The year 2018 was not a great year for cryptocurrencies from a fundamental point of view. Cryptocurrencies went from their all-time highs down to a “discount” of an average of 90%. Bitcoin went from being an outlaw to a sheriff.

Is this a coincidence?

Initially, Bitcoin was perceived as the de facto medium of exchange for all kinds of online criminal activity. If someone were to mention the word “Bitcoin” before 2017 – this would immediately raise the eyebrows of the listener due to its association with illicit activities.

Without any doubt, the price and not the technology behind Bitcoin was one of the primary drivers behind Bitcoin’s brand.

Bitcoin started as a project among geeks that went on to something that caught the attention of retail investors.

A straw poll among consumers will suggest that most people would have bought it for speculative reasons – among other things they wouldn’t know that they could do a transaction from one bitcoin wallet to another without the need for a third party like a bank. This means that they don’t appreciate, let alone understand, the technology underlying it.


The steep increase in the price of Bitcoin and other cryptocurrencies made them one of the most lucrative assets in history. Unlike bonds and shares, there aren’t any geographical restrictions or minimum investment amounts.

If someone were to invest in shares from a different jurisdiction one would have to go through his stockbroker who in turn has to place an order with his/her foreign counterpart. The asset would need a high rate of return to cover the fees unless one were to make a substantial investment.


Not only did Bitcoin allow “investors” to trade on a global level, the barriers to entry are quite minimal. In the case of Bitcoin, there is no need to go to a broker unless you don’t have the know-how of simple online banking tools. 


Bitcoin is simple to obtain, apart from having entry costs that are quite low. It can be obtained mainly through three ways: an exchange, over the counter or by mining. Trading cryptocurrencies became an international activity regardless of wealth and location.


The higher the price of Bitcoin went, the more media attention it gained.
This attracted more people who joined the game in the hope of becoming the next millionaires. Everything went smoothly until the price of Bitcoin reached all-time high of USD 19,665.39 (Source: https://athcoinindex.com/).

Once the all-time high reached the price of Bitcoin came spiraling down to its lowest levels of USD 3,000. This didn’t stop people from purchasing the Bitcoin with the hopes that the decline in the price was just a hiccup. They got in the game with the purpose of buying low and selling at a profit.

However, more and more people kept on buying despite all the warning signs. Ultimately, people either sold Bitcoin at a loss or kept on holding with the hope of someday selling at least the price at which they’ve bought it. In most cases, this has not yet happened.

This led people to calling Bitcoin and other cryptocurrencies a scam which prompted regulators to intervene and put an end to this wild speculation. This situation made more investors  panic sell driving the price lower – creating a self-fulfilling prophecy that Bitcoin was indeed an elaborated scam. This gave Bitcoin and other good projects a bad name, and was one of the catalysts behind the 2018 bear market.

Aside from Bitcoin, there are other cryptocurrencies, with one of the most notable ones being Ethereum. Unlike Bitcoin, Ethereum incorporated smart contracts which, amongst other things, allows its users to raise funds for projects by issuing tokens in return for an investment in that project.

Unfortunately, this novel method of raising funds has also been used in illegitimate ways; It’s estimated that over 75% of the ICOs during 2017 and 2018 turned out to be scams or ill-led.

There is always something positive from a negative event like the bear market.

One of them is that the market makes everyone humble.

The bear market cleaned the market from useless projects and scams that raised millions through plagiarised white papers while promising “too good to be true” returns.

One case in point was Bitconnect. There was a time where hardcore fans were still defending the project despite the founders’ indictment by law enforcement agencies.

There were other projects which despite not being a scam had a substantially flawed business model. This included projects that dubbed themselves as Ethereum killers as they promoted themselves being faster, scalable and have cheaper transactions, without anything to prove it. However, they still managed to raise funds. This was a cause for concern.

As more and more people got burnt,  the regulators started acting quicker in order to place certain safeguards. The three approaches which were mostly adopted were an outright ban, a wait-and-see one, and regulation.

A typical investor would favour a regulated environment, as this would bring legal certainty and peace of mind knowing that even though a project may have a flawed business model, those behind it are held accountable.

In February 2018 the Government of Malta published a paper “Malta – A Leader in DLT Regulation”. The publication was hailed as emancipatory as it attracted two of the largest cryptocurrency exchanges in the world, Binance and OKEx, to operate from Malta.

The focus was on the underlying  technology, Distributed Ledger Technology (DLT)/blockchain, and the legal aspects of cryptocurrency trading and creation. Therefore, in June the Government of Malta published three bills which since have become legislation, with these becoming known as the “crypto laws”. These consist of The Malta Digital Innovation Authority Act, the Virtual Financial Asset Act and the Innovative Technology Arrangements and Services Act.

This gave Malta the status of the “blockchain island”.

However, some critics sustained that regulations are useless from a technological point of view. How is a regulator going to control Bitcoin, if Bitcoin was specifically designed to be outside the control of the Government?

The truth is that it can’t be controlled at its very core. Andreas Antonopoulos once said “Bitcoin isn’t being tested by governments, governments are being tested by Bitcoin. It forces them to reveal their true colours.”

The regulator has very limited options to control cryptocurrencies like Bitcoin – one of the best ways to control it is through the entry and exit points i.e. when Bitcoin becomes fiat or a token and vice-versa through exchanges, over the counter trades, etc.

If Bitcoin remains on its own network there isn’t any way that the regulator can control it unless the regulator physically unplugs the millions of nodes spread around the world. This, by and large, can also be seen to apply to other cryptocurrencies that utilise open, permissionless, public blockchains.

Andreas Antonopoulus went on to say that “Countries that do not respect the individual freedom of their own citizens are against cryptos.”

This doesn’t apply to Malta.

The Government of Malta invited global players in the cryptosphere to see how they can work as partners. The process involved writing the rules together. Malta acted proactively with other jurisdictions adopted a wait-and-see approach. It started reaping the benefits of its success. Other nations soon started to do the same.

As mentioned above, most investors invest in cryptocurrencies for purely speculative reasons – mainly to buy low and sell high. Investors investing in cryptocurrencies participate in Initial Coin Offerings (ICOs) and Security Token Offering (STOs) as they believe that the return on such investment could be substantial. If it isn’t, then the investment wouldn’t have fulfilled its purpose. Naturally, this does not apply to those who participate in such ICOs/STOs in the belief that the project will succeed in the long-term regardless of the price of the underlying tokens.

Participating in ICOs / STOs requires the transfer of Bitcoin or Ether, among other cryptocurrencies, from the wallet of the investor to that of and of the recipient ergo the fundraiser. The investor, in return, will get tokens in the hope that they will increase in price or fulfill the functions promised by the issuer.

The Maltese regulations are putting a burden on the project issuer to make sure that the crypto funds received are from legitimate sources through knowing your customer (KYC) and anti-money laundering (AML) procedures. Therefore, the regulator is controlling the entry and exit points by placing the issuer as a subject person.

Moreover, the regulator is keeping the issuer of the whitepaper accountable along with the Virtual Financial Assets Agent (VFA Agent) who assist the issuer. Once the whitepaper is approved by the regulator, the issuer has to ensure that all that is promised and envisaged within the whitepaper is carried out.

This is an investor’s dream as the regulator is helping greatly by separating the wheat from the chaff through the assistance of the VFA Agents. An investor wouldn’t have to go through hundreds of projects. This will consist of a handful of projects with better value.

Which project will you invest in? A project with an unknown origin or one that is certified by a regulator?

Unfortunately, this is already too late for most retail investors as the bear market has already killed their dreams of becoming instant millionaires, with lots of projects falling victim to the bear market.

The regulations that were designed to protect retail investors will protect institutional investors who look for legal certainty. Unlike retail investors, they have the know-how and expertise. They are more equipped in doing better investments – first, they’re investing their client’s money and secondly they have fiduciary duties towards their clients.

As we’ve already seen cryptocurrency exchanges are turning their focus to institutional investors e.g.  Coinbase Prime, Coinbase Custody, Bakkt, Chicago Mercantile Exchange and many more.

Despite all this, the positive news isn’t reflected in Bitcoin’s and other cryptocurrencies prices.  Institutional investors tend to look at the long-term side of things.

Good things happen to those who wait.

Andy Cassar

Andy Cassar

Experienced Assistant Director Of Administration with a demonstrated history of working in the financial services industry. Skilled in Analytical Skills, Government, PHP, Financial Advisory, and Management. Strong administrative professional with a Postgraduate Certificate focused in Business Research Methods from Heriot-Watt University.