In 2017, more than 75 digital hedge funds targeting Cryptocurrency were launched, and private banks and brokers began offering bitcoins as investments. Then in December, we saw the listing of futures contracts for bitcoins from the two largest currency exchanges in the US – CME, and CBOE, which opened the possibility of investing in bitcoin to any institutional investor who is allowed to buy futures as part of his investment plan.
In addition, since bitcoin futures contracts have been approved by the CFTC in the United States, the potential approval of the regulatory requirements of the bitcoin stock exchange investment fund has again become a topical issue.
Considering that today most of the funds invested in the cryptocurrency come from private investors and a small handful of high-ranking officials, the potential for increasing the cost of many leading crypto-currencies will be quite significant after institutional investors reach this market in full.
While the price of bitcoins of $ 16,000 and aired at $ 1,000 may seem too big for investors today, by the end of 2018 these prices could be quite low to start investments if institutional investors really decide to switch to crypto-currencies for the next twelve months. And in light of the high profitability of the currency compared to securities, bonds and commodity revenues in recent years, this seems quite plausible.