Cryptocurrency market has been recovering from the reigning bears in 2019
Blockchain and Crypto market trends explained!
InWara provides research on ICO and STO projects. In addition to ICOs/STOs, we provide research on Crypto exchanges and their security, private blockchain companies, Hedge Fund, VC, HNI and angel investments in the Blockchain industry and Mergers/Acquisitions in the space.Disclaimer: this is not financial advice. For more details visit terms and conditions.
2018 was a challenging year for cryptocurrencies with Bitcoin’s price hitting a yearly low of $3125 on Binance in the 3rd week of December. Nevertheless, 2019 promises some interesting developments which will impact the cryptocurrency market. InWara’s market intelligence platform is conducive to understanding the changing dynamics of 2018 and help build an independent data-driven perspective for times to come.
One of the key elements which InWara focusses on are the STOs — Security Token Offerings which have picked momentum when the ICOs — Initial Coin Offerings have tapered. In an evolving ecosystem, investors are still bullish — selectively on the products and the ecosystem has been showing initial signs of maturity with dealmaking picking up the pace.
Furthermore, liquidity drivers — managed by exchanges have shown initial moves from centralized to decentralized. On the regulatory front, governments are taking positions either for — with liberal regulations or against — with stringent regulations. Bitcoin ETFs are the victim of the delays in regulations and are a hindrance to institutional money.
STOs pick up momentum over ICOs
Security Token Offerings (STOs) are similar to Initial Coin Offerings (ICOs) except that they grant the investors a right on the company’s tangible assets much like stocks or bonds instead of just the tokens.
Why are VCs and Institutional Investors bullish about STOs?
Funds raised in ICOs have traditionally been unregulated, with unintended consequences such as management teams spending the money raised lavishly, not being accountable, or simply scams.
With the growing number of scams hitting the news in 2018, investors both institutional as well as retail, started to lose faith in ICOs. New structures were being explored by the community and one of the more prominent and successful so far were STOs.
STOs are registered tokens commissioned with the Securities and Exchange Commission (SEC) which make the management teams accountable to a large extent. With a regulatory umbrella behind it, STOs are an alternative which provides asset backing — a need to for the retail and institutional investors.
InWara’s data shows the steady progress in the number of STOs coming up by month, it is evident that the teams have started to acknowledge this and the ones with a genuine project idea wishing to raise funds are opting for STOs.
Not only investors but also the companies like Fieldcoin, Global Reit that are doing or have done ICO are doing/planning to do STOs.
Institutional investors bullish on cryptos
Despite the fall in Bitcoin price from an all-time high of $20,000 to $3500 in Dec 2018, institutional investors like Digital Currency Group (DCG) are not shy of investing in cryptos. DCG owned Grayscale Investments accumulated around $826 million worth of Bitcoins. DCG was also the leader amongst VCs with 20 announced rounds where it participated. Other notable VCs include Pantera, Node, Blockchain Capital and Andreessen Horowitz.
Source: InWara’s Annual Report 2018
However, the bearish sentiment has hampered the valuations and hindered the funds raised in private investments, with Q4–2018 impacted the most — a 65% dip in funds raised QoQ. Despite the last quarter dip, overall the private funding has seen significant growth in 2018 with total funding rounds doubling as compared to 2017
Source: InWara’s Annual Report 2018
Crypto Trading shifting towards decentralization
Single point of failure such as hacks has posed a serious threat to centralized exchanges. On the other hand, decentralized exchanges which operate on multiple nodes mitigate the risks and help assuage investor fears. Top exchanges like Binance, Cobinhood are working on launching their decentralized platform soon (source: Top crypto exchanges article).
Top 5 Centralized and Decentralized exchanges, trading volumes (in $MM) compared!
Trading volumes in $MM (Source: InWara’s crypto exchange database)
The decentralized exchanges are in their nascent stage of operations. Liquidity, currently low, is expected to improve as the exchange participants and market makers adapt to the new trading systems.
Long awaited approval of Bitcoin ETF
The delay in approval of Bitcoin ETF has been one of the early triggers sending the price of Bitcoin down in 2018.
Source: InWara’s Market Intelligence Platform
This graph plots the RoIs of top listed ICOs between July 1st, 2018 and September 30th, 2018.
The vertical lines A, B, C, and D represent an event or news that may have affected the cryptocurrency market. The line ‘A’ represents the day when SEC officially postponed its approval hearing of Bitcoin ETFs.
The delay caused a massive crash in the Crypto space with ICOs tanking more than 50%. If the SEC approves a Bitcoin ETF, then we can expect a trend reversal followed by a market recovery (Source: What happens if SEC approves ETF).
Regulations and Sale Restrictions of cryptocurrencies
SEC in the US and other governments worldwide have put in place regulations for ICOs, to protect investors and restrict foul play. USA is leading the ICO main sale restriction without a clear legal framework this could continue into 2019. The number of ICOs restricted in the US was high at 540 followed by China at 304.
Source: InWara’s Annual Report 2018
Mergers and Acquisitions on the rise
2018 saw some major M&As like that of Bitstamp acquired by NXMH, Chain by Stellar and BitTorrent acquiring Tron. These large-scale deals are an early indicator that the market is poised for growth as well as consolidation.
Source: InWara’s Annual Report 2018
Blockchain and Cryptocurrency space has seen significant M&A deals. There is an almost 100% increase in 2018 in comparison to 2017, this trend is likely to follow in 2019 as more traditional companies & businesses move onto blockchain ecosystem to do business.
To sum it up
These market trends indicate the maturing crypto market, however, there is a long way to go. Blockchain as technology has the potential to take over the digital currency ecosystem as indicated by the significant growth in the adoption rate. The profound impact can be already seen in sectors such as Fintech, Financial Services, Healthcare, Gaming.