Market Focus Will Shift to Security Tokens in 2019, Circle Reports
Circle, the Goldman Sachs-backed crypto finance company, released its crypto retrospective report of 2018, touching on an array of topics, including the crypto market performance, critical blockchain and token data and key trends to watch in the new year.
- Bitcoin dominance saw an increase of more than 50%, while reaching a peak at 57% in December, 2018
- The transaction fees of Bitcoin (BTC) and Ethereum (ETH) dropped more than 90% in 2018
- 88% of ICO funds were raised in the first half of 2018 as regulatory uncertainty continues to sadden the ICO market. ICO funding totaled $12.6 billion in 2018 (up 96% yoy)
- In spite of a slowdown in crypto land, blockchain M&A transaction activity is still projected to surge more than 300% year on year
- While Ethereum has 18x more DApps than EOS, EOS DApps have 3x more daily users
- Key trends in 2019 include stablecoins, security tokens and institutional crypto
Rising NVT Ratio and Bitcoin Domiance
The NVT ratio measures the value of crypto transaction activity relative to network value. When the growth in transaction volume exceeds that in network value, the NVT ratio shows a downward trend and the crypto becomes more investable.
As shown in the graph below, the NVT ratio of both BCH and ETH has continued to rise since April, 2018, meaning that these two coins have become less investable in recent months.
Entering the new year, the NVT ratio of the two still sees an upward trend, according to the graph below.
In addition, the dominance of Bitcoin—the king of all cryptocurrencies—has steadily increased over the past several months and stayed above the 50% level since August 12, 2018. This figure peaked at 57% on December 15. In view of this, Bitcoin may serve as a safe haven to some degree in the face of a rolling bear market.
Correlations Between Bitcoin and Other Assets
According to the Circle report, “correlations between Bitcoin and other crypto assets increase when the tide turns from bull to bear, and decrease when the market trend reverses.”
Spike in Short Interest
Though the price of Bitcoin and Ethereum dropped by 73% and 83% respectively last year, the short interest of Bitcoin was up 95% and ETH up 85% in December relative to the beginning of 2018.
“Rising short interest indicates bearish sentiment, as participants expect to prices to continue to fall in the short run,” the report explains.
Dropping Active Addresses and Transaction Fees
The on-chain activity of BCH and ETH suffered a sharp decrease in 2018.
“Active addresses peaked at 1.3 million on January 4, 2018, and hit a low of 405,000 on April 8, 2018. The average for daily active addresses in 2018 was 667,000,” the report states.
Similarly, the active addresses of Ethereum peaked at 719,000 on January 16, 2018, yet hit its low of 195,000 on July 1, 2018. Last year, the number of ETH daily active address was 327,000 on average.
Additionally, the transaction fees of Bitcoin (BTC) and Ethereum (ETH) fell by more than 90% in 2018.
According to data compiled by TokenData, ICO funding totaled $12.6 billion in 2018 (up 96% year on year).
Yet there is an increasing uncertainty in projects raising funds, as regulators across the world have provided a cautionary note on ICOs.
It is worth noting that a total of 287 ICOs filed Reg D offerings with the SEC in 2018, raising $8.7 billion vs. 44 such fundraisings in 2017 when a combined $2.1 billion was raised.
According to the Circle report, “Regulation D is a type of offering that is exempt from full SEC registration requirements.”
Rising Crypto Funding
As shown in the graph below, global investment in blockchain companies amounted to $5.29 billion in 2018, rising by 366% year on year, while the blockchain M&A transaction activity is projected to surge more than 300% year on year.
Key Crypto Trends to Watch in 2019
Circle also highlights four main crypto trends to watch in the new year:
- Crypto insiders may become more excited for stablecoins
- Market focus may shift to security tokens
- Crypto institutionalization starts to materialize
- Blockchain technology is expected to make progress in addressing scalability, security and interoperability