Q4 2018 Crypto Market Observations: ETH rebounds but broader crypto declines continue
January 18, 2019 | Blog

Q4 2018 Crypto Market Observations: ETH rebounds but broader crypto declines continue

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.

December Constituents Performance
December Constituents Performance
Source: SharesPost Research; CoinMarketCap; Data as of Jan 01, 2019

Top (relative) performers

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.

Bottom performers

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.

Constituents Performance since Inception in July 01, 2018
Constituents Performance since Inception in July 01, 2018
Source: SharesPost Research; CoinMarketCap; Data as of Jan 01, 2019
Index Performance since July 01, 2019
Index Performance since July 01, 2019
Source: SharesPost Research; Coinalpha

Q4 index rebalance results: 13 eligible constituents in the index

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.

Index constituents weights as of January 1, 2019
Index constituents weights as of January 1, 2019
Source: SharesPost Research
Index Constituents weights as of Oct 1 2018
Index Constituents weights as of Oct 1 2018
Source: SharesPost Research

Market commentary: 2018 has been a wild ride for crypto investors

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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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.