State of the Market [STM] | Aug/2018
TLDR
- Sustained (bear) market cap levels reflect a shift from retail speculation into a transition period — one that is heavily reliant on regulatory validation to usher institutional capital inflow.
- Investors are starting to look beyond the marketing hype into meaningful data and research to evaluate the landscape to make more prudent investment decisions.
- Bitcoin exceeds market dominance of 50% as investors seek a flight to quality and exit positions in smaller altcoins.
BTC
The market is impartial to the slew of recent positive updates such as NYSE/ICE’s Bakkt launch announcement, arguably one of the most significant advances in recent months, yet news of the SEC’s delayed decision on the VanEck SolidX Bitcoin ETF sends the market down a death spiral. Further developments such as Coinbase’s instant purchase option and the addition of framework-worthy digital assets are 6 months too late, as the retail era of cryptocurrency hype seems to be a faded memory from 2017. Meanwhile, price support hinges on elements of adoption and economic utility, such as Turkey’s Lira currency crisis. Meaningful upside rests in the hands of regulatory bodies to pave the path for institutional capital. A market bottom would be more evident when miner incentives breach breakeven prices and miners stop mining (around 3–4K USD) according to an interesting OpEd by a major exchange operator and research hub.
ETH
Recent ICO raises with ETH treasuries have liquidated over 100,000 ETH in the last 30 days to limit exposure. The combination of ICO fatigue (as reflected by lower returns) and competitor politics (ahem.. EOS) is putting downward pressure on ETH to breakeven vs. prior year prices despite maintaining the incumbent stronghold in development and decentralization within the cryptocurrency community. Many eyes are eagerly monitoring the progress of projects with multi-billion dollar valuations pre-launch, such as Dfinity, Telegram, and Hashgraph to assess the validity of their claims and supposed advances to current models. Current ICOs raising funds are faced with tougher scrutiny, namely, “does this project need a token?” A new project, dubbed Handshake, is looking to simplify and iterate on the model using an incentive structure specifically designed for value additive developers and entities.
Altcoins
The most recent market correction shifted BTC dominance >50%, reflecting a potentially fatal pendulum swing for many smaller altcoins which may not survive a return to meaningful levels. Perhaps this is what the space needs, as speculators start to exit short term positions and take losses, or consolidate to positions in BTC and stronger alts which can sustain valuations based on perceived utility. Meanwhile, the market looks towards an iteration of the ICO model to provide a more regulated (and accountable) means of capital raising, possibly through an STO wave. A small but impactful cohort of developers continue to make advances and meaningful progress on blockchain applications as we usher in a builder phase with a higher focus on technology and longer term incentives. Perhaps serious Funds could play a meaningful role in that evolution through participation and incentives. Meanwhile, big names continue to invest in the space and establish positions for what is to come.
