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Section 1: Global market update


In the last months, we witnessed what can be called a crash in DLT tokens prices. Global market cap of the sphere has been divided by 3,4; with typical prices of popular tokens falling as much as one fifth, one sixth or more of what they were worth early January 2018. If this is not a crash, then what would be? Even if three months later, a minimum point would seem to have been reached with a significant rebound during April.

Though, a couple hundred billion USD total size of the sphere is still small in the ocean of financial assets valuations. I like to compare it to the 10 trillion USD order of magnitude reached by internet bubble at its burst (and fiat money printed since would inflate this benchmark). Despite the fundamentally different natures of both phenomenons, the crypto sphere has therefore clearly the potential to climb higher than last January peak, especially if institutional investors start to ‘play’ with it (and we will need to deep dive into that carefully).

However, still, I would express that ‘something has been broken’ with this crash. Even the most volatility-used crypto-investors were blasted on January 17th and had to admit that in 2017, especially at the end “it went too high too fast”; so now a sort of new time has come.

Many people who entered in all-time-high periods of November-December have experienced much pain in Jan-Feb-march. Moreover, now, if prices fail to recover, these people who lost money will be extremely cautious about re-entering – if they are not altogether disgusted. Moreover, as individuals have been the primary source of fresh cash in the cryptosystems, if they step back and wait to see without being replaced by other speculators to sustain demand somewhat, then prices of DLT tokens will probably struggle (with an important caveat: in the current situation of usages).

In January and February, crypto haters and skeptical of all kinds won battles on battles stating how much they could not understand how much interest could be laid in such an empty thing; they have made their points and impressed the opinions almost as much as the enthusiastic people had their show hour just before. Crypto has become a matter of (too much) belief and (too much) passion: either you are into it and believe in its future, or you are out (by choice or not), and you will discredit it with all your power. So many interests are at stake that it is not a game anymore, and believers on both side contempt each other but now a neutral person can hardly decide for him or herself which side it will all go. Spirits have heated and diverged too much and they ought to calm down a bit to try to converge back on reality.

So, it looks especially difficult as of end April / early may figure out where the DLT tokens will be heading in the next weeks, months, not to mention years. Trends have been broken. Nevertheless, absolute levels reached down are not necessarily breaking longer trends. We only have what we observed in the past to try to extrapolate what may happen, and with few previous situations like the current one on the records, we have to navigate in the unknown.

Well, let’s see if we can think about what can happen in the next months.

We have expressed the conclusions step by step, but to write in a few sentences the main points to retain from this study:
Regulations fears have eased but will come back, especially as G20 will work on concrete proposals from July on. Especially, ICOs will obtain frameworks, and KYC issues will continue to focus on requirements from officials.
There is clear technical progress, especially in terms of governance, scalability, with competition in the nature of solutions; next months will be technically very interesting

Individuals may not be keen to pour more cash into cryptos at it shall first stabilize and recover; banks and funds look to be cautious towards cryptos, not taking the relay. Ultimately, the global economic situation as it may evolve on its own will probably be the parameter with the most impact on DLT tokens valuations.

Ultimately, from an investment perspective, the next 12-18 months may be expected to offer limited or disappointing growth in DLT tokens; we may witness ups and downs maybe even more severe than the ones already experienced in 2018 already, with occasional rallies.


ndependently of intrinsic qualities or flaws of DCT tokens, their short or mid-term fate largely depends from dynamics as large as- or larger than- them; and in the first place comes the global economic growth cycles.

So looking at the technical facts, correlation is positive but very low between any crypto and classical stock indexes such as the S&P500, typically below 0,1 (even if there has been an increase in this value in the last months). Meanwhile, correlation is also below 0,1 with gold (and it is of course as expected in the 0,5-0,7 between cryptos).

Interestingly, there is a negative correlation (~ -0,2) between volatility on for example American stock exchange (VIX) and cryptos. This means that when stock markets become more stables, then cryptos go up. Said differently, when there is little movement (and thereby opportunities to arbitrage) on stocks, people tend to turn to an alternative asset class that in their views may bring higher returns, in what could, therefore, be seen as a deliberate run for risk.

This quantifies somehow how individuals with spare money to invest have struggled to find sufficiently appealing return rates in the last period and how they have turned to cryptos for some of them as an alternative, fueling speculation.
Well, observed decorrelation in periods of exponential ups and downs may not tell what it will be in a possibly more stable future, but the brutal insight would be to admit that fluctuations and possible problems in the stocks markets will not have too big an impact on DLT tokens valuations evolutions.

However, but. What if stock exchanges indeed would crash?

Well, by opposition, if they carry on their rally (and crash later ;)), then the amount of money available in the pocket of investors willing to diversify and look for returns will keep increasing, and the availability of cash would likely continue to flow in the high-risk areas, including VC and the DLT tokens.

Early 2018 with indexes of PE/VC also at their highest levels, Nasdaq at its all-time high, central banks interest rates starting to increase, bankers are encouraging their clients to take more risks: one could argue that all signs (or alerts) of a stock market peak are out there for all to see. Some preliminary shocks on the stocks have even been experienced, which would prove it all. Speaking for myself, the risk of currently overpriced companies shares look far higher than risks of possible midterms benefits on holding them.

Whatever reason for stocks to fall, if they do, the classical mechanics of events is well known: issues to finance businesses, unemployment, individuals struggling to pay their debts, household consumption down, overproduction & sales down, and looping. So, what if this happens, even in light or short type of crisis? In my views, if individuals and companies all of a sudden have difficulties in finding the cash to finance their lives and businesses, speculating into cryptos are going to be hit hard. Or at least even if people who hold crypto would try to hold them as they are initially persons who had spared money they did not need (thereby making offer scarce then price hold) at least I see hardly fresh money flowing into the system in such a situation, so it would definitely be a factor for DLT tokens valuations to go down.

So I would find the logic that in the case of an economic crisis worldwide, Bitcoin & co will suffer just like all the rest, and even more if it has become more significant meanwhile. However, let us see now how this reasoning may be nuanced:

  • If cryptocurrencies are fundamentally decorrelated (or negatively correlated) from the stock exchange, for instance, if people get conscious that they can protect them from fiat money devaluation by central banks ‘quantitative easings’ (otherwise call it inflation or an artificial dilution of a citizen’s financial significance). To push it to the extreme, if one wants to protect herself from a failed central state, cryptos are already quite an option – look at Venezuela, Cambodia, Zimbabwe.

  • If Bitcoin end-up being a sort of digital gold intrinsically, then it could attract value as a refuge. However, one would argue that it is somewhat volatile to pretend to play this role – yet

  • If coins end up having a concrete utility, due to practical usage, may it be in the sense of IT like Ethereum or like an ecosystem-captive currency, or as a more wider acceptance as an optimized Dash? This, to be discussed further.


Otherwise, now that many people investigate everything about cryptos and have widely available data to test everything, research has been done that shows a correlation of Bitcoin with the ‘forward price to earnings ratio’ of stocks listed in the S&P 500. What can be said from that again is that investors try to look for returns and Bitcoin has merely behaved as the expectation of gains of investors? Moreover, then that if stock drop, hopes will crash even worse, and cryptos should reflect that.

So, to sum up, if a more or less violent stock exchange thunderstorm takes place tomorrow and crypto assets do not fundamentally change in their nature and perception in the next year, then the value of DLT tokens can be expected to suffer in the next months. Otherwise (if the stock exchange crisis happens later on, or is moderate, and if the usage of tokens starts to be enjoyable per se, may it be as a hedge against inflation) then expectations on prices of tokens will be more complex to anticipate.

Even more widely, worldwide geopolitical stability influences business climates and investors minds; I guess there is little we can say on that apart than affairs go their way, Korea seems to ease a little but Iran agreement is not, there are ups and downs that are a far broader subject than we can cover here. No particular red lights, this is all we would retain.