While many people in crypto are waiting on the sidelines to figure out what’s the next development and application, I would like to take this time to end the year on reflecting my views being in the frontlines of the crypto ecosystem. By doing this, it provides an opportunity to reconsider events, thoughts and feelings from a fresh perspective leading to a new year.
The Good
- Connecting with the community — Having attended over +15 conference this year is more or less the same. However, it was a great opportunity to feel the pulse of the market from a diverse group of professionals across different parts of the world. Learning how individuals first got involved with blockchain and fintech allowed me to dispel the myth of crypto is a community of scammers. According to the Global Cryptoasset Benchmarking study released by the University of Cambridge, millions of new crypto users have entered the ecosystem to 139mn accounts with at least 35 mn identity-verified accounts. This is a 4X growth compared to 2017.
- The interest of regulators — Despite introducing the idea of a decentralised economy, we have to realise that retail investors are less informed and need to be protected. Education and community engagement plays an important role, but regulators are also needed to ensure . It is interesting to note that self-regulatory efforts are also growing along with the emergence of professional services in order for the industry to mature. Japan is one of the first movers towards this approach.
- Asset Tokenisation — Before the ICO frenzy, equity crowdfunding was a key interest for me. It allowed ordinary individuals to invest partially in a piece of real estate or partake in the early growth stage of a company. Unfortunately, this method of raising capital did not take off as many entrepreneurs saw equity crowdfunding as a last resort compared to VC funding or debt financing. Also, professional investors did not see projects on the platform as high-quality and wanted more control. Asset tokenisation re-sparked the interest of professional investors, corporations, and entrepreneurs.
The Bad
- Poor Treasury Management post-ICO- Most projects assumed they had 3–5 years of runway with their capital. After speaking with several projects this year regarding their use of proceeds, it seems that most only convert partial amount of ETH to fiat for short-term operation, while leaving the remaining amount to anticipate for price recovery or appreciation. As a result, a company’s runway has significantly been reduced to under a year. One well known ICO is even day trading their holdings instead of building the product as stated on the whitepaper. Statistically, over 90% of startup fails, poor treasury management can increase the failure rate.
The Ugly
- Syndicates and funds damaged investment interest — Traditional VCs make long-term investments into early-stage projects. However, the majority of crypto related funds take a shorter term approach with discounted token pricing and favourable lockup periods compared to other investors. The major players were involved with assisting market making, marketing and exchange listing services which executed successfully in a bull market as everyone was excited seeing projects on upcoming top-ranked spreadsheets, fund logos on websites, PHDs with blockchain experience, and self-claimed partnership agreement with large companies. Unfortunately, now that lower tier funds and retail investors have lost money and trust in the space, the overall market has left without a sense of direction on where upcoming projects are headed.
Once again, trust needs to be brought back into the crypto space before we witness a recovery in the market. Next month, Binance will be hosting their first Blockchain Week in Singapore from 19 to 22 January 2019. Key focus will on exploring solutions to secure crypto asset. Security remains a top priority for the industry. The community needs to be making effort to keep platforms secure from attackers, fraudsters and money launderers. According to research house Autonomous Next, more than US$800 mn has been stolen in the first half of this year alone.
Teams and individuals who are interested in the upcoming Binance pre-Hackathon in Hong Kong on Jan 11 to 12, 2019 can register here.
Looking at the big picture, bitcoin has been grounded dead over 300 times in the past, yet we still see an increasing number of experienced professionals transitioning in the blockchain and crypto assets ecosystem. Also, the total value of daily transaction continues to show positive growth; suggesting increase usage of various crypto networks. It will be interesting to see how the underlying technology of blockchain will be involved in the future core infrastructure of society.
Christian Ng is a fundamental investment professional experienced in fintech, cryptocurrency and equity markets. He is passionate about working with exchanges, start-ups, and large financial services organisation to help build the infrastructure and capabilities required to scale crypto.