The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) $133 million stable coin project shuts down amid SEC concerns
2) Blockchain and cryptocurrency patent applications reach record high
3) ICO fundraising nearing 2018 low

 

Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
LTX Litecoin 26.06 -0.59%
EOSX EOS 1.92 -2.56%
ECX Ethereum Classic 3.82 -4.42%
XRX XRP 0.29 -8.46%
XBX Bitcoin 3,213.63 -10.52%
ETX Ethereum 85.21 -11.12%
ZCX Zcash 50.67 -16.77%
XMRX Monero 39.10 -18.44%
XLMX Stellar Lumens 0.10 -21.19%
BCX Bitcoin Cash 79.67 -26.61%
1. Underlying Asset sorted in descending order by 7-Day Price Change.
2. 7-Day Price Change monitored from 12/09/2018 17:00 UTC thru 12/16/2018 17:00 UTC.

7 day price movers

We released indices for three new digital currencies this past week–EOSX (EOS), XLMX (XLM), and XMRX (XMR). Check out our new index announcement as well as our new indices on TradeBlock’s index page.

Digital currencies are up broadly over the past 24 hours after sliding over seven days. Among our indexed assets, bitcoin cash declined the most, while litecoin declined the least. Our indexed digital currencies remain under pressure as regulatory concerns continue to surface (see first topic below) and a broad de-risking across various asset classes dampens investor appetite. Over the past three months, multiple asset classes have lost significant market value ranging from crude oil to bitcoin (see chart below).

Figure 1: 3-Month Relative Performance Across Various Asset Classes

Mulit-Asset Sell Off

Data for chart sourced from TradeBlock, Yahoo Finance, and Investing.com

 

$133 million stable coin project shuts down amid SEC concerns

On December 13, 2018, the team behind Basis Project, an upcoming stable coin platform, announced that the project would be shutting down and returning capital raised in its ICO. Basis is by far the largest project to shut down operations due to regulatory concerns. The company had secured $133 million over the course of a two month ICO that included prominent investors, such as Bain Capital, Google Ventures, Andreessen Horowitz, and Polychain Capital.

The Basis team has stated that after conferring with its legal council and meeting with SEC officials, it became clear that tokens required in their ecosystem would be considered securities under US law. While the stable coin itself, Basis, would likely not be labelled a security, both “bond” and “share” tokens which are required to stabilize the Basis token, according to the white paper, would have been considered securities.

In complying with US securities laws, Basis would be subject to various aspects of centralization such as maintaining a list of all holders of “bond” and “share” tokens, as well as ensuring that such holders are accredited investors. By restricting access to the ecosystem, the team has stated that it is unlikely the platform would have had adequate liquidity from buyers and sellers in order to ensure that the Basis token remained stable.

 

Blockchain and cryptocurrency patent applications reach record high in 2018

The number of blockchain and cryptocurrency related patent applications filed in the United States reached a record high in 2018 with 380 applications filed. While 2018 saw one of the largest sustained losses in market value for digital currencies, this has not deterred institutions and individuals from looking to secure patents on the novel technology behind these assets.

We ran a query for patent filings that included “blockchain” or “cryptocurrency” in application abstracts on the US Patent & Trademark Office database for the past couple years. We found that cryptocurrency related applications rose from 23 in 2017 to 33 in 2018, a rise of 43.5% YoY, while blockchain related applications rose from 98 in 2017 to 347 in 2018, a rise of 254% YoY. In the chart below, we diagram the number of applications filed each month since 2016.

Figure 2: Blockchain and Cryptocurrency Patent Applications Over Time

Blockchain/ Cryptocurrency Patent count per USPTO

Data for chart sourced from the USPTO database

 

ICO fundraising nearing 2018 low in December

The second half of 2018 has been a difficult period for ICO fundraising as investor interest has waned amidst declining digital currency prices and increased regulatory pressure on ICO issuers. The past several months have seen multiple high profile actions from the US SEC on ICO issuers, which has culminated in projects agreeing to return funds raised. Both the number of new ICOs as well as the amount of capital raised have reached a monthly low for December, which is on pace to record the lowest monthly ICO activity since last year.

Figure 3: Capital Raised and Number of ICOs Issued Over Time

ICO Capital Raised YTD

Data for chart sourced from CoinSchedule

 

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