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Section 1: Global market update



As 2019 began, observers and actors could only sum up the past year as a “crash” or “worst year ever in crypto.” The bear market that was seen as early as mid-January 2018 and confirmed in February has proved to be a strong trend that is not yet finished, as there are no signs of a recovery in the crypto markets in early 2019.


Despite this, the demand for tech people involved in DLTs remains strong (see comment on “Blockchain talent” page 13). Over the course of the previous twelve months, a lot of people that had entered by chance, perhaps attracted by the hype, have lost their enthusiasm, or have drifted elsewhere. Nowadays, fewer amateur and inaccurate articles are found on the web. Only the knowledgeable and the serious enough have remained.


So, from a hype standpoint, crypto has declined, but the nuclear core is still very (radio)active and convinced. We believe that this community will not shrink any further, but instead, it will start to attract newcomers.

When surveying the remaining “core community” that is still working in the crypto sphere, we could sense that its people share a common feature: they are all passionate individuals who strongly believe in what they do, in the vision of the world that they hold and are trying to solve its actual problems. These individuals are not going to exit it anytime soon; they are going to pursue their ventures, whatever it takes.

There are a lot of clues indicating that embers glow under the ashes. We are going to uncover them throughout this report; one of these relates to volume considerations. Despite the decreasing prices of crypto-assets, the volume of off-chain exchanges, expressed in bitcoin (rather than in fiat), has increased steadily compared with one year ago. Furthermore, the number of on-chain bitcoin transactions has been constantly increasing since the low level of February 2017, to again, reach its highest levels ever. Add to that, there is still volatility in the markets, which proves that bitcoin is very much alive.

Less noisy but tangible applications keep appearing, with DLT-based applications now in production and delivering some measurable bottomline results. The gains are not yet fantastic, but they are now proven, and companies will make logical decisions to implement the pilots. This is what we think should be carefully monitored, as it is here that we see a pulse.

Right now, the battle in the media between promoters and detractors of DLTs has stabilized. Detractors are no longer bothering to argue over a body believed to be dead, while promoters continue their efforts.

The present situation is summed up well by this quote from Jimmy Song, bitcoin developer and entrepreneur: “Bitcoin price going up can be a very big distraction for a lot of developers. When the price is going up, we’re all thinking about how much bitcoin we have and what we can buy, so it’s very easy to get distracted when there’s a bull market. During a bear market, you don’t want to think about the price that much. Instead, you get down to work and build all sorts of goods and services that might be useful to people, and that’s a good thing.”

So, we will continue to pay a lot of attention to profitable application deployments, but overall, the DLT ecosystem is not in bad shape to begin a recovery sooner rather than later. The expectations of the public and CEOs have also come down to earth. This is a good starting point for a new and hopefully sane cycle.




The three-month gap between releases of this Quarterly is enough time for the global economic situation to evolve, and yet short enough for the evolution to be substantial each time. This time, though, we have sufficient elements to enable an accurate assessment of the situation.

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In November, stock markets fell significantly, increasing the extent of the expected reversal, especially for technology-related companies. Apple fell from 230 in October 2018, to 140 in January 2019, and Facebook experienced a similar downturn (see figure 2). These are large capitalizations, so the losses for investors were considerable. Losses were reported in other sectors and, to a lesser extent, other countries. Nevertheless, the situation is the same regarding the trend reversal.


In our last report, it appeared obvious that some key resistance levels for stock indices were being tested; these levels have since been broken. This leads us to conclude that the uptrend is broken, and therefore, we have entered a downtrend. As before, the aim here is not to focus too much on the causes that may influence further moves in the world’s stock markets, but rather to acknowledge that markets experience cyclical behavior, and we are heading toward further corrections: this view is now validated. The only unknown is the extent of the correction—the gravity of what lies ahead in the next eighteen months.


The fact that we have entered a downtrend in stock markets is important. Now, what are the implications for crypto-assets?


First, crypto-asset classes are evolving independently from other asset classes, including gold. And whereas some still pretend that precious metals are negatively correlated to cryptos: this does not appear to be obvious—maybe not yet—as clearly seen in figure 3.


The non-correlation of crypto and stock markets should continue. With the drop in the value of cryptoassets, the remaining value has shrunk so much already that, for holders, the difference between a write-off of 90 percent and 95 percent is not great, so a further shrinkage would not cause much pain if it were to happen. Currently, crypto-assets appear “cheap” compared to stocks, and hence the likeliness of a transfer of wealth from the former to the latter has increased.


This potential negative correlation would be in line with the initial purpose of cryptocurrencies; to be an alternative to the world monetary system—thereby benefiting when the adversary collapses. Although crypto prices react to news, they also react to fears of a collapse of the euro, the failure of fiat currencies, forks and other technically relevant crypto developments. However, they don’t react to changes in interest rates and real economic indicators. A caveat: there is no history of cryptocurrencies existing during a bear stock market, so for this reason, any theory may hold.


An interesting point that is never mentioned, but one that we believe is very relevant, concerns the impact of cryptocurrencies on macroeconomics. Cycles occur when monetary expansion results from the willingness of economic actors to initiate activities which require funds to be invested in projects, with the expectation of future positive cash flows.


When we see excessive creation of value, whether it be through bitcoin valuation, through altcoins appearing out of thin air—regardless of what they are homogeneous to—or very interestingly through stablecoins tokenizing fiat, we are looking at either a new “gold” resource suddenly being discovered (similar to the nineteenth century) or at new kinds of banks that want to act as money multiplicators.


In the case of the crypto market, we experienced a monetary expansion outside of the control of a central bank for the first time since Bretton Woods ended. If this mechanism works, it has the potential to fuel an economic expansion in the coming years.

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