Blockchain and Cryptocurrency 2018 Predictions – Thejas Nalval, Element Digital Asset Management

FinTech, Investing, News | January 1, 2018 By:

Thejas Nalval is a director within the Portfolio Management team at Element Digital Asset Management. He brings over 10 years of experience in trading and risk management. Prior to joining the Element Group, he spent three years at a boutique inter-dealer broker as the lead trading strategist. In that role, he structured custom alpha generation solutions for mid to large size institutions. Prior to that, he worked as a risk manager at JP Morgan for the US cash and equity derivative businesses. Nalval holds a BA from Rutgers University and an MBA from the Stern School of Business at New York University. 

His predictions for 2018:

1. There will be increased regulations for both ICOs and cryptocurrency trading. The ICO process will be monitored more closely by most, if not all, leading regulatory bodies to protect against fraudulent activity. Cryptocurrency trading will also be more heavily monitored, specifically as it relates to pump and dump attempts, insider trading, front running and felonies that exist in the traditional financial marketplace.

2. Another major exchange will be hacked and/or will shut down. More than likely it will be an exchange that has lax operational and risk management infrastructure.

3. Service providers will emerge in a big way. The lack of traditional service providers (order management systems, reconciliation software, custodians, etc) has kept many institutions out of cryptocurrencies. The emergence of good technical solutions in this category will mean a huge risk gap will be filled, leveling the playing field for many fund managers.

4. Fund managers will experience a dispersion of returns. In the past year, it was not uncommon for a fund manager that bought and held to promote their extraordinary returns as alpha. That will change in the next year as markets become more efficient. The skill and edge of a fund manager will become more evident as good managers will show higher returns than lucky managers.

5. The trading strategies will increase in sophistication. New products, new exchanges and new players mean more creative ways to express an investment view.

6. There will be repercussions from Coinbase’s power and influence. No company should be as powerful in a trading ecosystem, definitely not in what is meant to represent a decentralized technology. There will be a concerted effort to break up Coinbase’s influence, either by the community or by regulation or by competition.

7. New products will emerge. This includes futures on other cryptocurrencies, more options structures and ETFs. This is a given.

8. There will be at least three major short-term corrections, however, they will be quick on the way down and quick on the way up. This is also a given. We’ve seen six major corrections itself in 2017.

9. We will see bouts of hyper-volatility because of futures expirations, options expirations and ETF rebalancing. Even the traditional equity markets experience high levels of volatility a few times a year because of these scheduled events. This type of volatility will be an order of magnitude larger in the cryptocurrency world when futures and other derivatives expire or need to be rebalanced.

10. We will see at least one traditional financial brokerage firm lose money and go out of business because of mismanagement with a derivatives product. Despite there being a listed derivative with futures (and possibly ETFs), the truth of the matter is that trading and hedging with the underlying asset is still an operationally difficult test. One bad trade or one bad line of code within a company that isn’t a cryptocurrency trading expert can and will do irrevocable harm to the bottom line.

11. We will see continued psychological buying and selling, however, more attention will be paid to what insiders are doing. There’s been quite of a bit of mob mentality driving the marketplace currently as the retail trader can feel empowered making public market calls on social media. That platform to voice an opinion coupled with some good luck has made the average investor feel invincible, so much that they do not listen to what insiders are saying or doing. As evidenced by the correction that happened in December, paying attention to insiders matters. More than likely they know more than the average person, no matter the numbers the latter may have.