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In the Market
It’s been a checkered week in the crypto world. While Bitcoin had a strong showing, increasing its market cap by 5% (now at $134bn), other cryptos such as ripple shed 2% in value. As a consequence, the heavier cap DCX Index outperformed the smaller cap DCEX Index with a 1.9% move relative to -1.6%. Due to this week’s Bitcoin really, the Cryptocurrency (DCCX) Index was the best performing layer of the crypto economy. The Protocol Layer (DCPX Index) slid by –2.1% due to drag coming from Cardano’s -11% drop while the Token Index (DCTX) had a tough week bleeding by -7.4%.
AdToken(ADT), a decentralized advertising network, had an incredible run almost doubling in value in just 7 days. This unbelievable 98% rally was driven by UpBit, a Korean exchange, which decided to list ADT on their exchange. The buying pressure of Korean traders entering the new market, coupled with low levels of liquidity caused the price to move substantially. Looking at today’s intraday ADT moves; however, the price has already begun to slide back down. Substratum(SUB), a project which aims to provide a censorship-resistant decentralized internet, was the worse performer of the week with a hurtful -28.5% drop. Melon(MLN), an Ethereum-based asset management platform, closely followed with a -25.6% slide.
In The News
Summary: Crypto investors Cameron and Tyler Winklevoss had their application for a bitcoin-based exchange traded fund (ETF) rejected by the US Securities and Exchange Commission (SEC).
Why it Matters: The virtual currency had been rising recently in part on speculation that the SEC would sign off on an ETF. The regulator’s decision is a setback for digital-currency enthusiasts because an ETF would have opened up the market to mutual funds and other institutional investors that are restricted from trading the token.
Summary: Mike Novogratz’s crypto-focused merchant bank Galaxy Digital released its first-quarter report for 2018, posting a $134 million loss as cryptocurrency markets slumped, according to Bloomberg July 26.
Why it Matters: Earlier this month, Mike Novogratz predicted that mass adoption of crypto and blockchain is “still five to six years away.” Novogratz said that one of the major obstacles preventing widespread adoption is the increasing “cost of technical talent” as well as the doubts of conventional investors, who are aggravated by “no clear precedent for the financial industry.”
Summary: “Cryptocurrency capital markets–which are less than 3 years old–are challenging the supremacy of traditional investment banks for raising new capital, as they raised 45% of the amount raised by traditional IPOs during Q2 2018.”
Why it Matters: ICOs are ballooning in popularity due to their new investment model that empowers both startups and investors. However, investors should proceed with caution since ICOs are largely unregulated and investors with little or no experience investing in risky products are often swindled out of their money with the promise of exponential returns.
Summary: A report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse (SCAC) shows that the number of ICO and crypto-related federal class action lawsuits in the US has increased to seven in the first half of 2018.
Why it Matters: While the ICO frenzy hit the market last year and is still continuing, it is worth mentioning that the growth in ICO and crypto-related class action lawsuits go in hand with an increase of class action securities lawsuits in general. Starting with mid-2016, there have been filed over 750 federal securities class actions, which is the highest figure for a two-year period since the Private Securities Litigation Reform Act of 1995, the report notes.
Digital Tulips? Returns to Investors in Initial Coin Offerings – Benedetti and Kostovetsky, Boston College
Abstract: An empirical analysis of 4,003 Initial Coin Offerings which raised an aggregate amount of $12bn.
Interesting Finding: “We find evidence of significant ICO underpricing, with average returns of 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days.”
#Crypto Utopia – Autonomous research
Summary: This report explores the crypto landscape over the past year and does a deep-dive into the status quo for crypto funds, ICOs, and the regulation that governs them.
Key takeaway: “The path from ICO to a successful large-cap liquid coin is difficult, and is often exposed to scams and fraud which constitute as much as 20% of project white papers, phishing and hacking responsible for the theft of 15% of all crypto assets by market cap, and over 50% of ICO projects have failed to raise funds or are no longer operational.”
Q2 2018 Blockchain industry report – CoinDesk
Summary: A succient piece on Blockchain’s key trends, data and events in Q2 2018
Interesting finding: “Majority of survey respondents think price declines were caused by shorts and rebounds from over-speculation.”
Summary: A risk manager’s perspective into how systemic risk can be managed in the cryptocurrency market.
Most important method: “A comprehensive education package with an insight on the latest security methods backed up by anti-malware, backups, cold storage, strong and frequent password protection and regular updates of software can help mitigate the cyber and fraud risks and improve confidence.”
A big list of the best thinking about network effects and crypto – Nathaniel Whittemore
Summary: Like the title says, a nicely curated list of articles on the network effects of crypto.
My favorite link: Blockchain Tokens and the dawn of the Decentralized Business Model