2018 | Q2 // Market Snapshot

Nik Jacob

Published in

Taureon

3 min readSep 14, 2018

Bear market cycle for traders, business as usual for industry development

Development Updates

The majors continue to spearhead the industry.

BITCOIN sees volatility and commerce dip. Meanwhile $1.3T transaction value exceeds Discover and Paypal, only lagging Visa.

ETHEREUM issues a major roadmap update, with considerations for economics and inflation. Meanwhile, Google enables queries on ETH’s blockchain, and futures may see markets later this year.

COINBASE continues its quest for token market imperialism with a launch of its Custody offering, and $1B+ M&A spree for a suite of exchanges and services. In addition to Institutional Core Principles, new token listing plans were released.

BINANCE leads the gateway with LCX Liechtenstein fiat exchange, a demo of their upcoming DEX, plans for a Crypto Bank, and the launch of Labs investments.

Market Narratives

Crypto market narratives evolved away from the fat protocol thesis to see these emerging themes.

Dapp-ification thinning out protocols

Falling altcoin market capitalizations are pushing investors to re-evaluate the broader thesis in fat protocols, where value is consolidated in the software infrastructure layer through virtuous network incentives (compared to a thin application layer). As the market becomes saturated with tokens of redundant utility, well-funded projects compete to capture network value through technology, talent, market share, network saturation, and partnerships. Inevitably, dense protocols with successful traction shift value towards the application layer through network adoption to generate sustainable utility. Bitcoin brought us the first killer app with payments, followed by Ethereum’s decentralization of the capital raising process for equity liquidity — the market awaits the third iteration of value capture, which will likely come in the synthetic form of a gamified micro-economy (think Cryptokitties with utility) or an unquantifiable abstraction such as neural network growth on a seemingly non-monetary application (similar to social media network’s explosive growth in its heyday). The democratization of capital started with transactions, continued with public ownership, and will evolve into self-sustaining economies.

Advanced Picks & Shovels

In parallel, builders and participants are investing in building out the infrastructure layer through cashflow generating businesses to enhance token-agnostic cryptocurrency adoption through ancillary services such as exchanges, trading sophistication (HFT), compliance advisory, identification management, custody, and scaling mechanisms during the bear market in anticipation of the next wave of growth.

Flight to Quality

As investor fatigue and a prolonged bear market cloud retail sentiment, valuable deals are funded privately by institutional funds and bypass public offerings (ICOs) altogether in lieu of regulatory uncertainty. As the bear market weeds out speculation, the market witnesses a flight to quality, as professionalization of teams with vetted backgrounds and networks secure funding to pursue visionary projects, while other well-funded projects continue to focus on development in an emerging title for blockchain utility and brand dominance. Furthermore, resources see consolidation through means of dominance, M&A, and capital concentration across verticals. Meanwhile, cryptocurrency investors are focused on enabling existing portfolio businesses and strengthening their internal networks for curated information as a buffer from external marketing noise, as the investment space transitions to resemble the venture capital ecosystem.

Investment Landscape

Q2–2018 saw fewer investments with larger checks from big names including an increasing roster of tradtional equity VC funds. Money continues to flow into financial infrastructure and base-layer blockchain advancements.