Five New possible Changes in Crypto Market
Since the last year was a fabulous year for crypto investors, now almost everyone in the world wants to jump into this crypto bus. Even though the new year will bring many new crypto opportunities, we need to be careful about the five new possible changes in the Crypto market.
- Changes in Regulations :
Regulators and lawmakers feel that there should be new legislation and regulations that cover the crypto assets. This trend started in 2017 and will definitely continue this year as lawmakers in the UK, Europe, and other regions have already announced that a regulatory framework needs to be put into place to cover decentralized digital currencies. In an extreme example, an outright ban of cryptocurrencies could happen overnight.
Regulatory changes in major bitcoin economies such as China, South Korea, Japan and the U.S. could also affect asset prices. So cryptocurrency investors will need to position portfolios accordingly and keep a close eye on regulatory developments at home and abroad.
- Verification of User Accounts:
Digital currency exchanges require users to fully verify their identity to comply with KYC/AML regulations. This is especially the case if users want to withdraw fiat currency from exchanges. However, not all exchanges require user verification yet. This will likely change in 2018 as more and more regulators are honing in on bitcoin exchanges in an attempt to prevent money laundering, terrorist financing as well as tax evasion through the use of digital currencies.
- Slow Down in ICOs
The ICO market had one hell of a year in 2017. Blockchain projects managed to raise over $4 billion through this new form of startup financing and investors in many newly-issued ICO tokens were rewarded with several hundred percent returns on their investments. Nonetheless, the ICO market started to slow down in the fourth quarter of 2017 as the market became increasingly flooded with mediocre projects that no longer managed to entice investors and that in many cases did not even have a finished product.
- New Taxes
In 2018, the tax authorities will also be keen to get their piece of the crypto pie. More detailed guidance and legislation in relation to the taxation of cryptocurrency investment profit will likely also become a fact of life in 2018 and cryptocurrency traders will be expected to declare their gains on their annual tax returns.
Tax authorities such as the U.S. Internal Revenue Service and the South African Revenue Service have already announced that they are using blockchain tracking software to locate cryptocurrency traders who have not been appropriately declaring their investment income.
- Institutional Investments
Finally there will be the potential wave of institutional funds that look set to enter the cryptocurrency market this year. In 2017, over 75 digital currency-focused hedge funds have been launched and private banks and brokerages have started to offer bitcoin as an investment. Then, in December, we saw the listing of bitcoin futures contracts on two of the largest derivative exchanges in the U.S. — the CME and the CBOE — which opened up bitcoin investment to any institutional investor who is permitted to purchase futures as part of their investment guidelines.
Furthermore, since bitcoin futures contracts have been approved by the U.S. CFTC, the potential regulatory approval of bitcoin ETFs is now also back on the table.
Given that most funds invested in cryptocurrency to date have come from private investors and a handful of high net worth individuals, the potential for the multiplication of value of many of the leading cryptocurrencies is substantial once the institutional investor market enters the digital asset space in full force.