Forbes says 2017 has been a breakout year for crypto with a mind-bending appreciation of cryptocurrencies, transaction volumes for Bitcoin increasing 100x (in USD) from what they were at the beginning of the year, and appearance countless new blockchain projects. I’d say it’s just the beginning of the crypto expansion to the multi-trillion dollar markets, that will be led by less volatile asset tokens.

Last year, a research was made estimating that the total cryptocurrencies capital could exceed $5 trillion by 2025, and this number already seems conservative — which is making the market grow faster than we expected.

An estimation was made that the market capital would reach over $400 billion by the end of 2018, but the latest news about major exchanges launching futures on bitcoin and the growing interest from institutional investors towards cryptocurrencies speeded up the growth, so we now have $600+ billion market cap (4x since we published the report).

This year 2018 the crypto market would become more volatile and can increase even more, such that the rapid capitalization growth of late 2017 was not yet accompanied by a similar growth of the number of crypto wallets.

However, the long-term trend is set to stay: the crypto market will grow exponentially within the next 5–7 years mostly thanks to the high adoption rate of cryptocurrencies, just like those of the cell phones and the Internet.

The blockchain has provided great advantages, like the ease of cross-border transactions, low transaction costs and security, are huge, and we estimate that the number of bitcoin wallets alone will double next year reaching a record of 40 million wallets.

A Safe place to the Cryto World.

With the adoption of crypto and causing its demand to increase dramatically, we expect the size of the market to change as well. The attention of the crypto holders can shift to asset tokens, whose price is linked to hard assets, ranging from equity and debt to real estate and even works of art, and here’s why. The volatility of the cryptocurrencies is not for the faint of heart, it can repel some of the traditional investors, but less volatile asset tokens can be seen and used as a crypto safe haven.

As estimated, the further growth of the crypto market will lead those tokens that would be used to diversify crypto portfolios without converting to fiat and losing 2–10% on commissions. By 2025 they can account for at least 80% of the total crypto market.

Tokenization

There’s another sign of the great potential of asset tokens. If you look at the structure of portfolios of traditional investors, you’ll see that they hold only ≈ 5% in cash or equivalents, and the rest is assets, like real estate, equity, bonds etc.

We expect that a similar situation will exist in the crypto market in few years. Only a fraction of the capitalization will be the “cash currencies”, like Bitcoin or Litecoin. The majority of tokens will be linked to different asset classes.

We believe, tokenization — creating asset tokens — is the next big thing in crypto. As Bradley Rotter, Principal Officer and Managing Partner of various equity and specialty-financing companies, notes, «everything that can be tokenized will be tokenized.

The Era of the ICOs

In 2017 holding an ICO event has become a an alternative to VC funding. An average ICO proceeds have reached $15 million, meaning that blockchain startups could raise as much through crowdfunding as a mainstream startup from VCs during Series A or B. At the end of 2017, the total ICO funding is going has exceeded $5 billion with top-10 projects raising up to $100M-$250M from a single ICO event. So it’s no surprise that since June monthly number of ICOs have increased from 40 to 200 projects.

In 2018 it is believed that more ICOs will stay a very attractive option for raising money, so the number of token sales will increase. But more ICO projects will struggle to raise funds as the competition for investors’ attention intensifies. We also estimate that the amount money raised by successful projects will increase in line with the growth of the total crypto market. As soon as investors’ attention switch from rapidly growing Top-20 cryptocurrencies, ICOs can become a hot topic again.