Abstract : 2018 was a turning point and the mood of the market gradually returned to prudence and pragmatism from fanaticism and excitement. With all the bubbles washed off, the value of the whole cryptocurrency industry returned to its starting point and the industry is accumulating strength for a strong re-emergence.
DD Think Tank, an analysis team under ChainDD spent two months carrying out in-depth tracking and analysis of the cryptocurrency market and its performance, finalizing 2018-2019 Cryptocurrency Market Annual Report: Reset the starting point of value. DD Think Tank team collected, processed and analyzed more than 100,000 pieces of data of the global cryptocurrency industry and integrated more than 900 digital currency governance policies from 224 countries and regions (as defined by Baidu Baike), covering dozens of vertical segments. Furthermore, the team performed a weighted index calculation with a selection of 12 mainstream coin trading pairs at head exchanges, using the composite DD index to reflect the conditions, trend and fluctuations of the whole market.
This annual report is the most intuitive 2018 annual industry report for cryptocurrency investors and practitioners worldwide and provides reliable data and trend guidelines for the development during the next stage.
Chapter 1. 2018 Global Cryptocurency Market: Reset starting point of value
DD Think Tank summed up the data by CoinMarketCap and found that by January 9, 2019, there were altogether 2,091 digital currencies on the global digital currency market, with a total market value of 137.2 billion USD. Compared with the total market value of 823.8 billion USD a year ago, 727.6 billion USD evaporated from the overall digital currency market, a sharp drop of 87.76% on a year-to-year basis.
1. 2018 Digital Currency Market Condition: DD Index plummeted 65.51% within six months.
DD Index is a digital currency index produced by ChainDD and it performs a weighted index calculation with a selection of 12 mainstream coin trading pairs at head exchanges, to reflect the conditions, trend and fluctuations of the whole market. DD Index was launched on June 28, 2018. According to the comprehensive DD Index data, within the second half of 2018, DD Index plummeted 65.51%.
2. Recap of Annual Trend of Mainstream Digital Currencies. (Prices vs Trading volumes)
DD Think Tank has conducted a review of the market performance of some mainstream digital currencies (BTC, ETH, BCH/BCH ABC, XRP, LTC), and illustrated the data in two dimensions including price trend and trading volumes.
In 2018, all mainstream digital currencies dropped more than 80%. Among them, BCH/BCH ABC suffered the worst price drop of 97.32%, while BTC had the smallest price drop of 81.54%. This corroborates the analysis of the report of the top 30 digital currencies in terms of market value in the first half of 2018, which is though BTC's price dropped 81.54% under the backdrop of a harsh market condition in a bear market, it still enjoyed relatively high level of recognition in the digital currency field and was the coin with relatively stronger guarantee against devaluation.
3. In 2018, ICO Projects' Growth Slowed Down: Relatively High Periodical Growth.
2017 was the year of explosive growth of ICO projects and the number of digital currencies skyrocketed. DD Think Tank summed up the data from CoinMarketCap, which shows that the number of digital currencies rose from 691 in the beginning of the year to 1355 at the end of the year, a growth of 93.19%, almost doubling the number of digital currencies. In 2018, the total number of new ICO projects on the digital currency market reached 731, an increase of 53.95%, which was slower than 2017.
- During the period of horizontal price movement, the number of ICO project skyrocketed.
In 2018, the number of new ICO projects on the digital currency market reached 731. DD Think Tank has found that among these projects, 64.29% of them were issued during the period of horizontal price movement on the bitcoin and digital currency markets between July and November.
On November 14, the state of horizontal price movement was broken and the price went all the way down to somewhere around 3,000 USD. DD Think Tank ran its analysis and concluded that the main reason is that under the backdrop of a harsh overall economic condition, the bear digital currency market had already lasted almost half an year and investors' confidence about digital currencies was lacking.
The price plummet occurred right before the BCH fork battle and BTC's computing power decreased significantly. In addition, insufficient new money injected to the digital currency market means no follow up funds entered the market for rescue when the price dropped below the 6,000 USD threshold, leading to further price drop of digital currencies to somewhere around 3,000 USD.
- Largest ICO project in history: financing for EOS ended and its mainnet was launched.
In 2017, Daniel Larimer, the developer of BTS and Steemit founded BlockOne, claiming a project which could replace Ethereum had been developed, namely, EOS. The fund raising for EOS started on June 26, 2017 and ended on June 1, 2018, lasting 355 days and raising seven million ETH. Calculated by the ETH price at the end of the fundraising (On June 1, 2018, ETH/USDT pair trading price was approximately 580 USD), total fund raised exceeded four billion USD, making it the ICO and blockchain fundraising event with the most money raised in history.
4. Explosive Stablecoin Market in 2018: USD is the dominant benchmarking asset.
The stablecoin strictly speaking is not a type of digital currency but a coin with stable value and relatively steady price, combined with the decentralized system on crypto payment networks. There are mainly three types of stablecoins. The first one is fiat-backed stablecoins. The second is cryptocurrency-backed stablecoins and the third one is stablecoins without collateral/algorithms bank. The explosive growth of stablecoins has the following three characteristics:
a. In the second half of 2018, stablecoin market experienced explosive growth.
b. Fiat-backed stablecoins were dominant in the market and USD was the dominant benchmarking asset.
c. Ethereum's smart contract was the main technological framework.
5. Market value of 700 billion USD evaporated and the global crytocurrency market returned to its value starting point.
In 2018, the digital currency market experienced sharp rise and drop and the overall market value shrinkage reached 87.76%, indicating the beginning of a harsh crytocurrency market condition. However, this is not the first grim market condition crytocurrencies have experienced in history. Four years ago, BTC experienced a similar cycle.
On October 1, 2013, the price of BTC was 132 USD and within just two months' time, on December 5, the price of BTC shot sharply to 1,152 USD, an increase of 7.72 times. However, later the price of BTC started tumbling down and in early 2015 the price dropped to 176 USD, a decrease of 84.72%. After three years of harsh market condition between 2014 and 2016, the price started rising again in the second half of 2016 and returned to 1,000 USD at the beginning of 2017. Then it was 2017 and as everyone knows, the price of BTC experienced another round of rising and skyrocketed from 1,000 USD to 20,000 USD.
The harsh market condition lasted almost three years starting from 2014. During this period of time, early bitcoin community members started exploration of blockchain technology behind the bitcoin. Vitalik Buterin, an early bitcoin programmer, using ideas from his bitcoin experience, proposed the public blockchain platform with smart contract functions and established today's Ethereum through cross funding in 2014.
The development of Ethereum and smart contracts helped ICO and digital currencies become the first mature application of blockchain and was the driving force behind the sharp rise of the price of BTC in 2017. During the last cycle, understanding of algorithms and decentralization was improved. However, large number of fake ICO projects entered the market and grew relentlessly around the gray area of supervision. The whole cryptocurrency market was inundated with sham and bubbles.
DD Think Tank believes that 2019 will see bubbles cleaned up and the opportunistic “storm chasers” will exit the stage with the disappearance of the dividends. The market will return to its value starting point. This cycle will last till May 2020 and the BTC reward will decrease from 12.5 to 6.25. Each time the reward is halved is coupled with BTC's price rise and this period will be see explosive advancement of blockchain 3.0, which will be the integration of real economy and commercial scenarios with the highest explosive growth potential, leading to significant improvement of productivity and relations of production, and expansion of business models and innovation of application scenario implementation, a technology that will truly drive technological, collaborative and distributive frameworks of real business operations. This period of harsh market condition will be technologically supported by public blockchain technological update and the performance and security of blockchain will improve. The next great opportunity will emerge in blockchain sharing economy, property rights, applications, and account privacy and encryption.