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The Hard Fork – Weekly Market Commentary

This Weeks Topics:

1) Bitmain co-CEOs Jihan Wu and Ketuan Zhan reportedly stepping down
2) Ethereum gears up for Constantinople upgrade
3) Security token offerings see greater issuance

Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
XBX Bitcoin 3,507.05 -8.51%
ZCX Zcash 53.27 -9.88%
XLMX Stellar Lumens 0.10 -11.10%
XRX XRP 0.31 -11.44%
XMRX Monero 42.82 -14.34%
EOSX EOS 2.23 -18.55%
LTX Litecoin 30.22 -20.84%
ECX Ethereum Classic 4.18 -22.25%
BCX Bitcoin Cash 123.04 -22.58%
ETX Ethereum 115.76 -24.07%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 01/06/2019 17:00 UTC thru 01/13/2019 17:00 UTC.

7 Day Price Movers

Digital currencies broadly pared gains this week after a strong showing last week. Among our indexed assets, ether saw the largest downside movement in price followed by bitcoin cash. Bitcoin, the largest digital currency by market cap, saw the smallest decline among our indexed assets. At the time of this writing, bitcoin was hovering around $3,500 per coin. 2019, thus far, has been characterized by somewhat choppy markets as digital currencies have traded with elevated volatility on limited volume.

 

Bitmain co-CEOs Jihan Wu and Ketuan Zhan reportedly stepping down

First reported in Chinese media, articles have surfaced claiming that both co-CEOs and founders of the world’s largest bitcoin mining operator, Bitmain, will be stepping down. Jihan Wu and Ketuan Zhan are expected to be replaced by Haichao Wang, who was previously a director of product engineering.

Bitmain has faced an uncertain future, amidst falling bitcoin prices, which have squeezed mining operators’ profit margins. Over the course of 2018, Bitmain’s Bitcoin mining market share has fallen by more than 25%. Last week, reports claimed that Bitmain would be laying off nearly 85% of its work force as the company seeks to restructure its business lines.

Earlier this year, Bitmain gained significant media attention as it was one of the first digital currency firms seeking to go public through a highly anticipated initial public offering. At that time, the firm was valued at ~$15 billion.

 

Ethereum gears up for Constantinople upgrade

The Ethereum network is set to undergo its planned protocol upgrade on Wednesday, January 16, 2019 at block height 7,080,000. Constantinople represents part two in the Metropolis phase, with part one, Byzantium, having occurred in 2017.

Constantinople is set to usher in five new Ethereum improvement proposals (EIPs) with the improvements primarily designed to optimize the creation and usability of decentralized applications (dApps):

  • EIP 145 will seek to reduce costs associated with using dApps by lowering the amount of gas needed to run certain smart contracts.
  • EIP 1014 will move the network closer to incorporating state channels allowing certain transactions to be settled off-chain, which will optimize the efficiency of the network.
  • EIP 1052 will seek to optimize verification of contract codes.
  • EIP 1234 will delay the network difficulty bomb and reduce the miner block reward from 3 ETH to 2 ETH. This reduction will reduce the inflation rate of ether by nearly 30%.
  • EIP 1283 will introduce new usages for contract storage to reduce complexities and pare excessive gas costs.

 

Security token offerings see greater issuance

Security token offerings (STOs) have begun to see greater adoption as the US SEC increases regulatory actions on traditional initial coin offerings (ICOs). In November two ICOs, which conducted token offerings not filed as securities, were penalized by the SEC. STOs are security digital tokens (often ERC-20 tokens) that can represent various financial instruments, including: equity; revenue sharing; or, some other instrument.

To determine how security token adoption is shaping up in this new capital raising environment, we tracked the number of new STOs each month (see Figure 1 below). It remains unclear as to whether STOs will rise to replace ICO issuance or if the SEC will take a softer approach towards ICOs. Last month, a bipartisan bill was put forth that would exempt digital tokens, such as those launched in an ICO, from filing as securities.

Figure 1: Security Token Issuance Over Time

Security Token Offering Statistics

Data for chart sourced from stoupdates, stomarket, stocheck, and icorating.

 

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