Updated: Jun 17, 2019
In this article, we discuss the current activities of some key players in the blockchain and crypto-assets space
News of mining plants closing or at least suspending business, continue to hit the headlines. For instance, Bitmain, the Chinese mining giant, has closed several offices (Israel, Netherlands, and Texas). Gigawatt in the US has also been forced to cease operations. This trend has resulted in the available bitcoin hash rate decreasing by 25 percent to 30 percent since October, despite the overall annual increase. In turn, this has an impact on the safety of the bitcoin network.
Only low-cost mining plants are today operating with a limited profit (the rest being unprofitable, see figure 6), mostly thanks to advantageous contracts with electricity providers. Even for these miners, unless mining difficulty level adjusts as a result of more miners unplugging, the threshold is 2,400 USD/bitcoin.
Demand from ventures that issued an ICO for listing on the main exchanges (Binance, Huobi, OKEx, Kraken, etc.) is high. On the one hand, the benefits for projects that are listed on one of the main exchanges are significant, in terms of recognition, exposure, and access to liquidity. On the other hand, one of the business objectives of exchanges is to offer a maximum number of interesting tokens that they are confident will create a market that is active enough.
Hence, some exchanges have implemented admission processes, including token information disclosure requirements. ICO details and success criteria are often analyzed by the exchanges as a proxy for evaluating the attractiveness of tokens. Their focus is on avoiding listing scams and weak projects that have a high probability of failure—they, of course, want to protect investors who are using their platform, from being trapped and having a bad experience.
Very often, a voting mechanism is deployed for investors and users of the exchange platform to nominate (in priority order) which tokens they would like to see listed on the exchange.
Despite the noise decentralized exchange projects still make (they represent one fifth of total number of platforms), their relevance in the overall traded volumes is still negligible. The evolution of these figures will tell a lot in the coming months.
Some sources have highlighted that the rising cost of compliance for off-chain exchange platforms has resulted in decentralized exchanges having a competitive advantage.
Exploring this trend is, in fact, very interesting.
Decentralized exchanges cannot be stopped; governments cannot close them, they are available 24/7 to any citizen on earth to use, with no identity check, no financial cap, and without questions regarding the origin of the funds. Hence, their use is likely to be prohibited by financial regulators, if not completely, then at least as far as their jurisdiction applies.
Blockchain entrepreneurs and application developers
At the price level that cryptocurrencies have now reached, holders of BTC and ETH, and even teams holding their own coins, are down to a tiny fraction of what they raised. From this moment on, it makes little sense for them to exit or sell what they still have.
If it no longer makes sense sell out at those price levels, this means that the downward pressure on prices is likely to be almost exhausted. In parallel, of course, ICOs currently going public are raising only a fraction of what similar projects were able to raise just one year ago.
In this quarter, it is particularly difficult to clearly express the general sentiment among average investors. Firstly, there is not much discussion these days. Secondly, among individuals active on social media, who claim to be crypto experts, the tone and feeling are primarily objective; dispassionate, but still quite positive. In summary, there is no real evidence of deep despair, which is typically present when markets bottom out.
Retail investors appear to be inactive, although probably, not many are unsettled at this stage. Most people who entered the market after November 2017 were individuals who invested a small amount of their wealth and can afford to lose the investment without being financially affected. These people are now, at most, at 10 percent of their initial investment value. They do not care anymore; they played, and they lost. However, before they consider getting involved again, the price needs to rise above their entry level to confirm their initial view, regardless of whether they held or not.
When the so-called “whales” move their assets, many think that it is a sign that “something is happening.” Whether or not this is true, it is a fact that these people have such a large share of the cake that they could influence the market if they chose to. Interpretation of such on-chain movements, of which nobody knows the origin or the destination or the price at which the movement is valued, is open to question.
A simple way to interpret this information is that these people are active and are dealing with their assets: they are either waiting, consider when to sell, or when it is appropriate to buy.
Whales have been active in recent months, e.g. on XRP and BTC. A huge transaction occurred on January 10, 2019: 130 004 bitcoins moved from one address to another. There is no way to know what this means, but a lot of addresses that have been inactive for years also transferred bitcoins back in October 2018.
Check the full version of Blockchain Quarterly (Q1 2019) report for more Insights.