Crypto Newsletter 12/26: 2018 A Review of Crypto Winter
2018 was a year of growing pains for crypto. Scammers absconded with millions. Companies unable to begin development of viable products crumbled and began disappearing into the ether. Then US regulators waded into the party and said, “hey, a lot of these tokens are securities.” Those that violated securities laws began to face charges, fines, and settlements, a process of cleaning up the market that will continue in the new year.
In the face of regulation, prices dropped. Per CoinMarketCap, the total market cap went from a high of $824B in January to $125B, as of December 19th. The price of Bitcoin, long considered a marker for the health of the industry, dropped from its year high of $17,119 to $3,835. Speculators cleared out. Adoption moved more slowly than anticipated.
Yet not all of the stories this year were bad news for crypto. 2018 was also the year of stablecoins. TrustToken, Carbon, Paxos, Gemini, and Circle, to name just the largest, all launched stablecoins this year. To counter crypto’s volatility, entrepreneurs figured there was demand for cryptocurrencies that held their price and were stable, and the growth of on-chain transactions for stablecoins is slowly proving them right.
Alongside the growth of stablecoins, institutions stepped into the water. Andreessen Horowitz raised $300M for its first crypto fund, Fidelity launched their Digital Asset Services platform for custody and trading, the Intercontinental Exchange (the operator of 23 global exchanges, including the New York Stock Exchange) announced the development of Bakkt, a trading platform for digital assets, which is scheduled to go live in Q1 2019.
This was also the year where the phrase ICO began to die out, and the phrase STO began to emerge. It may well be crypto winter now, but there are signs of spring in the not so distant feature.
The Biggest News of the Year
In the beginning of March, the SEC took its first step against the unregulated crypto marketplace when it sent 80 subpoenas to different companies to get more information on just what exactly was going on with some of these businesses.
2) EOS Launched
In June this year, the EOS blockchain that raised a historic $4B in its ICO, launched to some controversy with its semi-centralized approach of having just 21 block producers. Yet despite the outcry that the blockchain was not decentralized enough, EOS is currently the most active blockchain, according to Blocktivity.
Lightyear, the for-profit subsidiary of the Stellar Foundation, acquired Chain, a firm developing blockchain solutions for enterprises, including Visa, Nasdaq, and Citigroup. In the move, both companies retired their names and rebranded the new entity as Interstellar. The move made a statement for the Stellar blockchain being a future home to private permission-based blockchains intended for business use.
In September, the New York Attorney General released a report on the decentralized exchanges that facilitate the trading of cryptocurrencies. The findings weren’t promising, and the report broke down the flaws with these trading platforms in five sections, ranging from conflicts of interest to abusive trading and lack of investor protection.
This fall, the SEC’s subpoenas and investigations turned to enforcement action. First, they charged 1Broker with violating federal laws around security-based swaps. Then in November, the SEC charged the founder of EtherDelta with operating an unregistered exchange for securities. Then the SEC charged two ICOs, Airfox and Paragon, with selling unregistered securities in their respective ICOs. The founders of EtherDelta, Airfox, and Paragon all settled their charges with the SEC and agreed to pay fines.
Our Favorite Reads of the Year
Onboarding 50,000 new users a day, accusations of insider trading, and Little Mermaid sing-alongs. Life at the top is equal parts euphoria and panic. An in-depth look at Coinbase, the first billion-dollar crypto company, and Brian Armstrong, the introverted man behind it.
A journalist for The New Yorker explores the crypto rabbit hole, interviewing the founders of Ethereum and tracing the beginning and present of one of the most exciting projects in blockchain.
Speaking of the founders of Ethereum, Charles Hoskinson delivered a keynote address at the StartEngine Summit in October, powerfully describing how a new financial system based on blockchain will change the world for everyone from coffee bean farmers in Ethiopia to Mongolian nomads.
Tezos, the proposed self-amending cryptocurrency led by the married couple Arthur and Kathleen Breitman, as well as Johann Gevers, raised $232M in an ICO in 2017, yet the project soon stalled as the founders fell into a power struggle with each other. The Breitmans controlled the code, Gevers the money. Here’s what happened.
In a satirical website, the SEC detailed its own fake ICO, “HoweyCoins,” in order to give readers an idea of what red flags to look for in ICOs that may not be compliant with securities laws.
There’s a lot of hype around blockchain, decentralization, and direct peer-to-peer trading, but how can blockchain benefit securities and marketplaces that have centralized controls in place? What complications are there with tokenizing assets like equity or debt, and why would an entrepreneur want to tokenize in the first place? Howard Marks explains all of that and more in this piece for Hacker Noon.
An investigation from the Wall Street Journal traced $90M in dirty money that was laundered through decentralized crypto exchanges that don’t identify their customers. Criminals around the world were able to wash ransomed Bitcoin into Monero on ShapeShift and disappear with the money behind a cryptographically protected screen.