What I Learned in 2019 — And Where I Was Wrong
A year-end review of my 2019 predictions. DeFi exceeded expectations. Institutional adoption was slower than hoped. Libra changed the conversation more than the technology. And the halving narrative proved more powerful than fundamentals — again.
What I Learned in 2019 — And Where I Was Wrong
At the end of 2018, I wrote that 2019 would be the year of infrastructure. The thesis was that the building happening during the bear market would start producing usable products, and that institutional commitments would begin to materialise as operational infrastructure. A year later, it is time to evaluate that thesis honestly.
Where I Was Right
DeFi became a real category. This was my highest-conviction prediction for 2019, and it exceeded my expectations. The total value locked in DeFi protocols grew from under $300 million at the start of the year to over $650 million by December. Compound launched its v2 protocol. MakerDAO launched Multi-Collateral Dai. Uniswap's volume grew steadily. And the concept of composability — DeFi protocols building on top of each other — moved from theory to practice. DeFi is no longer an experiment. It is an ecosystem.
Regulatory frameworks crystallised. The SEC published its token framework. The FATF extended the travel rule to crypto. Multiple jurisdictions — Switzerland, Singapore, Bermuda — published clear regulatory guidance for digital assets. The regulatory environment is still imperfect, but it is dramatically clearer than it was twelve months ago.
Stablecoin competition intensified. USDC grew significantly. Dai survived the transition to multi-collateral. And the Libra announcement — whatever its ultimate fate — forced the entire world to take stablecoins seriously. The stablecoin category is more robust, more competitive, and more important than it was at the start of the year.
Where I Was Wrong
Institutional adoption was slower than I expected. Again. Bakkt launched but with disappointing volume. Fidelity Digital Assets is operational but has not disclosed significant client numbers. The institutional on-ramp exists, but the institutions are not rushing through it. I continue to underestimate how long institutional decision-making processes take.
I underestimated the power of narrative over fundamentals. Bitcoin's price in 2019 was driven more by narratives — the halving, Libra, China's blockchain endorsement, trade war hedging — than by fundamental improvements in the technology or ecosystem. The halving narrative in particular proved extraordinarily powerful, driving accumulation behaviour months before the actual event. I tend to focus on infrastructure and fundamentals. The market focuses on stories.
I did not anticipate the Libra effect. I expected 2019's most important crypto event to come from within the crypto ecosystem — a DeFi breakthrough, an institutional product launch, a regulatory milestone. Instead, the most important event was Facebook's Libra announcement, which came from outside the ecosystem entirely. Libra changed the global conversation about digital currency more than anything the crypto community built this year.
The Updated Thesis
My infrastructure thesis remains intact, but my timeline continues to be too aggressive. The infrastructure is being built. The products are improving. The regulatory frameworks are forming. But the pace of adoption — both institutional and retail — is slower than I expect, every year.
The adjustment I am making for 2020 is to weight narrative and market psychology more heavily in my analysis. Fundamentals matter over long time horizons. But over shorter horizons — quarters and years — narratives drive prices, and prices drive attention, and attention drives adoption. Understanding the narrative layer is not a concession to irrationality. It is a recognition that markets are social systems, and social systems are driven by stories.
Looking Ahead
2020 will be defined by the Bitcoin halving in May. Whether the halving drives a new bull market — as it did in 2012 and 2016 — or whether the market has matured enough to price it in advance remains the most important open question. DeFi will continue to grow. Institutional infrastructure will continue to mature. And the regulatory environment will continue to evolve.
But the biggest developments may again come from outside the crypto ecosystem — from central bank digital currencies, from the response to Libra, or from macro events that nobody is currently predicting. The lesson of 2019 is that the most important things are often the ones you did not see coming.
Intellectual honesty requires updating your model when reality diverges from your predictions. My model for 2020 is the same infrastructure thesis, with more respect for narrative, more patience for timelines, and more humility about what I cannot predict.