Four reasons why crypto insiders think better days are ahead
November 7, 2018 | Blog

Four reasons why crypto insiders think better days are ahead

As part of our “feet on the street” approach to research, we talked to a lot of Crypto ecosystem stakeholders in recent weeks – from Crypto startups to investors, from Blockchain lawyers to big tech Crypto experts. The two common questions emerged again and again: When will the Crypto Winter end? What factors would prompt the turnaround?

Crypto insiders see four potential catalysts that could change the current dynamic:

More clarity from regulators in 2019 will embolden the market. Many of the regulatory questions from 2017 and 2018 have yet to be fully resolved, but things are moving in the right direction. Despite limited guidance from the Securities and Exchange Commission (SEC) and inaction by Congress, the regulatory rhetoric about Blockchain and tokens has become more constructive. The SEC website recently launched a page devoted to Initial Coin Offerings, giving that funding method more legitimacy. The SEC’s FinHub website also reflects this more accommodating approach in adjacent, innovative financial technologies, such as digital marketplace financing and artificial intelligence. Many overseas jurisdictions have followed suit. For example, Costa Rica decreed that all Blockchain tokens are commodities. Regulators in Thailand now have a stronger mandate to regulate the market. Industry officials see the SEC’s efforts to safeguard investors from fraud as positive: clear regulation, even though enforcement, is far better than none at all. We believe regulators who are engaged with the industry and are thus better educated about crypto technology will help unlock demand from institutional investors, both from buy and sell sides.

Token offerings are forging ahead. Over the past few months, several Blockchain startups have been diligently working on their projects despite the volatility in the broader ecosystem. Some companies raised significant capital last year, and thus see an open road through end of 2019. For example, Valut12 launched a coin offering earlier this year to address custody and security issues facing crypto investors. CEO Max Skibinsky sees Valut12 as the “Bank of Yourself.” The company is currently Beta testing its app and is planning a wider release in 2019. Origin Protocol also executed a successful token offering and will help to launch 40 sharing economy marketplaces next year.

We will also closely monitor 0x, OmiseGo and Zilliqa. At the ETHSF Hackathon, 0x showcased its ability to facilitate the exchange of synthetic assets or token bundles that mimic real world assets, such as the S&P 500. OmiseGo hopes to launch a non-custodial, fully decentralized exchange based on its OMG token during the first half of next year. Despite some delays, Zilliqa intends to launch its Mainnet sharding technology in January 2019 designed to boost Blockchain computations and scale crypto marketplaces.

Smart money and institutional capital is piling up. Venture capitalists are still investing in Blockchain, notwithstanding the estimated 70 percent drop in cryptocurrency market caps. The decline will weed out the economically infeasible tokens from 2017 and focus investors’ attention on higher quality tokens. Institutional investors, the so-called “smart money,” are taking more time to understand the economics of Blockchain projects. According to Icodata.io, investors have poured over $7 billion into 1,139 STOs, compared to $6.2 billion in 2017 on 875 ICOs. The amount of committed capital for the month of October is approaching $675 million.

Pace of crypto innovation continues. Over the past several weeks, we have identified a long list of Blockchain startups tackling real-world problems with innovative solutions. The plunge in cryptocurrency pricing has not deterred entrepreneurs and startups. Here’s a list of interesting projects we’re watching:

  • Oasis Labs: This firm wants to merge cloud-based computing with Blockchain on the Oasis platform.
  • Arbitrum: Through a combination of protocol design, incentives and virtual machines, Arbitrum wants to bring “Scale-as-a-service” to market.
  • Dirt Protocol: This project seeks to streamline the adoption of Token Curated Registries (TCR) by acting as a “TCR factory,” as Founder Yin Wu put it. TCRs address problems in creating and maintaining data sets viz. the alignment of incentives.
  • Chainlink: As a developer of Blockchain middleware, Chainlink is developing solutions to improve the scalability of Blockchain technologies.
  • Plasma Cash: This project aims is developing a scaling solution for a subset of Ethereum-based apps with non-fungible tokens (e.g. Cryptokitties)

Many of these projects address problems encountered in Blockchain implementation (e.g. scalability problems, token economics). They represent new ways of overcoming pre-existing, prior-to-Blockchain challenges. Investors are funding good projects, though VCs have been trying to talk down project valuations.

Bottom line: The foundation for a meaningful crypto comeback appears to be in place, despite the current environment.

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This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

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Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.

PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own financial advisors before making any investment decisions. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.