The ICO economy succumbed to a dramatic decline in Q2 of this year. Such was the extent of the slump that its pushed the average ROI for ICOs into the red for the first time since records began. New figures released this week show the severity of the great ICO slowdown.
Token Sales Are in Trouble
The fact that most ICOs from the last quarter are mired in the red will come as no surprise: anyone who’s glanced at their portfolio in the last 90 days will have deduced that much. New figures from ICOrating.com reveal the extent of the decline, but do provide a glimmer of hope for certain segments of the market. A detailed report highlights a number of interesting trends, the most headline-grabbing being the fact that despite an increase in funding, from $3.3 billion in Q1 to $8.3 billion, 50% of ICOs in Q2 failed to raise more than $100,000.
Other noteworthy statistics include:
This latter statistic could be taken as a sign of progress, but as ICOrating.com observes, “The absence of a working business had no effect on fundraising success.”
If You Bought into an ICO in Q2, You’ve Probably Lost Half Your Investment
In Q1 of 2018, ICOs made a median return on investment of 49.32%. In Q2, that figure slipped to -55.38%. It’s hard to tell what’s more surprising: the fact that ICOs lost so badly in Q2 or that they turned a modest profit in Q1. Looking back, it’s hard to recall a lot of winners from the start of the year, or indeed from at any point this year. Like the cryptocurrency market as a whole, the ICO industry has suffered from the bloodletting that has seen every major cryptocurrency, bar three, at a loss for the year to date.
ICOrating.com’s research is to be commended for the level of granular detail it provides. Its 64-page report reveals, for instance, that 53% of all dapp-related ICOs failed, which tallies with figures showing that no one’s using dapps at this point in time.
The research also found that projects at the idea stage – i.e comprising little more than a whitepaper and a basic team – raised just $4.5 million in Q2, whereas those with an MVP fared 8x better.
Finally, Exchanges & Wallets, Real Assets, and Computing & Data Storage were the top three categories for fundraising during this period. Financial Services, Privacy & Security, and Banking & Payments, on the other hand, all wound up in the red. Q2 has been the toughest three months for ICOs yet. Token sales scheduled to go live in the remainder of 2018 will be praying for more forgiving conditions.
After strong gains by Bitcoin and other cryptocurrencies at the start of July, a downturn arrived a month later. Over a ten-day span the total market cap of cryptocurrencies cratered by 26 percent, from $297 billion down to $221 billion (8/9/18), according to CoinMarketCap. The market loss of $76 billion erased more than all of the gains made in July.
A Bloomberg News report revealed a massive margin call was made on a wrong-way trade as the likely cause behind the sharp drop in the market.
But Goldman Sach’s chief investment officer Sharmin Mossavar-Rahamani added fuel to the fire, declaring:
“…We expect further declines in the future given our view that these cryptocurrencies do not fulfill any of the three traditional roles of a currency: they are neither a medium of exchange, nor a unit of measurement, nor a store of value.”
Yet, within the same week, Goldman spoke from the other side of its mouth as the investment bank considers launching its own cryptocurrency custody solution.
What is going on?
One of the contributing factors in the initial rise of cryptocurrencies at the start of July can be attributed to Coinbase claiming it solved the custody issue. Later in the month, press releases from Fusang family office in Singapore and Northern Trust state they, too, are going to solve the number one problem plaguing the market.
Coinbase’s crypto-custody announcement got a lot of press. But if the six-year-old company that makes a digital wallet and an exchange-trading platform had really, fully solved the custody issue, then why did the surge in the cryptocurrency market decline despite that whale margin call? Stranger still, why did Coinbase announce the hiring of Jeff Horowitz, the former head of compliance at Pershing Capital in the same capacity at Coinbase, a full month after the custody press release?
Yes, Coinbase’s media push is to win new institutional business. But there isn’t a point for ‘smart money’ – hedge funds, pension funds, endowments, mutual funds, banks, and insurance companies – to enter the market. So has Coinbase actually solved the underpinnings of a true crypto custodian solution?
What is Custody?
Custody is “a service in which a brokerage or other financial institution holds securities on behalf of the client. This reduces the risk of the client losing his/her assets or having them stolen. They are also available to the brokerage to sell at the client’s demand. Like a bank, custody provides an investor a place to store assets with little risk. Unlike a bank, custodians are not allowed to use the items in safekeeping for their own ends…”
In “reducing the risk” of losing clients’ assets in the Digital Age means that security and safe storage of assets are paramount importance. Yet when one looks at the cryptocurrency landscape it is littered with data breaches, with billions of dollars in assets hacked or stolen. In the first five months of 2018, $1.2 billion were stolen – three times the amount of theft in 2017.
That hardly instills confidence in the emerging market.
Beyond security, selling assets “at the client’s demand” is also crucial for a complete custody solution.
There are other components as well, such as over-the-counter trades (OTC). How would OTC work with crypto-wallets?
What Custody is Not
With blockchain products leaking digital coins institutional investors will remain on the sidelines waiting for the new market to cure its most pressing need. The three main products in the space include exchanges, wallets, and “sharding” of assets into bits of data stored on hundreds of nodes around the world. Yet, with each one of the solutions there are gaping security holes.
The exchanges, which have suffered three-quarters of the breaches the past three years, according to www.myntum.io analysis, are trading platforms first. Security is an afterthought. Getting an exchange approved by regulators and into the market is the main focus. On digital wallets: When a person can lose, steal, or throw a device away it does not meet the definition of custody. Nor does sharding, which stores pieces of assets on a network of nodes, the same nodes that cryptojacking siphons mining power and has disrupted at least one online videogame.
“There are OTC trades, where wallets won’t work and where reporting mechanisms don’t exist – not in the way they do on Wall Street,” said Manny Alicandro, a New York City lawyer in the cryptocurrency space at a FinTech event. That might change, as the New York Stock Exchange announced it plans to launch a Bitcoin trading platform.
Coinbase lists five categories that make up its quasi-custody solution: segregated cold storage, dedicated coverage, financial and security control, SLAs for fund transfers, and insurance provided by Coinbase.
The most problematic is the most important: Who is watching over the segregated accounts?
It appears Coinbase partner Electronic Transactions Clearing (ETC), Inc.; a Los Angeles based broker-dealer, will manage the custody piece. ETC, however, just paid an $80,000 fine to the SECfor breaking several custodian rules of the 1934 Securities Exchange Act in 2015, including using clients’ money to cover margin accounts.
Sure, the fine is a pittance. But does it instill confidence in the market?
In Coinbase’s custody solution there is no mention of reporting to the public or how OTC trades would be handled. Sure, moving crypto assets offline, offchain in cold storage is one way to safeguard them, but having in place service level agreements (SLAs) to seek permission of a future date from Coinbase on when clients could transfer money from their accounts doesn’t meet the custody definition of selling assets “at the client’s demand.”
Other solutions with “hot” – as opposed to cold – storage and transparent reporting of transactions, clearing, and settlements need to come to the fold to solve custody. When they do, then institutional money will flow into the new asset class. Xapo wallet, with a cold storage Bitcoin vault, has an institutional page, but like Coinbase, it falls short on solving custody.
It’s good to see Nomura, Fidelity, Fusang, and Northern Trust try to solve the problem. But none of these financial institutions are blockchain-based software companies, so it will be interesting to see what they produce.
The real litmus test for the market is when trillions of dollars from institutional investors will flow in and the cryptocurrencies market will expand in value.
Until then, custody remains a complex problem for the crypto community to solve.
From a big pile of EOS bounties to toilets on the Tron blockchain, here’s a look at some of the stories breaking in the world of crypto.
EOS has handed out the vast majority of all bug bounties on record. To date, the company has rewarded hackers with more than $440,000 for finding loopholes in its platform.
According to Hard Fork, that’s two thirds of all crypto bug bounties in 2018.
Tron is putting toilets on the blockchain. A new partnership with China-based portable toilet maker MOSHROOM will let people pay to use the bathroom via cryptocurrency. The companies will begin by targeting Southeast Asia and India.
Bitcoin, Ethereum and Litecoin
A new poll from the American Institute of CPAs finds that 48% of Americans are completely unfamiliar with Bitcoin, Ethereum and Litecoin.
Of those who are familiar with cryptocurrencies, 24% think they will rise in value over the next year; 29% think they’ll fall; 35% say they’ll fluctuate wildly; and 12% say they’ll remain stable.
Binance CEO Changpeng Zhao is offering a sneak peek at the company’s new decentralized cryptocurrency exchange. Zhao says he hopes to launch the new platform sometime this year.
Commonwealth Bank of Australia (CBA), the largest bank in the country, has been mandated by the World Bank to arrange a bond issue exclusively on a blockchain, according to a press release Aug. 10.
CBA will reportedly arrange the first bond globally to be “created, allocated, transferred, and managed using blockchain technology.” The Blockchain Offered New Debt Instrument (bond-i) will be issued and distributed on a blockchain platform under the operation of the World Bank in Washington, and CBA in Sydney.
The two organizations are using a private Ethereum blockchain, but the CBA “remains open” to alternatives as “other blockchains are developing rapidly.” Microsoft conducted an independent review of the platform to assess its security and resilience. CBA Executive General Manager of Institutional Banking & Markets International James Wall said:
“We believe that this transaction will be groundbreaking as a demonstration of how blockchain technology can act as a facilitating platform for different participants.”
According to the CBA and World Bank, using blockchain technology will simplify capital raising, trading securities, speed up operations, and “enhance regulatory oversight.” The World Bank issues $50-60 billion in bonds per year for sustainable development in emerging economies.
In July, CBA successfully delivered a 17 ton shipment of almonds to Europe using its new blockchain platform to track the cargo from Melbourne to Hamburg, Germany. The platform is underpinned by Distributed ledger technology (DLT), Internet of Things (IoT), and smart contracts.
In Thailand, the Thai Bond Market Association (TBMA) revealed that it would deploy a blockchain solution on its registrar service platform. The new platform will reportedly allow the TBMA to provide faster bond certificate issuance which, in turn, will boost the liquidity of the secondary market. The blockchain solution is scheduled to be introduced later this year.
August 9: The summer crypto rollercoaster continues, as the market sees a healthy rebound into the green after sustaining major losses yesterday.
On August 8 total market capitalization had shrunk to $219 billion –– its lowest level since mid-November 2017. In today’s upward bounce, virtually all of the major cryptocurrencies have posted gains, as data from Coin360 shows.
Bitcoin (BTC) is trading at a solid $6,500 at press time, up around 3.2 percent on the day. The leading cryptocurrency shot up around $300 within the space of two hours earlier today, from $6,229 to $6,528. Having since slightly corrected downwards, the coin is nonetheless trading $330 higher at press time than its 24-hour low at $6,144. Bitcoin’s weekly losses however remain at a stark 14 percent, with a more modest 3.5 percentage loss on the month.
While today’s sprightly uptick may assuage some edgy crypto nerves, Dogecoin creator Jackson Palmer has been eyeing the recent plummeting markets, which many attributed to U.S. regulators’ announcement August 7 that they would be delaying their decision over whether or not to approve a high-profile BTC exchange-traded-fund (ETF).
In a thread of tweets this morning, Palmer pointed to data showing declining daily transaction rates for Bitcoin, Ethereum (ETH) and Ripple (XRP), as well as a downtrend in decentralized application (dApp) usage, as more noteworthy indicators of the “fragility” of the space.
More optimistically, Litecoin (LTC) creator Charlie Lee said in a tweet today that he considers the bear market to be “the best time for people to work on adoption.”
Ethereum (ETH) is currently trading around $363, up around one percent on the day to press time. The altcoin’s intraday spike closely correlated with that of Bitcoin, as it jumped up from $352 to $367 within two hours. Ethereum’s losses on its weekly chart remain at around 11 percent, with monthly losses pushing 24 percent.
On CoinMarketCap’s listings, all of the top twenty coins by market cap, except one, are in the green, seeing solid gains within a 1 to 9 percent range.
Cardano (ADA) is the strongest performer among the top ten, seeing around 8 percent in growth to trade at $0.12 at press time.
Stellar (XLM) and EOS (EOS), and IOTA (MIOTA) are also seeing solid gains, all up 4-7 percent on the day.
Among the top twenty coins by market cap, Ethereum Classic (ETC) is the only alt in the red, the first day it has seen losses after a strong bull run all week that defied the wider bear market. After riding a wave of positive momentum triggered by news of its August 7 listing on popular U.S. crypto exchange and wallet service provider Coinbase, the alt has dropped slightly by around 2 percent today to trade at $15.04 at press time.
Tezos (XTZ) –– ranked 18th –– is up a bullish 6.22 percent on the day to trade at $1.65 at press time. This strong growth comes despite the project’s latest setback in an ongoing securities class action against its controversial $232 million Initial Coin Offering (ICO) in an American court this week.
Total market capitalization of all cryptocurrencies is around $228.6 billion at press time, up over $9 billion from yesterday’s aforementioned $219 billion low.
As the dizzying vagaries of the crypto markets leave some reeling, a team of financial experts from Yale University have this week suggested a system of factors to predict price trends in major cryptocurrencies.
They found that cryptocurrencies “have no exposure” to most common stock markets, nor to returns of currencies and commodities and macroeconomic factors. Instead, they identified crypto-specific patterns, including a “strong time-series momentum effect” among major assets such as Bitcoin, Ethereum and Ripple, as well as a correlation between price and investor attention, which they deduced via social media and search engine trend analyses.
Commenting on this “investor attention,” Pantera Capital CEO Dan Morehead today said that crypto markets have recently witnessed something of an overreaction from investors in response to short-term news, such as the SEC’s Bitcoin ETF delay.
Those thousands of hours you spent crafting witty memes while you should have been doing your algebra homework may finally earn you more than retweets and Reddit karma.
CNET reports that Brave, the privacy-centric web browser launched by Mozilla co-founder Brendan Eich and funded by an initial coin offering (ICO), plans to roll out Reddit and Twitter tipping to its native cryptocurrency payments system.
After manually enabling the payment system through the browser’s settings page, users will be able to link their social media accounts to their in-browser Basic Attention Token (BAT) wallets and both tip and accept tips from other users.
“The model will be tipping — a user likes a tweet and can give BAT to the tweeter, and optionally tweet back that he tipped,” the company said, adding that the feature would go live later in the year.
As CCN reported, Twitch streamers and YouTube channel operators, along with website owners, can already register as Brave publishers, allowing them to accept BAT payments from their viewers, readers, or fans. Users seeking to reward publishers for quality content can either manually set monthly contributions for individual sites or allow Brave to divide their monthly contribution automatically based on the amount of time that they spent consuming each publisher’s content.
Two months ago, Brave — whose browser blocks ads by default — began trialing a feature that allows users to earn cryptocurrency by opting-in to device-based ads that do not track or expose user data. Over the long-term, Brave plans to allow users to earn 70 percent of the gross advertising revenue raised through this system. Publishers will also receive a portion of that revenue, while Brave will take a small cut as well.
As of July, the company reported that its browser had 3 million monthly active users across all devices and said that it expects to cross the 5 million mark by the end of the year.
Notably, Brave isn’t the only web browser seeking to integrate cryptocurrency into its core services. Last month, Opera announced that it would add a native ethereum wallet to the Android version of its web browser, and just this week the company revealed that users will be able to link their mobile ethereum wallets to their desktop browsers.
Bitcoin cash has been confirmed as the second cryptocurrency payment option by subscription model pay-TV provider, DISH. As announced on the company’s website, in addition to bitcoin which was adopted in 2014 as a payment system, subscribers can now pay for services using bitcoin cash.
Since 1980, DISH Network Corporation has played a significant role in the evolution of pay-TV. The company provides services to millions of customers across the globe through its numerous subsidiaries. The services include satellite DISH TV and streaming Sling TV services. The company also operates a national in-home installation workforce and advertising solutions among other services.
Maintaining Brand Versatility
The adoption of bitcoin cash by DISH happens at a time when the company is also migrating to BitPay as a new blockchain payment processor for cryptocurrency transaction with customers.
John Swieringa, executive vice president and chief operating officer of DISH, notes that the addition of bitcoin cash as a payment system is aimed at serving customers who have adopted a new way of doing business.
“We have a steady volume of customers paying with cryptocurrency each month, and BitPay will allow us to continue offering more choice and convenience to our customers.”
BitPay is the pioneer company in bitcoin and blockchain payment processing. With offices in North America, Europe and South America, the company is also established in cross-border payments, and enables consumers to manage digital assets with the BitPay Wallet.
Enabling a Seamless Transition
To pay with bitcoin or bitcoin cash, a one-time payment is executed by a DISH customer through the website or DISH’s hopper DVR. On sending the exact payment amount in bitcoin or bitcoin cash, BitPay exchanges the funds into U.S. dollars immediately, thereby avoiding the risk of volatility usually associated with cryptocurrency transactions.
According to Sonny Singh, chief commercial officer of BitPay, the goal of his company is to offer DISH Network a seamless transition that will enable all customers who are currently use bitcoin for payment to have the extra option of paying with bitcoin cash.
Singh notes that cryptocurrency is an increasingly popular way for customers to make purchases and pay for services online as it reduces credit card fraud and is cheaper for the merchants.
CBNT (cbnt.io), a decentralized news, and content sharing community will build a well-designed incentive system to create a win-win ecosystem for all participants, including content/articles providers, content readers (viewers), ad publishers, and token holders. In the CBNT community, whether you are content generators or content viewers, both sides can receive tokens “Mining Rewards”. As CBNT grows and traffic boosts, all the profit of numerous ads will also be distributed to all of the participants.
Sales for an exclusively African cryptocurrency opened up in August to those with a South African bank account — seemingly capitalizing on virtual currency’s popularity in the nation. Despite growing interest, however, scams and fraud are still rife in the country.
Cryptocurrencies like Bitcoin have seen a surge in popularity across South Africa as the nation grapples with growing political and economic uncertainty.
The nation has made international headlines as the ruling African National Congress (ANC) and President Cyril Ramaphosa discuss contentious land reform policies in a country facing high unemployment rates and liquidity crises.
As a result, more and more citizens are researching virtual currencies, and rising trade volume inside of the country has also been seen. Research from a pan-African investment bank in July revealed how38 percent of South Africans “wish they had invested” in cryptocurrency.
Legal regulations in the nation have also been relatively loose so far.
The South African Revenue Service announced a new taxation framework for cryptocurrencies in April, but authorities have not really had any other mandates concerning the digital currency market just yet.
FIRST DIBS ON SAFCOIN
South African investors now have a new cryptocurrency to look into before the rest of the world gets a glimpse.
Those with a valid bank account can now purchase some of the 500,000 SAFCOINs exclusively available for sale to South Africans. In October, 5 million tokens will be listed on other local and international exchanges.
Launched by a blockchain company called FHM (Pty) Ltd., SAFCOIN is designed to help Africans get involved with digital currency investing. Company leaders hope to see SAFCOIN “become a widely accepted form of payment across the entire African online trading community” by eliminating “red tape and bulky transaction processes.”
FHM said in mid-July that more than 400 e-commerce companies were willing to accept SAFCOIN as payment.
A THRIVING MARKET, BUT ONE WITH SOME RISKS
Even though many exchanges are seeing record levels of visitors from South Africans who are looking to buy, sell, trade, and expand their portfolios, there have been some high-profile scams that have swindled investors.
In March, a massive Ponzi scheme in the country affected around 28,000 virtual currency investors. BTC Global was able to steal at least $80 million from victims. South Africa’s Directorate for Priority Crime Investigation said in late May how BTC Global representatives promised “2% interest per day, 14% per week and ultimately 50% per month” for investment returns. The authority also alleged BitCaw Trading Company of being involved with the scheme, an accusation the company strongly denied.
Some experts also worry about the lack of education and awareness across Africa about the risks and responsibilities associated with cryptocurrency investment. Rafiq Phillips of ‘just for Getting it (dot) CryptoCurrency’ thinks the virtual currency world in Africa is overall “stacked against the man on the street” as speculation holds up the market across the continent.
Messaging service Kik unveiled their own cryptocurrency last year, partially as a way to set it apart from the competition. A growing number of companies are now trying out Kik’s ‘Kin’ virtual currency and associated application for their own usage.
Kik, well-known for their popular ad-free messaging service, had a highly successful $100 million ICO last year.
The company’s Kin token is designed to help users get rewards for finishing activities like surveys and quizzes and for watching interactive videos. Kik has teamed up with Blackhawk Network to also let users trade in rewards for gift cards from places like Dominos, Nike, and Sephora.
Companies like Red Bull and Swarovski have been recently experimenting with Kin in order to give fans tokens in exchange for answering survey questions.
Now even more companies have taken an interest in Kin’s exclusive Android app, Kinit, which was launched last month. It lets people earn Kin by engaging with different brands through quizzes and surveys, allowing users to spend tokens thanks to a built-in wallet.
PLUGGING INTO KINIT
Other messaging services like Telegram have taken steps to create their own cryptocurrency. But Kik’s offering is unique for a couple of reasons.
The company decided to move the Kin token from Ethereum to the Stellar network back in March since Stellar is designed for faster transactions. Kik has also spent at least $3 million dollars to get developers to work on the token through the ‘KinEcoststem.’ The Kinit app was designed to get more people used to Kik’s virtual currency.
A growing number of companies are turning to Kinit to encourage more user interaction. An Austrian company called Swelly uses Knit to carry out polls for brands. CEO Peter Buchroithner said offering cryptocurrency through Kin was another way to further reward customers who answer questions.
21st Century Fox’s ad-tech division, TrueX, is also utilizing Kinit to give people rewards after they watch 30-second advertisements.
Kik’s vice president of communications, Rod McLeod, wrote how the purpose behind Kinit is to help make
“Crypto truly consumer-friendly through fun and engaging experiences.”
A BRIGHT FUTURE FOR KIK?
Even though the Kik team sees a bright future for the Kin cryptocurrency and associated Kinit app, there are some questions about future viability.
Some are not sure current reward structures make it lucrative enough for people to engage with Kinit and Kik in order to earn Kin tokens. Others are worried that partner brands will be unwilling to give users generous amounts of Kin, hindering them from getting the rewards they want.
However, others see Kinit as a way to get users and brands to interact and collaborate in a manner that reduces the amounts of personal data shared. This, in turn, could make it a popular tool for people who are concerned about their digital privacy.