The cryptocurrency market is developing in two directions. One of them is investment in cryptocurrencies and in tokens that are promoted through ICOs. The other is investment in the cryptocurrency infrastructure. From creating convenient applications on digital wallets to clearing the “bottlenecks” of cryptocurrency blockchains by using technological “second layers”.

It is curious that when at the beginning of the year the market of crypto coins was near its historic highs, crypto enthusiast Anthony "Pomp" Pompliano made an important statement on January 7, saying that he “invests in infrastructure and does not buy or not sell tokens on the exchanges.” Back then he still adhered to the forecast that Bitcoin will rise in price by December of this year to $50,000, an opinion that was also confirmed on July 25. But on August 24, he revised his outlook and declared that we needed to prepare for a price of $3,000 per Bitcoin. This statement was made by Pompliano when he was already a partner at Morgan Creek Capital, which he co-founded and whose activities are focused on investing in new startups on the crypto market.

Cheaper Pricing Is Not An Obstacle For Investments In The Crypto Industry

Indeed, Pompliano was almost right. In December, Bitcoin stooped to the level of $3,800. But the fulfilled forecast once again confirmed that such dynamics of cryptocurrency prices had no effect on investment activity, which is associated with the support of new companies. When Bitcoin was at the very bottom of the year, Bloomberg reported that Facebook is preparing to launch payments with its own crypto coin via WhatsApp. This is a serious step towards the development of an infrastructure. In addition, just when the “cryptocurrency frosts” hit, the startup Flipside Crypto focused on developing new methods for analyzing the cryptocurrency market and raised $4.5 million, which included investments from classic venture capital funds. Interestingly, the company was created back in 2017, but received serious funding when the majority of crypto coins lost more than 80% of their value compared to their historic highs. This was a clear example of the fact that investors in the crypto businesses, and not the crypto coins themselves, are immune to a declining market.

And this is not the only case. The startup Tagomi Holdings raised $16 million in mid-December, and Layer1 platform provided investors with an inflow of $2.1 million. Countrywide, a large amount of new companies created on the crypto market was noted in the UK. By the beginning of December, there were already 817 such companies, more than four times their number in 2017, when the cryptocurrency market experienced the most powerful bullish phase in history. It is important to note that it is in the current year that the world labor market is demonstrating a boom in demand for blockchain and cryptocurrency specialists.

Second Lease On Life For ICOs

As they say, cryptocurrencies come and go, but the crypto market remains. Indeed, this year, the world of altcoins was bereft of a number of coins, including Bitconnect, Fitcoin, and Lottocoin, a crypto asset that lasted five years on the market. Charlie Lee, the founder of Litecoin, believes that more projects will exit the market. Erica Stanford, the founder of two cryptocurrency startups, is confident that 98% of the crypto coin projects will disappear. The key marker for the success of the Stanford project is that some companies from the investment world are investing in it, starting from investment banks to venture capital companies, or if the ICO team gets approval for its application for a loan from a bank.

Despite such a small percentage of success, investors developing a cryptocurrency infrastructure are convinced that it will be in demand, and this means that the percentage of losses on the market of crypto coins, when any projects can be closed en masse, is acceptable. All this suggests that in 2019, infrastructure investments will eventually "eke out" the ICO market too. As the creator of the ERC-20 token standard, Fabian Vogelsteller, notes that the primary placement of crypto coins is an excellent procedure for attracting funding, and after some decline in ICO activity in 2018, we can expect a boom in the release of new tokens in 2019, which can turn out to be bigger than what we saw in 2017.

The Poor Results of Wall Street Forced Investors To Invest In Cryptocurrencies

If you look at what inspires optimism in investors, you can pay attention to the statement of Alex Pak, who says that since Bitcoin has become an important reflection of the prices of many tokens, then it will always have a non-zero value. That is, fundamentally, the cryptocurrency market is very stable, which is not true of Wall Street, as the bankruptcy of companies operating there and the resetting of their shares is not uncommon. Moreover, the collapse of the markets on Christmas Eve, when the Nasdaq lost 22% compared to the historical maximum, and Dow Jones declined by 16%, caused a shock not only on the US stock market, but also in Japan and Israel, where indexes went strongly into the red.

All 30 of the largest ETfs, focused on shares of American corporations, made investors incur losses in 2018. The spread of rumors about Facebook’s “venture” into the world of crypto occurred at a time when the shares of this company fell by 43% compared to their maximum value. Has the social network’s management finally thought of using new financial technologies? The entirety of the US technological elite is significantly slipping. Netflix has a loss of 42%, Apple has a minus of 35%, Amazon has a minus of 33%, and Google lost 23% compared to the historical maximum. And this is despite the fact that it is not uncommon for the American corporate sector when managers send significant amounts of company budgets to buy their own shares in order to increase their capitalization. However, the situation looks really critical, as well as very disappointing and annoying in its uncertainty. If in the first two years of the Obama presidency of the United States, the stock market showed an increase of 47.7%, then with Donald Trump, only a meager 3.9% during the same period, which were almost completely “eaten up” by US dollar inflation.

As a result, in December, the sales of corporate bonds in the US in the amount of $11.7 billion are “stuck”, as there is simply no demand. Pessimism about the outlook for the economy tied to the US dollar has spread to the commodity market. WTI oil dropped to $42.6 by the morning of December 26, having fallen by 40.2% over the past three months. The pre-holiday week was the worst since the global financial crisis of 2008, after which a response to investors' requests appeared in the form of a new asset called Bitcoin. Then, during the crisis of 2008, there was no Bitcoin yet, but now it already exists. Over the past two years, Bitcoin gained in price in dollar valuation over 400%, while in just one week the global stock market lost $3 trillion, falling below $70 trillion.

Banks Are "Drowning" And Do Not Want To Save Themselves Using Cryptocurrencies

A typical reaction of those who are on the sinking "Titanic" of classical finance: we will try to ignore up until the bitter end that the rescue crypto ship is somewhere nearby. Hence the message that the key players on Wall Street, like Goldman Sachs, and Morgan Stanley decided to “postpone their Bitcoin dreams.” All this would have looked like a sign of strength had there been any to begin with. The management of the credit institutions is only prepared to report that the shares held by the owners of such a business are drastically cheaper. The entire key US banking sector, which represents the major players in the global financial system, is ending the year on a minor note: Goldman Sachs shares lost 36% of their value, Morgan Stanley’s share price lost 27%, Citigroup lost 31%, and Wells Fargo lost 24%. The situation looks like this, that the banking sector is dying, and, quite possibly, they have started to realize that “just” using the blockchain and cryptocurrency will not help. It is no coincidence that, for example, most of the bankers in Belgium are confident that in the future they will simply cease to be necessary due to the proliferation of blockchain and cryptocurrencies.

The US Dollar Is Losing Popularity

New financial technologies are giving a “check, and mate" to the world of traditional finance. If we look at investments in Bitcoins, as well as in a significant number of cryptocurrencies, then the yield on them in the long run is several times higher than what Wall Street has to offer. If we talk about investments in the cryptocurrency infrastructure, the farther they are, the more they exist independently of the dynamics of the crypto coins market. It is symbolic that the crypto coins market began to move away from the US dollar, since the first place among Fiat as a means of buying and selling cryptocurrencies is now occupied by the Japanese yen. The decline in the popularity of the US dollar in the crypto world mirrors the anxiety that developed around this Fiat currency.

Cryptocurrency Infrastructure – The Basis Of a New Global Financial System

We are witnessing the collapse of the traditional world of finance, where investing is becoming more and more risky and losing mostly. Are blockchains and cryptocurrencies ready to replace banks? Yes of course. The world is changing rapidly. Back in early July, DeCenter wrote that the creation of cryptocurrency pension funds is a logical solution to the global problem with pensions. And on December 24, we read from Anthony Pompliano, that “The pension crisis is getting worse. Every pension fund should buy Bitcoin to combat the situation.” Thus, even crypto analysts often wait “to the bitter end”, when the price collapse in the financial markets of the world leaves no doubt that the savings of hundreds of millions of future retirees are “burning down” in it.

Cryptocurrency pension funds are also an element of the new infrastructure that inevitably arises, like cryptocurrency banks and insurance companies. The internet could not become a truly mass phenomenon as long as hard drives were too heavy, and only the appearance of smartphones gave a real opportunity to use the potential of the world wide web to the maximum number of people, and in a very convenient way. Similarly, the cryptocurrency infrastructure should end up in the “pockets” of people, so that its use will allow to carry out all the financial operations that are now in the classical financial world, but on the basis of the blockchain and cryptocurrencies. Investments of ​​funds, as well as time and effort in this undertaking is a task that is so ambitious that it can but carry one away.