Exactly a year ago cryptocurrencies were surging, every day another ASX shell was announcing a move into the overheated sector, and Bitcoin was coming off its $US19,288 record high.

And when the end of January came this year, the crash came with it.

Bitcoin, and its fellow cryptocurrencies, plunged. As did confidence in the 30-odd ASX companies that had aligned themselves via business deals or speculation with the sector.

The flood of speculators fled the market and few ASX crypto stocks were able to sell a convincing message about the assets they’d invested in during the bubble.

>>Scroll down for a list of the companies that do, or say they do, have crypto operations.

But experts say the rapid fall masked some huge developments in the space and they expect Bitcoin & Co to start coming back soon.

“I expect Bitcoin to recover as it’s done many times before,” said Apollo Capital partner Henrik Anderson.

“It’s declined more than 85 per cent in the past and it’s recovered every time.”

Mr Anderson pointed out that while the cryptocurrency is volatile, it has always settled at a higher base following a crash than where it was before the run.

Bitcoin almost hit $US20,000 in early December last year. It has now reached what many believe is a bottom at around $US3500.

But at the start of 2017 it had only just crossed $US1000.

Jack Quigley, founder of FinTech Australia, says he’s seeing anecdotal evidence of a “buying spree” in cryptocurrencies in the last month and large holders of crypto appear to be accumulating again.

Drivers of recovery: it’s all about the instos

The experts agree that institutional interest will be the catalyst for a Bitcoin recovery.

Mr Anderson points to evidence such as global investor Fidelity launching a custodial service for digital assets, murmurs from Goldman Sachs and Nomura of doing the same, and the New York Stock Exchange opening the Bakkt digital asset exchange in January.

The Bakkt was supposed to launch in November, but claimed interest was so high it needed more time to on-board institutions.

The Nasdaq is also in on the digital game, launching Bitcoin futures in the March quarter next year.

Fatfish Blockchain (ASX:FFG) chief Kin Wai Lau says growth based on institutional demand will create a more stable recovery than the speculation-born boom of 2017.

Already major traditional investors are putting money into digital assets. There’s the $US29bn Yale fund, the $US40bn Harvard fund, the $US16.4bn MIT fund, and the $US24.8bn Stanford fund

But in a setback for the institutionalisation of cryptocurrencies, the US Commodities Futures Trading Commission (CFTC) said in early December that it won’t approve any crypto exchange-traded funds soon, citing the risk of fraud and market manipulation.

What will 2019 bring?

If 2018 was all about state-level regulation being introduced and the rise of the ‘stable coin’, a token that is pegged to a real-world asset, 2019 will be a little different.

Stockhead asked Mr Anderson, Mr Lau and Mr Quigley to look into their crystal balls and they all agree that Bitcoin will come back with institutions driving that, but they also point to the fruition of some developments from 2018.

“Definitely security tokens, there are a lot of initiatives in that space and the trend is there,” says Mr Lau.

Security tokens, launched via IPO-like security token offers (STOs), are cryptocoins or ‘tokens’ which are regulated as financial products.

So far a gold-backed token called FutureGold has been proposed in Australia.

Mr Quigley believes 2019 will be the year when investors begin to wise up about what they’re putting money into: an asset, not techno-puffery.

“There’s a lot of different terms being thrown around, security token, listed coin offer,” he said.

“But [in investing] it still comes down to the underlying investment, not just the terminology of tech enabled investment.

“It really comes down to financial literacy.”

He says the entry of experienced money managers like Fidelity into the digital asset market will spur a recognition more generally that when investing it’s the quality of the underlying asset that is important, not the fancy tech it’s being enabled by.

Mr Anderson says 2019 will see the launch of new developments in crypto such as Orchid, which raised $US125m this year to build an alternative to the Tor network, as well as the launch of security token exchanges.

He says it’s hard to see when security tokens will be widely adopted because as regulated products, they must resolve issues such as being legally compliant in each jurisdiction where they’re offered.

The more cutting edge stuff will be the launch of ‘decentralised exchanges’; that is, a way to trade digital assets without having to go through an exchange at all, but be able to buy and sell using the underlying blockchain software.

“The blockchain becomes the trading platform so you don’t need to give up custody of your assets to trade,” Mr Anderson said.

“I believe this is part of a bigger picture which is called the open financial system, so we see some early companies and some early excitement in what’s called the open financial ecosystem.”

Bitcoin as digital gold

As fears grow that the world is entering an economic downturn, the question will be whether cryptocurrencies are spanked alongside equities, or really do become digital gold.

For the last few years experts and optimists alike have claimed cryptocurrencies are the equivalent of digital gold: a commodity-like repository of value.

But Bitcoin, Ethereum, Ripple and the others have not been around during an economic downturn and there is no way to know how people will treat it if the world is heading into a downturn, says Mr Quigley.

Mr Anderson, on the other hand, believes the “Bitcoin as a potential digital gold” narrative will grow in the coming years.

He thinks the world will be engulfed in another financial crisis in the next five years.

“I think crypto assets will probably benefit from such turmoil.”

A table of the ASX stocks Stockhead monitors that have blockchain and crypto operations, that say they do, and those they just enjoy the strong online rumours that they may.

TickerNamePrice Dec 18% change year to dateMarket cap
8CO 8COMMON LTD0.03523 $5.1m
AB1 ANIMOCA BRANDS CORP LTD0.099488 $68.3m
ACL ALCHEMIA LTD0.009-18 $3.2m
BPGBYTE POWER GROUP0.009Suspended whole year $28m
CCA CHANGE FINANCIAL LTD0.065-92 $5.6m
CCP CREDIT CORP GROUP LTD18.01-14 $889m
CHP CHAPMANS LTD0.005-95 $1.4m
DCC DIGITALX LTD0.052-86 $25.5m
DW8 DIGITAL WINE VENTURES LTD0.005-57 $4.1m
FFG FATFISH BLOCKCHAIN LTD0.018-77 $10.2m
FGF FIRST GROWTH FUNDS LTD0.008-59 $12.4m
FTC FINTECH CHAIN LTD0.047-64 $32.2m
GTG GENETIC TECHNOLOGIES LTD0.0075-38 $23.8m
HAS HASTINGS TECHNOLOGY METALS L0.165-54 $124.5m
ICI ICANDY INTERACTIVE LTD0.06-63 $18.5m
IOT IOT GROUP LTD0.001-90 $1.8m
KYK KYCKR LTD0.079-61 $12.1m
LNU LINIUS TECHNOLOGIES LTD0.054-68 $51.6m
MBM MOBECOM LTD0.12-70 $22.3m
MTL MANALTO LTD0.001-86 $3.6m
NOV NOVATTI GROUP LTD0.19-48 $29.1m
OOK OOKAMI LTD0.012-92 $3.6m
PCH PROPERTY CONNECT HOLDINGS0.001-67 $1.4m
PIL PEPPERMINT INNOVATION LTD0.015-32 $13.8m
PPL PUREPROFILE LTD0.072-55 $9.2m
RFN REFFIND LTD0.006-87 $3.6m
S3R SERPENTINE TECHNOLOGIES LTD0.003-77 $2.2m
SHO SPORTSHERO LTD0.11515 $29.38m
SRO SHAREROOT LTD0.003-40 $4.7m
TNT TESSERENT LTD0.053-12 $6.8m
TSN TRANSACTION SOLUTIONS INTERN0.008-36 $17.4m
TTL TRANSCENDENCE TECHNOLOGIES L0.016-33 $3.1m
YOJ YOJEE LTD0.068-77 $57.6m
YPB YPB GROUP LTD0.013-76 $11.2m
ZYB ZYBER HOLDINGS LTD0.014-22 $9.1m