SP Token Index declined 7 percent in December, while ETH grew by 20 percent
2018 has been a roller coaster ride for the crypto market, peaking at the beginning of the year to $19,500 and reaching a new low of $3,280 in mid-December, losing 83 percent in just 11 months.
During December, the SharesPost Token Index fell 7 percent to 27.62 from 29.76. However, ETH rebounded towards the end of the month. Ethereum grew 20 percent to 31.57 from 26.22 during this period. Bitcoin’s trend was largely in line with the index, declining 8 percent in December. Though consistent with prior month declines, the trend line seems to be improving. The Index dropped 48 percent in November, increased 4 percent in October, and declined 20 percent in September. Recent announcements of newer technologies planned on the Ethereum platform likely contributed to ETH’s rebound.
Overall, the index has underperformed both ETH and BTC. Since its inception on July 1, 2018, the index decreased 72 percent while ETH dropped 68 percent and BTC fell 39 percent. Holochain (HOT) is the only token that grew (17 percent) over the past two quarters.
While the overall market has trended downward, the relative best index performers during December were Zilliqa (ZIL), Binance Coin (BNB), and IOST in rank order. Zilliqa’s listing on Coinbase and speculation that Facebook plans to build its Blockchain network on the Zilliqa platform contributed to its 30-plus percent rise in December. Leading crypto exchange Binance’s Binance Coin (BNB) jumped 15 percent in December. The company boosted its trading volumes by releasing its first batch of Blockchain projects, rolling out sub-accounts for institutional clients and adding Circle’s USDC to its stablecoin market. IOST grew 9 percent after announcing launch dates for its testnet and mainnet platforms. The token also listed on the Bithumb exchange, driving up its value for the month.
The worst performing index constituents in December were NPXS, AE, ZRX and BAT. Each of the tokens shed more than 20 percent in value with NPXS and AE each declining more than 30 percent.
The decline of cryptocurrency valuations lowered the overall market cap of the index tokens. As a result, the number of tokens that met the index’s criteria fell to 13 from 15. Based on the average market caps and trading volumes, we removed three tokens-- Loopring (LRC), Aelf (ELF) and Bancor (BNT)-- and added one new token Chainlink (LINK) to the index for Q1 2019.
2018 has been an active year for the crypto market. While the market has seen huge swings, especially towards the end of the year, investors saw some positive developments over the past year: 1. The Chicago Board of Options Exchange launched Bitcoin futures and the Security Exchange Commission (SEC) no longer considers cryptocurrencies as purely speculative. 2. Investors are increasingly interested in digital assets as reflected by the increasing number of crypto currencies traded on large exchanges like Coinbase Pro, and 3. Traditional exchanges and large financial institutions such as Fidelity, Goldman Sachs and BlackRock are building Blockchain infrastructure and cryptocurrency products.
In the United States, regulators have cracked down on the cryptocurrency industry. The Securities and Exchange Commission (SEC) sanctioned several crypto companies, including unregistered exchanges that raised money from initial coin offerings. The agency levied fines up to $250,000 and forced the companies to refund investors’ money. The SEC has fined 18 crypto companies and suspended trading of 9 others last year alone. The agency will likely charge more non-registered crypto companies in 2019. Similar crackdowns took place in China, South Korea and other countries, contributing to a decline in crypto valuations last year.
The lack of clear regulatory guidance has stalled growth in this digital asset class. However, central governments have taken positive steps towards creating standards to protect investors: new laws to regulate crypto exchanges in Latin America; European Union legislation to treat crypto as a separate asset class; stricter regulations in Switzerland and New Zealand to combat anti-money laundering. The SEC’s approval of a long awaited Bitcoin exchange traded fund (ETF) would represent a significant milestone for the crypto community and drive investor interest in cryptocurrency and Blockchain companies.
In December, investors sold holdings for tax purposes, which partially contributed to a decline in crypto market caps. But the month was not entirely negative. The U.S. Department of Defense is mulling a plan to use Blockchain technology for disaster relief and Ohio became the first state to accept tax payments in Bitcoin. In India, the government is rethinking its long standing ban on cryptocurrency ownership in the country. New projects planned on the Ethereum platform pushed the cryptocurrency 20 percent upwards since the middle of December.
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