Weekly Market Report - 25th May 2019
This weekly report aims to provide an overview of the crypto markets focusing on secondary market trading. Though nothing here is investment advice, we hope this provides some useful and targeted information.
Weekly Market Report - 25th May 2019
2017 saw the rise of ICOs, as startups raced to raise capital during the greatest boom of the crypto market. However, since late 2018, IEOs seem to have taken the lead. Want to know the advantages IEOs have over ICOs? Read this week’s report to find out!
Market Overview
We are focusing our market overview on the top 100 tokens from CoinMarketCap and the sector classification is roughly in line with what MyToken uses with some minor modifications. We will be continuously updating the sectors and their constituents as we develop a deeper understanding of the crypto ecosystem.
This week’s new participants in the top 100 coins:
ELA, GBC, TFUEL, NULS
Coins that dropped out of the top 100 coins compared with last week:
HC, RDD, ABT, XZC
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from April 23rd, 2019, to May 24th, 2019
Returns vs Volatility
This is a look at the mean and total daily returns vs volatility for the 15 sectors as well as the overall crypto and equity market. Some sectors only contain one or two coins/tokens while others have more than a dozen.
Mean Daily Return vs Volatility from April 23rd, 2019, to May 24th, 2019
We abbreviated the names of several sectors to make it easier to view:
M = Market
DC = Digital Cash
CP/MP = Computing Power/Mining Pool
A/M = Advertising/Media
G/E = Gaming/Entertainment
C = Classics
D/GT = Dividend/Governance Token
E/T = Exchange Token
OC/I = Off Chain/Interoperability
Infra = Infrastructure
Correlation Between Daily Returns of Each Sector
Correlation between daily returns of each sector from Feb 16th, 2019, to May 17th, 2019. Correlation ranges between -1 and 1. A correlation close to 1 or -1 means a very positive or negative relationship between the two subjects, respectively. A correlation close to 0 means no linear relationship between the two subjects.
The above figure shows the correlation between the daily returns of each sector. The correlation has not changed much since our last analysis. Currently, the advertising/media sector shows the least correlation with the remaining sectors. From the price performance chart we also observe this sector to be the most volatile. This is partially due to the sector being composed of only one token.
Focus Spotlight — Initial Exchange Offerings
2017 saw the rise in initial coin offerings (ICO), as it offered startups a gateway to raise capital in the most efficient manner. While this method was convenient and involved less regulatory limitations, many investors find themselves falling victim to scams and pyramid schemes. With problems arising due to lack of transparency as well as increasing regulatory uncertainty with ICOs, IEO has gradually taken the lead since late 2018.
Initial exchange offering (IEO) is similar to an ICO. The major difference, however, is that instead of issuing the token directly on the blockchain via a smart contract, the process is conducted on a platform of a cryptocurrency exchange. An IEO is administered by the exchange on behalf of the project seeking to raise funds, and the token is listed on the exchange following the event.
Compare to ICOs, IEOs offer a number of advantages from the perspectives of both the team issuing the token as well as the investor. For the token issuer, conducting an IEO requires less cost as the exchange usually takes over branding and marketing efforts. Another major advantage is the immediate liquidity provided by the exchange once the event is complete, as a large user base is already guaranteed.
For investors, IEO can help eliminate scam projects. The exchange screens every project that seeks to launch tokens on their platform thoroughly to ensure that their reputation is not damaged. This provides an extra layer of trust and security, as the exchange takes on the majority of the risk of the token sale. Furthermore, most IEOs are conducted on exchanges that require users to pass KYC/AML, thus reducing issues relating to regulatory compliance.
As of now, there are relatively few platforms offering IEOs. Major players now include Binance, OKEx, KuCoin, Huobi, Bitmax and Bittrex. As IEO becomes more and more popular, other exchanges such as Bitfinex are seeking to build their own launchpad. Below is an overview of the leading platforms and their past IEO.
According to ICO Bench, over 60 IEOs have been launched in 2019. In the following chart, we compare the top 5 IEOs based on total funds raised.
As displayed above, BitTorrent is considered the most successful IEO of 2019, with more than $7 million raised on the Binance Launchpad. Despite this being the largest IEO, it is only a small fraction compared to Filecoin, the largest ICO in history, where $205.8 million was generated during the event, along with $52 million raised in its presale.
IEO platforms are still exploring new methods to improve the capital raising process. For instance, during BitTorrent and Fetch.io’s IEO, due to delays caused by a Captcha error, many users were unable to participate in the sale as it ended within minutes. In the more recent IEO with MATIC, Binance introduced a lottery system where users could claim up to 5 tickets based on their BNB holdings. This was well-received by the community and was considered fairer than the traditional first come, first serve basis. The IEO was a success and the token price experienced an uplift after the event.
Compared to ICOs, IEOs provide an increased level of trust among market participants, as the exchange actively participates in the fundraising process and seeks ways to improve security and efficiency. The IEO market is still in a very nascent stage. However, it has the potential of becoming the standard model for raising capital and may soon lead to another fundraising boom.
Thank you for reading this week’s report! Please leave a comment below to share your thoughts and ideas on crypto trading!
Data Source
We included data from sources such as CoinMarketCap for analyzing price movements, volatility, mean daily return, and correlations between each sector; MyToken for sector breakdown; ICO Bench, CoinSchedule, ICO Calender and CoinCodex for IEO information.
Stay Tuned Here
KRONOS is a leading quantitative research firm based in Taipei, Shanghai and Beijing. We’re bringing new asset management strategies to the crypto world by leveraging our combined decades of experience trading in global traditional markets.
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