This report presents data on cryptocurrency and ICO market changes during 2018. Special emphasis has been placed on an analysis of the changes that took place in August 2018.

Information as of September 3, 2018

Professor Dmitrii Kornilov, Doctor of Economics, Member of the Russian Academy of Natural Sciences, and Leading Analyst at ICOBox

Dima Zaitsev, PhD in Economics, Head of International Public Relations and Business Analytics Department Chief at ICOBox

Nick Evdokimov , Co-Founder of ICOBox

Mike Raitsyn , Co-Founder of ICOBox

Anar Babaev , Co-Founder of ICOBox

Daria Generalova, Co-Founder of ICOBox

Cryptocurrency Market Analysis (August 2018)

1. General cryptocurrency and digital assets market analysis. Market trends

1.1. General cryptocurrency and digital assets market analysis

Table 1.1. Trends in capitalization of the cryptocurrency market and main cryptocurrencies from January 1, 2018, to September 1, 2018

During August 2018 cryptocurrency market capitalization decreased from $277.8 billion to $228.5 billion (as at 03:00 UTC on September 1, 2018), i.e. by nearly $49 billion or 17.7% (see Table 1.1, Fig. 1). The fall in cryptocurrency market capitalization was due to a depreciation of the main cryptocurrency by $12 billion, with the aggregate impact of altcoin depreciation on capitalization equaling $27 billion. Bitcoin dominance increased significantly during August, from 48.1% to 53.2%.

The dominance of the four and eight largest cryptocurrencies as of 03:00 UTC on September 1, 2018, equaled 75.7% and 82.8%, respectively.

During August cryptocurrency market capitalization fluctuated from $191.1 billion (min) to $277.8 billion (max) (Fig. 1a), i.e. within a range of $86.7 billion. For its part, bitcoin capitalization fluctuated from $103.2 billion (min) to $133.5 billion (max), i.e. within a range of $30.3 billion.

The most significant changes in cryptocurrency market capitalization since the start of August 2018 are shown in Fig. 1a.
On August 14 cryptocurrency market capitalization fell below $200 billion for the first time in 2018, reaching the level of November 2017.

Figure 1a. Cryptocurrency market capitalization since August 1, 2018

The changes in capitalization can be partially explained by a number of events (see the comments below and Table 1.4):
From the start of August to August 14 there was a general trend toward a fall in capitalization, caused in large part by the actions of the SEC when considering applications on bitcoin ETFs. In particular, the plunge on August 7-8 was due to the SEC postponing the decision on the VanEck and SolidX bitcoin ETFs until the autumn, whereupon the bitcoin price dropped to $6,500;

Growth after August 17: Tether’s capitalization increased by $280 million over the course of one hour, from $2.4 billion to $2.68 billion (August 17), and by September 3 had increased to $2.83 billion.

The crash of August 23: The US Securities and Exchange Commission rejected nine applications to issue bitcoin ETFs all at once, two of which were submitted jointly by ProShares and the NYSE Arca exchange; The Chinese messenger WeChat blocked accounts with news on blockchain and cryptocurrencies; and access to foreign cryptoexchanges was blocked in China.

Figure 1b shows bitcoin capitalization (red line) superimposed on cryptocurrency market capitalization (blue line).
A growth in bitcoin dominance has been seen since early May, from 36% to 53%, with this dominance increasing by more than 5% in August.

Figure 1b. Capitalization of the cryptocurrency market (blue) and bitcoin (red) since August 1, 2018

Price trends of the cryptocurrency market leaders during August 2018

Table 1.2 presents the price trends of the top 10 cryptocurrencies in August 2018 (not including Tether). The prices of all cryptocurrencies from the top ten depreciated.

The price fluctuation index (High/Low) equaled from 1.24 to 2.12. Bitcoin and Stellar showed the most stable prices of the ten presented currencies (with due account of the average daily data of the coinmarketcap.com website). For example, Bitcoin had a High/Low of 7769/6287.9=1.24, and Stellar had a High/Low of 0.282/0.222=1.27. Cardano experienced the most significant fluctuations, with the high and low prices for this cryptocurrency differing by a factor of 2.12, ranging from $0.979 to $0.462 (see Table 1.2).

Table 1.2. Price changes in the top 10 cryptocurrencies by capitalization during the period from August 1 to September 1, 2018

Thus, during August 2018 the price change of the leading cryptocurrencies by capitalization compared to the start of the month (Fig. 2) ranged from -4.9% (Monero) to -30.3% (Bitcoin Cash). The average portfolio return (Portfolio 10 crypto) for August for a portfolio consisting of equal shares of the top 10 cryptocurrencies was negative and equaled -21.1%. Overall, cryptocurrency market capitalization decreased during August from $277.8 billion to $228.5 billion, i.e. by -17.7%.

Figure 2. Price change in the top 10 cryptocurrencies by capitalization during August 2018 (not including Tether), %

Bitcoin dominance on the market increased during August from 48% to 53%, which indicates the high sensitivity of altcoins to negative news and the shifting preference of backers from altcoins to the more stable bitcoin under bearish market conditions. A sharp decline in the entire market was seen from August 7-14, especially among altcoins. For example, in the space of a week the Ethereum price fell from $410 to $250.

However, a positive trend has been observed since August 24, with the market slowing starting to gain traction. The real turning point was when the SEC announced the possible reconsideration of its decision on bitcoin ETFs (https://www.coinspeaker.com/2018/08/24/sec-to-reconsider-the-latest-rejection-of-bitcoin-etf-from-proshares-graniteshares-and-direxion/).

The movement of the Monero price can be noted separately. This is the only cryptocurrency from the top 10 by capitalization whose price fell by less than Bitcoin. The price of this cryptocurrency remained practically the same during August. As can be seen in the graph, despite the fact that its price consistently moved in tandem with market trends, a strong growth over the last few days leveled off all the losses seen earlier in the month. This can be attributed to the very positive report from the Satis Group analytical firm, which refers to possible growth in the Monero price by more than 1,000% over the year (https://www.ccn.com/monero-headed-to-18k-ripple-price-primed-for-97-crash-research/).

The difference between the starting and ending price of EOS for the month also looks less dismal than the average for the other top 10 coins. After dropping by only 12.5%, EOS is one of the three cryptocurrencies that lost the least during August. This may be the result of the positive news at the end of the month on the implementation of a voting system in the EOS network (https://www.coindesk.com/with-nearly-200-million-on-the-line-eos-is-building-a-voting-system/).
The tremendous fall of Ethereum due to the massive sale of ETH by ICOs during August (https://www.trustnodes.com/2018/08/11/icos-sold-nearly-100000-eth-past-30-days) must also be mentioned. Generally speaking, the popularity of ICOs does not play into the hand of the Ethereum price, since most of the funds collected in Ethereum are sold by ICO projects to finance the development of startups, especially during a period of general reduction in capitalization.

Calculation of the index of trading activity on cryptocurrency exchanges

To analyze trading activity on cryptocurrency exchanges, the ZAK-n Crypto index is calculated (see the Glossary). In early September the 24-hour trading volumes (Volume 24h) for the four and eight dominant cryptocurrencies were approximately half of what they were at the start of the year (Table 1.1).

The values of the ZAK-4 Crypto indices are presented in Tables 1.1 and 1.3. In August the 24-hour trading volumes (Volume 24h) for the four dominant cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash, Ripple) equaled from $4.9 billion to $7.9 billion (Table 1.3). The value of the daily ZAK-4 Crypto fluctuated from 2.9% to 5.2% of capitalization. The highest trading volume was seen on August 14, when the change in market trends took place (Fig. 1a). As of September 2 the 24-hour trading volume of the four dominant cryptocurrencies equaled $6.5 billion, i.e. 3.6% of their market capitalization (Table 1.3).

Table 1.3. Daily ZAK-4 Crypto index calculation (from August 1 to September 2, 2018)

The daily trading volume on cryptoexchanges was overstated by $6 billion, which is why coinmarketcap.com calculates two trading volume figures: Adjusted Volume and Reported Volume.

According to data from the report of the Blockchain Transparency Institute (BTI): “Current metrics used to determine exchange rankings by coinmarketcap, even with the new ‘Adjusted Volume’ parameters, have still left most in the industry questioning their methodology. A new system was developed by BTI to provide better transparency for the crypto sphere on true exchange volumes. In the following report we have discovered at least 7 of the top 10 exchanges engaging in excessive wash trading from 12x to over 100x their true volume. We have also highlighted more trustworthy exchanges which move up 40-60 places in the true rankings list.”

We already touched upon this issue in a previous report. In particular, trading on the Singapore-based BitForex cryptoexchange (registered in the Seychelles), which only started in June 2018, is already in first place in the trading volume rating (see Fig. 3b).

Figures 3a and 3b show the rating of cryptoexchanges by trading volumes with and without the adjustment, according to the data of coinmarketcap.

Figure 3a. Top 5 cryptocurrencies by 24-hour trading volume with adjustment

Figure 3b. Top 5 cryptocurrencies by 24-hour trading volume

Table 1.4 shows the main events that took place since the start of August 2018 that had an impact on both the prices of the dominant cryptocurrencies and the market in general, with an indication of their nature and type of impact.

Table 1.4. Key events having an influence on cryptocurrency prices in August 2018

During a downward adjustment on the cryptocurrency market there is usually a fairly close correlation between the overall trend and the prices of most cryptocurrencies. According to the resource sifrdata.com (Fig. 4), this close correlation has been seen over the past six months between the indicators of crypto market leaders Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin and the other cryptocurrencies (area highlighted in red).

Figure 4. Correlation between cryptocurrencies

It is thought that the closer the correlation coefficient is to 1, the higher the similarity of changes in cryptocurrency price trends. If the coefficient is around zero, there is no correlation between the indicators. If the indicator is around -1, there is an inverse relationship. In the blue zone there is no correlation. Therefore, no direct dependency between the cryptocurrencies and the S&P 500 Index (^ SPX), the CBOE volatility index (^ VIX), the shares of SPDR Gold (^ GLD), and CBOE 10-year treasury bonds (^ TNX) was seen over the past 180 days.

Table 1.5 gives a list of events that could impact both the prices of specific cryptocurrencies and the market in general.

Table 1.5. Events that could have an influence on cryptocurrency prices in the future

1.2.Market trends

The weekly cryptocurrency and digital asset market trends from December 31, 2017, to September 2, 2018, are presented as graphs (Fig. 1.1-1.5).

Table 1.6. Legends and descriptions of the graphs

Figure 1.1. Total cryptocurrency market capitalization (weekly trend)

Figure 1.1 shows a graph of the weekly cryptocurrency market change from December 31, 2017, to September 2, 2018. Over this period, market capitalization dropped from $572.5 billion to $237.2 billion, i.e. by 59%. Last week (August 27-September 2, 2018) cryptocurrency market capitalization increased from $214.3 billion to $237.2 billion (as of September 2, 2018, based on the average figures from coinmarketcap.com).

Figure 1.2. Change in market capitalization (weekly trend)

The market is susceptible to sudden and drastic fluctuations. During the first week of January, market capitalization increased by approximately $250 billion, or 44%. The largest weekly fall in the first quarter of 2018 was $136 billion, or 23%, during the week of January 28-February 4, 2018.

Nine of the thirteen weeks in the first quarter of 2018 were “in the red”, i.e. capitalization fell based on the results of each of these weeks.

Six of the thirteen weeks in the second quarter were “in the red.” The market grew based on the results of the other seven weeks. As noted earlier, a growth was seen in April, while in May and June there was generally a reduction in capitalization.

Five of the past nine weeks in the third quarter have shown a growth in capitalization, and four a decrease (with due account of average daily data of coinmarketcap.com, see Fig. 1.2). On the whole, since the beginning of August capitalization has fallen by approximately $40 billion.

Figure 1.3. Number of cryptocurrencies and digital assets (weekly trend)

Since December 31, 2017, the total number of cryptocurrencies and digital assets presented on coinmarketcap.com has increased from 1,335 to 1,910. However, when calculating cryptocurrency market capitalization only those coins and tokens on which there is information on trading volume (turnover) are considered. Over the past week their number increased from 1,801 to 1,824, and average capitalization increased to $130 million. In total, over the past month 176 new coins and tokens have appeared on coinmarketcap.com. However, it should be noted that a number of other coins and tokens were also excluded from the list. Among the tokens that were added to coinmarketcap.com last week, Traceability Chain, EliteShipperToken, and WinToken showed high trading volumes.

Figures 1.4 and 1.5. Forecast of total cryptocurrency market capitalization

Looking at the results for the last week, one can see a positive trend on the cryptocurrency market, as well as a partial change in the correlation in the rise and fall of the prices of a number of coins and tokens. The overall trend for the month is negative. The dominance of the cryptocurrency market leader, bitcoin, continues to gain momentum, with it getting harder and harder for altcoins to survive on the bear market. This is due to the higher sensitivity of most altcoins to overall trends, as a result of their high elasticity and volatility.

When the capitalization of many coins and tokens decreases, the fall in trading volume also becomes more pronounced. At the same time, the number of cryptoexchanges has increased, as has the competition between them to win new and retain existing unique visitors. The net result is that, in order to attract attention to their operations, many cryptoexchanges indicate figures that cannot be substantiated, thereby climbing to a higher ranking in the rating of demand. The infrastructure is ready for higher workloads and for the use of new trade mechanisms. However, for now only the outflow of funds is being seen. Perhaps the decision on bitcoin ETFs will trigger new growth. Exchange-traded funds (ETFs) could quickly ensure a new influx of funds to this segment by major backers and a growth in capitalization over the medium term.

ICO Market Analysis (August 2018)

General analysis of the ICO market (for August 2018)

1.1. Brief overview of ICO market trends

Table 1.1. Brief ICO market overview, key events, and news during August 2018

Table 1.2 shows the development trends on the ICO market since the beginning of the second quarter of 2018. Only popular and/or successfully completed ICOs (i.e. ICOs which managed to collect the minimum declared amount of funds) and/or ICOs listed on exchanges were considered.

Table 1.2. Aggregated trends and performance indicators of past (completed) ICOs1,2,3

During August 2018 the amount of funds collected via ICOs equaled $933.4 million. This amount consists of the results of 49 successfully completed ICOs, with the largest amount of funds collected equaling $134 million (tZERO project). The average collected funds per ICO project equaled 19 million (see Tables 1.2, 1.3). A total of more than 200 ICOs were completed last month.

Three projects accounted for the lion’s share of the funds collected: the Hedera Hashgraph startup ($100 million), the Dfinity blockchain project (collected $102 million during a private token sale), and tZERO ($134 million).

Table 1.3. Amount of funds collected and number of ICOs

Table 1.3 shows that the largest amount of funds was collected via ICOs in March 2018, mainly due to the appearance of major ICOs. The highest average collected funds per ICO was also seen in March 2018.

Figure 1.1. Trends in funds collected and number of ICOs since the start of 2017

1.2. Top ICOs during August 2018

Table 1.4. Top 20 ICOs by the amount of funds collected during August 2018

Table 1.4 shows the top 20 largest ICOs by the amount of funds collected, most of which belong to the Infrastructure and Trading & Investing categories.

August’s leader was the tZERO project, which is a subsidiary of Blockstain Overstock.com. It follows from the information published by Forbes on August 9 that tZERO collected $134 million. The project was launched on December 18, 2017, and was developed to meet SEC requirements. tZERO is the first alternative trading system for cryptographic tokens that the US Securities and Exchange Commission (SEC) assigns to the category of securities. The goal was to collect $250 million. However, according to information from the press release, the funds collected by tZERO equaled $134 million. GSR Capital will subsequently purchase a share in the project worth $270 million when the company’s capitalization reaches $1.5 billion.

Figure 1.2. Top 20 ICOs by the amount of funds collected during August 2018

1.3. Top ICOs of last week (August 27-September 2, 2018)

Table 1.5 shows the ten largest ICOs of the week.

Table 1.5. Top 10 ICOs by the amount of funds collected (August 27-September 2, 2018)

The data for the previous period (August 27-September 2, 2018) may be adjusted as information on the amounts of collected funds by completed ICOs is finalized. Over the past week (August 27-September 2, 2018) the amount of funds collected via ICOs equaled $309 million. This amount is made up of the results of 22 successfully completed ICOs.

The leader of the week was the Dfinity project, based in Switzerland. Dfinity is a public cloud-based computing platform that plans to create a “huge Internet computer,” the operation of which will be supported by everyone that joins their protocol. Dfinity is an Ethereum-compatible smart platform that implements several revolutionary ideas to resolve the problems of productivity, scalability, and management of blockchain. The team is convinced that the Dfinity network will be much faster than Ethereum. As reported by the Coinspeaker website, the total amount of funds collected by the project is around $200 million, including $61 million that it collected in February with the participation of the Andreessen Horowitz venture fund and the Polychain Capital hedge fund, and $102 million that it collected in August during its private token sale.

Figure 1.3 presents the ten largest ICOs completed during the past week.

Figure 1.3. Top 10 ICOs by the amount of funds collected (August 27-September 2, 2018)

During August 2018 more than $930 million were collected (made up of the results of 49 successfully completed ICOs). August’s leader was the tZERO project, which collected $134 million. The total amount of funds collected by a number of ICOs failed to reach even $100,000 (the information for some projects is still being finalized). The total number of ICOs held during the analyzed period was more than 200.

The Glossary is given in the Annex.

Annex

Glossary