2019 in Review: Another Year of Highs and Lows for Crypto

2019 may not go down as a year of breathtaking highs for cryptocurrency markets, but major strides have been made for mass adoption of digital payments and blockchain technology.

A quick look at major headlines over the past 12 months highlight the shortcomings of the sector as well as the potential for cryptocurrencies to completely shake up the global payment system.

One need look no further than social media giant Facebook announcing plans to launch its cryptocurrency Libra and digital wallet Calibra. The move sent shockwaves around the world and led to the United States Congress enforcing a moratorium on the project. 

Security concerns continued to be a concerning topic amid some of the biggest cryptocurrency exchanges and platforms falling prey to hacks and thefts.

Bitcoin had a lackluster year in terms of trading and market value, as the preeminent cryptocurrency saw periods of both resurgence and decline. Meanwhile, Ethereum’s developers carried out a number of crucial upgrades that form part of the ongoing progression of the world’s second most-valuable cryptocurrency.

Important moves were made on the regulatory front as the United States Securities and Exchange Commission made pivotal announcements regarding the likes of Ethereum and went after projects such as social media startup Kik as well as Telegram’s highly anticipated Telegram Open Network.

Regulators in the United Kingdom took a softer stance toward Bitcoin and Ethereum, leaving the cryptocurrencies unrestricted in the country.

In this article, Cointelegraph delves into these stories while exploring the biggest highlights of every month of 2019.

Bitcoin’s lowly start

The dawn of 2019 found Bitcoin, the world’s preeminent cryptocurrency, trading below the $4000 mark following a difficult year for the global cryptol market. 

The price of Bitcoin summed up the slump in the sector, but the low price would soon pick up as the year began.

Ten days into the new year, news broke that Ethereum Classic’s network had fallen victim to a fully-fledged 51% attack. An unknown entity managed to gain a majority share of the network’s hashing power. 

The incident was serious enough to prompt American cryptocurrency exchange Coinbase to cease all ETC transactions. Their own blockchain analysis claimed that a “deep chain reorganisation” had occurred and included 12 double-spends amounting to 219,500 ETC, valued at over $1 million at the time.

All the while, the Ethereum network neared a planned upgrade that was then postponed on Jan. 19. The Constantinople hard fork was due to be activated at the end of the month, incorporating a number of Ethereum Improvement Proposals that would aid in the move from the currently used proof-of-work consensus algorithm to a proof-of-stake system.

A major feature of the upgrade would cancel out backwards compatibility in the network by requiring nodes to update along with the rest of the system. If not, those nodes would be running on a seperate blockchain.

The curious case of Cotten’s QuadrigaCX

Early in February, Canada’s Ontario Securities Commission initiated a probe into missing funds at the now-defunct QuadrigaCX cryptocurrency exchange.

Late in 2018, founder Gerald Cotten died in India and took with him the knowledge of crucial wallet passwords that held millions of dollars worth of his clients’ cryptocurrency holdings. Adding intrigue to the situation was the fact that Cotten had made changes to his will, which was released 12 days before his death. Cotten’s wife Jennifer Robertson was named as the sole beneficiary of his estate.

The Ontario Securities Commission eventually launched an investigation into the situation as clients sought to recover their lost digital assets. 

While QuadrigaCX users fought to recover their lost cryptocurrency in Ontario, an American pension fund in Virginia announced that it would directly invest a portion of its funds into the cryptocurrency and blockchain space through the Morgan Creek Digital firm.

The move is considered to be the first instance that a United States pension fund directly invested into cryptocurrency assets. Two funds in the Fairfax County’s Retirement Systems invested a total of $40 million into the Morgan Creek Blockchain Opportunities Fund.

Tesla’s founder Elon Musk also found his way into crypto news headlines after giving Bitcoin a proverbial “thumbs up” during a podcast interview in February. Musk gave credit to the “structure” of Bitcoin while highlighting the downside of the energy-intensive requirements of the cryptocurrency.

Musk also said that cryptocurrencies are a far better way to transfer value than traditional paper means.

Ethereum cleared at the U.S. SEC; Tether and Bitfinex in the crosshairs

Just days after finally implementing its Constantinople hard fork, Ethereum received a regulatory green light that had been hanging in the balance for some time.

The United States Securities Exchange Commission had been considering the nature of Ethereum’s original initial coin offering back in 2014 and whether it had broken longstanding laws of securities offerings. 

But on March 12, the SEC finally announced that Ethereum was not considered a security, and therefore wouldn’t be regulated as such. The move set a big precedent for token offerings that are similar to Ethereum which would otherwise be subject to stringent securities laws that have led to major lawsuits against ICOs over the past 24 months.

If the findings had been the other way round, Ethereum may have had to pay the SEC millions of dollars for conducting an illegal token offering.

While things looked up for Ethereum, the wider cryptocurrency community shifted its attention to Tether, the stablecoin that is linked to the U.S. dollar at a 1:1 ratio. 

Over the past two years, questions have been raised about the veracity of Tether’s cash reserves to back the amount of USDT in circulation. A lack of an official third-party audit of its accounts was a major reason for the attention. 

On March 14, users noticed that Tether had changed the terms of its reserve policy on its website. The website’s fine print had changed to state that Tether tokens were backed by “traditional currency and cash equivalents.” 

The move garnered plenty of suspicion from the cryptocurrency community regarding the way in which Tether was maintaining and managing reserves. 

In April Tether and its affiliated cryptocurrency exchange Bitfinex were back in the headlines. Bitfinex had been accused of using $850 million of Tether’s cash reserves to cover losses and meet client fiat withdrawals. 

The New York Attorney General’s office requested a number of documents to be provided by Bitfinex in relation to the transfer of funds between the companies. It was also suggested that the transactions had included a trade of shares and the rest of the cash funds would be repaid with interest — points that were argued by both companies.

By the end of the month, Tether’s lawyers addressed concerns around the company’s reserve policy. Legal documents given to the New York Attorney General showed that Tether only had enough cash reserves to cover 74% of outstanding USDT.

On the other side of the world, a report revealed that an arm of the Chinese government had developed plans to curb cryptocurrency mining in the country as part of an industrial revision program. 

Binance hacked while Facebook’s crypto project is unveiled

Early in May, one of the world’s biggest cryptocurrency exchanges, Binance, confirmed that it had been the victim of cyber theft in which over $40 million worth of Bitcoin was stolen from a hot wallet.

Hackers had reportedly obtained a variety of data including two-factor authentication codes and API that allowed the attackers access to one of Binance’s hot wallets. A total 7000 BTC were stolen in the attack.

The attack was a reminder that even the biggest exchanges could fall prey to malicious forces. Binance had to suspend all deposits and withdrawals while it reviewed its safety systems in the wake of the incident.

All the while, one of the biggest stories in the cryptocurrency space of 2019 began to unfold. 

A report on May 3 claimed that social media giant Facebook was officially looking to raise $1 billion for an ambitious cryptocurrency and wallet project. The company was reportedly in talks with Mastercard and VISA about the launch of a native payment system for its users.

A month later, Facebook finally released the white paper for its proposed cryptocurrency and blockchain project. Facebook’s Libra cryptocurrency was unveiled to the world alongside the digital wallet Calibra, created to support the token.

Buoyed by the positive sentiment in the space, Bitcoin also climbed above the $10,000 mark for the first time since March 2018. The bull run came to an unceremonious end that was directly attributed to the technical problems and crash of cryptocurrency exchange Coinbase on June 26. The price of BTC plummeted by over $1,400 just minutes after Coinbase’s operation crashed.

Congress halts, grills Facebook over Libra plans

Facebook’s plans for Libra came to a screeching halt at the beginning of July as the United States congress requested a stop-order on the project.

The financial services committee laid out serious concerns in a letter to Facebook’s leadership, saying that the project threatened the “privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy.”

None other than president Donald Trump added a voice of detraction on Twitter, going as far as saying Libra would have “little standing or dependability” while slamming cryptocurrencies in general. 

Two weeks later, Facebook was subjected to a three-day hearing by the U.S. Congress. Calibra’s head David Marcus was grilled for two days over the details of Libra and Calibra’s plans. Congress was specifically interested in how Libra would be associated to Facebook and how it would work.

While Facebook’s Libra dealt with a regulatory crackdown, Britain’s Financial Conduct Authority (FCA) announced at the end of July that it would not regulate Bitcoin or Ethereum.

The regulator released an updated policy statement on cryptocurrencies labeling Bitcoin and Ethereum as decentralized tokens that mainly act as a means of exchange. The documentation confirmed that neither cryptocurrency fell under the jurisdiction of the FCA.

Good news for crypto traders

Cryptocurrency traders in America were given some good news as Digital asset platform Bakkt announced the launch date of its highly-anticipated cryptocurrency futures markets.

The company had a long battle to meet regulatory requirements in order to provide the first regulated Bitcoin options and cash-settled futures and set its sights on a launch in late September.

The Bitcoin mining network hit a major milestone as the year rolled into September. Bitcoin’s overall hashrate surpassed 100 quintillion hashes — a measure that indicates the combined computing power of the Bitcoin network. 

Busy October as Zuckerberg enters the Congress–Libra fray

At the beginning of October, global payment processor PayPal announced its withdrawal from the Libra association.

The company was one of a number of heavyweights involved in the association, but the first high-profile one to pull out of the project. PayPal went on to tell Cointelegraph that it would keep options of future collaboration open. 

A couple of days later, Tether and Bitfinex were back in the news. The companies were the target of a class action lawsuit instituted by Roche Freedman in the U.S.

The law firm alleged that both companies were responsible for defrauding investors, market manipulation, and hiding illicit earnings. Part of the lawsuit accuses both organisations of manipulating cryptocurrency markets by issuing unbacked USDT and using them to pump and dump markets.

Meanwhile, global messaging service Telegram found itself in the firing line of the U.S. SEC for its record-breaking token offering for the Telegram Open Network project. The SEC announced it would sue Telegram and TON for the unlicensed sale of GRM tokens in 2018.

The TON ICO raised over $1.7 billion through two private token sales, which required an investment of at least $1 million from prospective, accredited investors. 

Problems started when Telegram’s Gram Asia began selling the rights to its GRM tokens through a Japanese-based cryptocurrency exchange. The sale broke the agreement of the original ICO and caught the attention of the SEC as an unregistered token sale.

Toward the end of the month, Facebook CEO Mark Zuckerberg was called to testify before the U.S. Congress in order to further discuss the Libra project.

Zuckerberg assured Congress that Libra would not be launched unless it was given full regulatory approval in the U.S. and suggested that talks over Libra having a majority backing by the U.S. dollar could be considered.

Positive moves for crypto in China and India

November started off on a stronger note for the cryptocurrency industry as Chinese authorities officially scrapped plans to enforce the ban on mining in the country.

Following reports published earlier in 2019, an updated report on China’s proposed industrial structure adjustments removed cryptocurrency mining from the list of undesirable industrial activities.

Meanwhile, India’s parliament decided to delay a sitting that would look at its “Banning of Cryptocurrency & Regulation of Official Digital Currencies” bill. It is understood that the bill proposes a complete ban of cryptocurrency use in India while encapsulating details of a planned central bank issued digital rupee.

The delay was met with positivity from the wider cryptocurrency community, considering the massive population in India and the postponement of stifling laws.

ETH one step closer to PoS, exhumation key to unlocking QuadrigaCX funds?

December 2019 brought down the curtain on an interesting year for the cryptocurrency and blockchain sector.

Ethereum closed the year by rolling out the Istanbul hard fork network upgrade. A key function of the upgrade enables interoperability with Zcash as well as improves scaling and privacy functionality of the network.

On Dec. 9, Bakkt celebrated the launch of the first regulated Bitcoin options and cash-settled futures in the U.S. 

Up in Canada, lawyers representing victims who lost funds in the defunct Canadian cryptocurrency exchange QuadrigaCX filed to have the late Cotten’s body exhumed to prove his death.

Law firm Miller Thomson have requested that the Canadian Mounted Police perform a post-mortem autopsy to assuage concerns that Cotten is indeed deceased. Given the dubious circumstances surrounding his death and the loss of private keys to cold wallets storing millions of user funds, lawyers want final proof that there has been no foul play.

A constantly changing landscape

The end of 2019 brings down the curtain on an all-important decade for cryptocurrencies and blockchain. In the space of ten years, Bitcoin has led the way for a wide variety of projects that have continued to shake up the space.

As the past 12 months have shown, some of the world’s biggest institutions and businesses are actively looking to employ blockchain technology to improve the services they’re offering to users around the world.

The challenge seems to be keeping regulators happy with a variety of projects. Facebook’s Libra plans are the perfect example of this, as the U.S. Congress went as far as saying the project could form a new global financial system.

Digital payment systems of this scale could well challenge the dominance of traditional fiat and global banking systems. The fact that Libra is being built on blockchain technology is just another feather in the cap of the cryptocurrency movement.

Some things seemingly don’t change. Security concerns will always be a challenge for cryptocurrency exchanges, while the cryptocurrency community will continue to be openly critical of projects that aren’t completely transparent about their operations.

Given the developments in 2019, the new year holds a lot of promise for the space. The likes of Facebook and Libra could well be the big news makers once again next year.