The world of venture capital saw quite a roller coaster ride through 2017, with close to US$6 billion being raised through ICOs. Compare this to the US$102 million that ICOs managed to raise through 2016 and you’ll know just what I mean when I say roller coaster. 2017 was most definitely a milestone year, where cryptocurrencies and ICOs managed to break through into the mainstream. So, will 2018 be a year where we sit back and watch the impact of this breakthrough? Unlikely. Most financial experts agree that given tthat he ICO industry is still in its nascent stages, we are likely to continue to see it grow and prosper.
Why am I so bullish? For one, blockchain tech continues to evolve rapidly, not just with increasing transactions per second but also due to improving consensus algorithms and security protocols. In fact, blockchain protocols are becoming increasingly interoperable. At the same time, smart contracts are also advancing in terms of capabilities, with code libraries being developed to ease the automation and integration of smart contracts that are reusable and efficient.
Investors are becoming smarter too, learning more about blockchain projects and knowing exactly what they are looking for when they invest. The only caveat then is that unless your ICO has something unique to offer or adds value for the investor, it might not succeed. So, companies will also need to learn their lessons and come forward with projects that investors can have faith in.
Gazing into the 2018 Crystal Ball
Possibly, the most apparent prediction for 2018 is that established enterprises will look to launch their own ICOs to raise capital for their expansion projects. After all, which business worth its salt wants to be left behind in the technology race? To succeed today, businesses need to innovate, as do venture capital firms and financial institutions, reinventing themselves in order to remain relevant in a rapidly changing financial market.
Of course, the cryptocurrencies world is difficult to predict, given its ever-changing nature and volatility. However, one thing that is becoming increasingly apparent is that ICOs are here to stay as an effective funding mechanism for seed money. And, the acceptance of this avenue of funding is only likely to increase going forward.
The latter half of 2017, especially the last two months of the year, saw a significantly high number of ICOs succeed, raising close to US$750 million in November alone. This wave seems to have flowed into 2018, with a large number of ICOs scheduled through January, and in fact all of Q1. However, the first quarter usually sees higher volatility in cryptocurrency prices, due to various factors, not the least of which is the Chinese New Year in February.
In addition, both the US and Canadian securities regulators had begun aggressive investigations into these kinds of investments, possibly looking at bringing in some regulations. This is likely to continue into 2018, with the potential for at least a couple of enforcement cases, including one or more crypto exchanges, being lodged in the US. If this does happen, it could impact market volumes. The reason I say “could,” rather than “will,” is that the 2017 US SEC report on the DAO seemed to have not affected the rapid pace or structure of ICOs at all in 2017.
Some experts also expect the first half of 2018 to see Bitcoin and Ethereum prices achieve new highs, with continuing interest in discovering alternative trading systems or ATS for security token trading. However, rising prices could act to both drive ICOs and to act as dampeners. And given that at least one major market correction is expected in the market cap of blockchain-based assets during 2018, investors might look to diversify their portfolios.
On the whole, I think it is going to be another exciting year, with rising awareness as well as adoption of blockchain technology.