Looking Back, Looking Forward, Looking Laterally: A 3-part Crypto Industry Overview — Part One

Following my previous article on HT I was contacted Huobi Research, and have had the privilege of gaining early access to their extremely comprehensive H1 2018 Global Blockchain Industry Strategic Overview in an exclusive sneak peak. I will break down the contents and deliver what I believe to be the most interesting things in 3 parts, so as to share the knowledge with you all.

The crypto asset class experienced its third bull market in 2017. This time bitcoin was no longer the only subject of everyone’s attention, rather, a vast number of ERC20 tokens were created and flourished thanks to the flourishing of Ethereum at the beginning of the year — this marked a paradigm shift in the crypto asset market, from consensus on peer to peer cash like Bitcoin to consensus on smart contracts. Entering 2018, the market started to cool down after an eruption of interest and prices in December 2017, but according to a sentiment survey conducted by Huobi Research, global investors are still optimistic toward the market in the second half of 2018, with 71.4% of the responders believing that the market cap will increase more than 30%.

We all know that the price of Bitcoin and the overall cryptocurrency market cap is down since the start of the year, but what else has changed? The research finds that along with prices we have seen a reduction in new token issuance and general interest, but interestingly the amount of capital raised in token sales is still far higher than in 2017, but has been declining since February. This perhaps displays behavior of people turning to ‘small caps’ and ‘high risk high reward’ plays during times of downturns.

Figure 1 — Top 5 Crypto Assets Prices Index Evolution Chart (Huobi Research, 2018)

Figure 2 — Cryptocurrency search index (Note: Figures represent search activities relative to the highest level during a certain period. 100 = highest level, 0 = no related search) (Huobi Research, 2018)

As can be seen in figures 1 and 2, as price wanes, so does general interest, but this should not be taken as a surprise. Comparing the 2017 bull run with the previous two, there are some clear similarities, but also many differences.

Figure 3 — The first bull run. April 2011 to June 2011, 60 days and 38x from 0.75 USD to 30 USD

During the 60-day bull market, Bitcoin price jumped 38 times from $0.75 to $30. Compared to $0.06 when Bitcoin first came into being, price increased 492x. The short bull market was triggered by the launch of a Bitcoin/GBP exchange in March. Later, media pieces from TIME and Forbes gave new credibility to the ‘magic internet money’, and promoted bitcoin investment. Soon after though, the well-known hack of Mt.Gox exchange happened, bringing bitcoin price down by 92%. Fundamentally a different reason for the ‘crash’ of 2018.

Figure 4— The first bull run. One year from 13 USD to 1147 USD

The second bull market lasted for one year, when Bitcoin increased 82x from $13 to $1,147, and the peak price was already 20 thousand times of the initial Bitcoin price. The cause of this bull market according to the research was the credit crisis resulting from the debt crisis in Cyprus. Later 2013, some countries in Europe announced their friendly policy towards bitcoin, boosting the market even further. However, in January 2015, the price went down again by 82% down to $210.

Figure 4 — The third bull run. One year from 789 USD to 19343 USD

The third bull market also lasted for about one year. Bitcoin went from $789 to $19,343 despite seeing a slight fall from $4,950 to $3,226 on the way up due to China restricting crypto assets on September 4th 2017. This time, the bitcoin peak price was almost 320 thousand times of the initial price and the booming ICO was a major cause of this run. Similar to what happened in the past, the market fell significantly in 2018, with Bitcoin price falling by 69% down to $6,000 in February 2018.

It should be noted that compared with the first two runs, this fall has actually not been as bad in terms of percentages. Perhaps this is due to increased interest and credibility in the space. In a private, leaked JP Morgan report from February (which I may write about separately) they concluded and subsequently advised one of their clients that cryptocurrencies can in some cases offer a better hedge for fund managers than traditional assets, and often trend inversely in times of traditional downturns. Further to this, it is clear from anybody paying attention that there has been an influx of traditional finance interest, with many famous venture capitalists such as Tim Draper (many), Jim Breyer (Circle), John Wu (MATRIX) giving votes of confidence towards the space with their investment decisions.

Looking Forward: What will drive crypto assets back above and beyond December 2018 levels?

Find out in Part Two! Within it are astute insights into what will drive the next bull run. To any readers who want access to the full report, it is being released first exclusively to attendants of Blockchain Festival Vietnam, and you can get 50% off when buying tickets with code WRITE50.