Token Report Newsletter: Vest Season Is Here
Keep calm and carry on-chain
Earlier this month, we looked at the growth of total ICOs closing on alternative protocols (or, platforms) to Ethereum.
As a matter of interest, here is how those alternative platforms’ corresponding currency in April fared against the reigning ICO champion, ETH:
The entire crypto market saw a rally in April, but the alternatives to Ethereum’s ICO platform took home more gains. Why is that?
One determining factor in how a cryptocurrency’s price behaves in a market-wide rally is the amount of access crypto investors have to trade it; or, how many exchanges the cryptocurrency is listed on.
Since the Ethereum ecosystem has been active for much longer than these alternatives, it inherently has more outlets (or, exchanges) for investors to acquire the base currency.
A side effect Ethereum has for being the incumbent dApps and ICO cryptocurrency is, ETH itself is frequently used as a trading vehicle to purchase large volumes of alternative cryptocurrencies, including these alternative ICO platforms. This trading activity, i.e. selling ETH for EOS, can contribute to a negative impact on Ethereum’s price.
To visualize this, we can use CryptoCompare’s free exchange data aggregator to look at the share of each denomination of the money flowing into these ICO currencies. (This is for a 24-hour period between April 26–27.)
(If you’d like to take a closer look, here’s direct links to this data: ETH — EOS — NEO — NEM — WAVES — Stellar)
Ethereum, the largest of these ICO platforms, also has the largest share of capital inflow in the form of the “almighty” US dollar, as well as the Euro. In comparison, the capital inflow of Waves, whose currency you can only purchase on decentralized exchanges, is dominated by Bitcoin. For each of the Ethereum alternatives, their capital inflow is made up of roughly 5 percent ETH.
The fact that so much of the volume in trades for Ethereum involves US and European fiat currency is very beneficial for ICO teams who have fundraised using Ethereum, since that means it is more straightforward (and likely cheaper) to exchange large amounts of Ethereum for fiat then, say, Stellar.
Along the same vein, ICOs based in Japan stand to benefit if they fundraise using XEM (NEM’s currency), since so much of the volume is JPY.
The dynamics of which exchanges an ICO platform’s cryptocurrency is listed on, and how much liquidity there is between the cryptocurrency and different national currencies, are considerations that ICO developers and investors need to make when comparing the available platforms.
Another important consideration, and perhaps one that has a more direct impact on the long-term performance of these ICO platforms, is the initial funding (or, “warchest”) that the platform’s core team obtains. This initial funding can be used to pay for development and marketing of the platform, or be used to invest directly in ICOs using the platform.
Here is how the alternative ICO platforms’ initial funding compares to Ethereum:
NEM, NEO, and Stellar have not started off with nearly as large warchests as Ethereum and Waves.
Not included in this chart is EOS, whose crowdsale is still ongoing and has purportedly raised over $700 million USD. According to co-founder Brock Pierce, EOS plans to raise “several billion” more, which the central EOS entity will use for their own VC-like investments. EOS holders are meant to partake in the control, ownership, and value generation of that EOS fund.
These widely varied initial funding rounds make it appear that the playing field is not level for these ICO platforms; that is, at least in how much capital the core team has to expend on mantaining and growing the platform. The initial funding is not the only way in which the core teams of these ICO platforms fund themselves, though; they each have a different structure of treasury funds and develepor bounties. That is a topic for another newsletter.
What other factors will impact the long-term success of these ICO platforms? We’ll be discussing in our Telegram forum.
Crypto Climate: 👔Vest Season Is Here👨💼
In case you are unaware, midtown finance executives are trend-setters, and not only in fashion.
In the past week we saw a taste of what will likely be the “look of the year,” which is, traditional finance companies adopting blockchain technology.
For instance:
- BBVA announced the first loan issued by a global bank using a
blockchain — Coin Telegraph - The Winklevoss Twins have inked a deal with Nasdaq to provide market surveillance for their exchange, Gemini — Bloomberg
- Nasdaq’s CEO said the firm is “open to becoming a cryptocurrency exchange” — CNBC
- A top Goldman Sach’s executive left the firm to join Galaxy Digital, a “cryptocurrency merchant bank” — Bloomberg
It sure looks like crypto is doing the Wall Street Shuffle.
1 Short Read: Your Blockchain Week Homework.
Boston Blockchain Week just wrapped, and I am sure you will be seeing news stories extrapolated from the excellent panels that our city hosted.
In case you had a serious case of FOMO, here’s what you can access online, for free, so you can at least
Last Week’s FOMO & FUD
You don’t have to believe any of it, but here’s what the Internet was saying about people and projects in crypto last week.
FOMO:
- Binance became more profitable than 148-year old Deutsche Bank — CCN
- The Next Web launched a promotion for their publishing brand, Hard Fork, and their upcoming TNW Conference (May 24–25). 50% of attendees’ admission fee will be “invested into cryptocurrencies using the eToro platform.” At the end of July, the entire fund is liquidated and TNW splits the profit with the ICO Pass holders
- Elio Motors announced ElioCoin, a “Securitized Token Offering” which they say will be tradeable for the Elio electric vehicles they plan to produce with the funds — The Drive
FUD:
- Congressman Brad sherman (D-CA) floated a ban on ICOs during a Financial Services Committee hearing, citing coin offerings as a threat to US repatriation — CoinTelegraph
- UCL Center for Blockchain Technologies has cut ties with the IOTA Foundation after its founders threatened legal action against researchers from MIT’s Digital Currency Initiative — Twitter
- Vitalik Buterin announced he is boycotting Coin Desk’s upcoming New York event, Consensus (May 14–16), over their “enabling of giveaway scams” — Business Insider
- Bitcoin Bravado, a Discord chat group, was accused by one of its members of “scheming to create a pump and dump scheme”; the member also claims to have reported the group’s leaders to
the FBI and SEC — News BTC
Who to Follow:
“Ethereum is currently at risk of being classed as a security. While most people don’t doubt that the ethereum presale was likely a securities issuance, they argue it is now decentralized enough to no longer fit that bill. If it turned out today that the Ethereum Foundation controls a larger supply of ether than they admit and use it to move the market in meaningful ways or even to influence consensus once ethereum has moved to proof-of-stake, that would clearly hurt their decentralization argument.”
From “Ethereum Presale Dynamics Revisited” by Hasufly on Medium
Contact us:
✉️ galen@tokenreport.com / kyle@tokenreport.com
Token Report is an independent financial information service founded by Galen Moore and Peter Vessenes. Galen is a financial journalist with a background in startups, venture capital and launching news sites. Peter is a co-founder of the Bitcoin Foundation, and launched the first VC-backed Bitcoin company in 2011. He is managing director at New Alchemy, a boutique consulting and investment group based in Seattle, Wash., that is making a pre-seed investment in Token Report.
Nothing contained in Token Report materials or posted at tokenreport.com constitutes an offer or a solicitation of an offer to buy or sell a security, financial instrument, or other category of asset, or investment advice or recommendation of a security, financial instrument or other category of asset. Tokens involve risk and are not suitable assets for everyone. Token Report believes its information was obtained from reliable sources but does not guarantee its accuracy or completeness and accepts no liability for losses arising from the publishing of this information. The information provided by Token Report is not a substitute for financial, legal and other professional advice. Each individual should always consult his or her own financial, legal or other professional advisors and discuss the facts and circumstances that apply to the individual.
