This was a year of biblical proportions. Settle in as I try and highlight some of the key learning points, bright lights and the roaches we found when we peeled back the carpets and shone the torches underneath. If you are faint of heart or easily offended, don’t read on. I have my 6 shooter ready and aimed.
Chapter 1. Euphoria
After the lofty highs of around $19.8k USD on the 17th of December 2017, one could be forgiven for thinking the transfer of profits into alts could have seen a total market cap in excess of 1 trillion. Alas! Only to fall short at around $836 billion USD.
Many thought, myself included, that would had enough steam to reach that mythical trillion mark. However, like the tiring contestant on American Ninja Warrior, we failed on the warped wall and the fall was one for the ages.
So what was the main reason we fell?
I have read so many hog-wash conspiracy stories of why we failed and what was the catalyst for the free-fall, but logic always prevails in these instances. We had an $800 billion USD dollar market, consisting largely of transaction tokens and VERY few products or revenue streams. In other words, we had jumped the gun in all our excitement over the technology and we had pumped the tires not yet attached to a car. Many realised, that this was not sustainable and decided to cash out or take profits etc. We saw the likes of Justin Sun, Charlie Lee and many others cashing out of their holdings in their own projects when they realised this was a gift horse, not to be looked in the mouth.
Chapter 2. Regulation
We soon saw the capitulation of Bitconnect and other obvious scams and witnessed the arm of the law, lead by the infamous SEC starting to flex their muscles. Well sort of, not really, but at least saying a whole lot of ‘stuff’. As we know with any new technology movement, the regulators are often playing catch up.
There’s money to be made by taking a ‘cautious, but serious approach’ to regulating new technology, as we have seen played out over and over again through the course of time. This movement is particularly difficult when considering its global reach and the fact that the technology isn’t bound by borders. Added to this fact is the element of local taxation laws, which differ greatly from country to country. I’m drawing lines here, feel free to read between them.
Make no mistake though, regulation is coming, and the birth of the STO, will take some time to play out. It isn’t easy for those playing in the space to be complaint across multiple countries, dealing with multiple laws and the pace at which the landscape is changing.
Chapter 3. Greed
If you think greed was limited to the investors side of the fence, you are sorely mistaken. Many projects raised ridiculous sums of money in 2017, especially the tail-end. Why do I say ridiculous? Well, can you name one example of where a team of C Level executives of a multi-national have ever approached a BOD (Board of Directors) and said “We need somewhere between $2 Million USD and $63 Million USD?” This is how crazy the majority of soft and hard cap disparities were. Any BOD would reply with “How much do you need? If you can’t be precise then you don’t understand what it is you are asking for”. They would be right.
These ridiculous sums of money were raised for problems that for the most part have already been resolved by other projects in the space. Such was the prowess of the marketing departments of these projects to prey on the lack of knowledge of the majority of investors. Now comes the problem. A lot of these projects then proceeded to HODL their raises in cryptocurrency, believing they could turn their $20 million USD raise into 30, 40 or 50 over the following months.
When the market began to go into free-fall these projects continued to gamble and hope that the market would improve. Having hired talent, for way above market rates and being nowhere near completing their road-map objectives, some of these projects had to sell ETH at $100 or 8% of the value in some cases of the raise amounts, just to make payroll and keep the lights on. Welcome to the unregulated and unqualified world of blockchain. If you think a lot of these projects will survive if this market continues, you are again sorely mistaken. We are firmly in ‘walking-dead’ territory now folks.
Chapter 4. Delivery
Did you see a few projects in 2018 that looked like the were the answer to all the worlds problems? Many sounded, well, a little far fetched and for good reason. The technology wasn’t ready to deliver on some of these promises. In some cases, I believe it was firmly a case of the projects being mislead by fancy marketing of platforms who couldn’t back their own claims. However, for the most part, I think that people knew they couldn’t deliver on what they promised. This is clearly evident in the cold light of day.
We were promised the reinvention of the wheel and we were delivered…. well….
This did nothing but further damage the reputation of the industry and make it even harder for people to trust whitepapers and promises.
Chapter 5. VC’s.
I tread carefully here, because it’s not always the case, but lets be honest. 2018, saw the running out of gas in the market and the rise of the opportunists. Many of the ICO’s either sold pre-ICO, pre-sale or just did hidden back door deals for VC’s that saw some get 1000% bonuses before the retail investors got to fight over crumbs at 10x the price. We saw projects opening on exchanges only to have their prices dumped. People were left scratching their heads and thinking, how can this be possible? Why would someone sell for 20% of what WE paid for them? That’s still 200% profit for those who got in early.
Many of the leading VC’s are now hurting and some have been forced to wind up or continue operating at a loss, with the hope that things will pick up.
Chapter 6. Exchanges
Quite possibly the most blatant and nonchalant of all, where the exchanges. If you wanted liquidity, or in some cases, the illusion of liquidity through bot volumes, then you had to pay a kings ransom to be listed. Some of the exchanges were charging north of $1 million USD per listing, yes, you know who you are. It was near impossible in most instances to even get a reply to requests for listings, such was the huge demand.
How those tables have now turned. We now see those same exchanges actively reaching out to projects with emails along the lines of “We have noticed your project isn’t listed with us. As you are a project of high value and standing, we are prepared to list you for a greatly reduced fee… blah blah blah”. Why would exchanges with $100’s of millions USD of ‘apparent’ daily volumes need to sell listings at fire sale prices? Surely their trading fees are enough to have the entire staff bathing in buttermilk.
The truth is, these models for the most part, were set up in a bull run and there was no foresight or preparation for an extended bear market. A lack of business acumen and planning has lead us to our current quandary.
Chapter 7. Enlightenment
Why are we still here then?
Cryptocurrency is going through its awkward pubescent years. The cute baby has somewhat turned ‘ugly duckling’ and people are still making strong arguments as to why this is a lot better than it really is. Will we need thousands of cryptocurrencies in the future? Probably not.
So to quote the gold rush, we have seen the early adopters come with their simple pans. Word has gotten out and we have people selling the promise of tools to provide the added advantage needed to get rich. These tools are imperative as they will become the very important next phase of the evolution of blockchain technology and decide the fate of cryptocurrency. We need to see the evolution of products.
Enter the Institutional Money.
One of the most commonly asked questions to me, is “Where is all this money then? The prices are crashing and we are seeing volumes dropping off, not increasing”
Well, yes, that’s true. Have a look at Cirlce and the swag of others who have each invested 100’s of millions USD, into the space. At this stage they are investing in the tools. They are investing in the things that can make them money from YOUR speculation of the market. Trading platforms, exchanges, wallets, etc etc, the list goes on. They aren’t stupid. As mentioned above, it takes a LOT to get BODs to hand over huge amounts of money, especially when people are responsible to shareholders. They need to be clear on what the investment is, how they will make their ROI and the timeframes in which this is likely to happen. The majority of these investments will be extremely lucrative for these investors.
So why am I so bullish?
Take my own gun and shoot me with it for what I am about to say. I actually believe we are living through the next internet, as far as significance of technology is concerned. Yes, I said it, I am here for the tech.
People I know, took chances and worked for start-ups like Google, Facebook and Uber and despite eating noodles for years or doing it tough to begin with, these people made hay and believed. In the end they were part of something significant AND reaped the financial rewards. I believe that blockchain is my opportunity to do the same thing.
There is a MASSIVE difference between cryptocurrency and blockchain technology. This year we have seen the emergence of some powerhouse projects, some amazing technical feats accomplished that people are yet to a) digest and process and b) see move the needle on price due to lack of practical implementation YET!
Never before in the history of blockchain, have we seen such a monumental number of technological advancements being made. The future is certainly very bright for the projects that can survive this winter and I for one, have made sure I have a front row seat for the ride. Have you?
I would love to hear your comments on the 2018 year in crypto and look forward to a massive 2019 with all of you.