From the hand of Mr. D. PhD Ismael Santiago, Professor of Finance at the University of Seville, Department of Financial Economics and Operations Management, Researcher of the PAIDI group (SEJ500) “Finance and Tourism”, Professor of the subjects: Valuation of companies; Systems and Financial Markets; Short-term Finance and Introduction to Finance and Co-founder of the Spin-off of the University of Seville: M2M Marketplace, S.L., we evaluated the situation experienced in this year 2017 of the crypto coins and how it has affected the economy.
The anxiety that causes central banks the fear of losing control of their own currencies is the main factor we consider about the increase of legal restrictions, produced by them in the global market of crypto coins.
The United States SEC, Israel Securities Authority, and South Korean financial authorities are studying how to regulate ICOs (and recently Europe). In the latter, its Bitcoin regulation law orders the creation of insurance as a way to protect investors who wish to be part of an ICO.
Russia said it would regulate Cryptomonedas without outlawing them.
Bolivia and Ecuador bet on the prohibition of cryptographic currencies, while the governor of the Bank of Mexico declined the option to approve Bitcoin as legal currency and qualified it as a commodity.
But it was the decision taken in mid-September by the Central Bank of China banning ICOs and deciding to close Chinese exchange houses shortly, which would cause a considerable drop of 40% in the value of Bitcoin and a similar size in other crypto coins like Ethereum, after 1 of September the Bitcoin quoted to a maximum of 4899,04 $ and 2 of September the Ethereum quoted to 389,37 $ (although a week later they managed to trace some of these losses).
According to CoinTelegraph, the decision by the Chinese authorities caused the Japanese digital asset market to become the largest in the world, with more than 50%, above the US that accounts for about 30% of the business.
The measures taken by China were joined by statements by JP Morgan CEO Jamie Dimon, who said that this currency is no more than a “fraud” worse than the tulip bubble of the seventeenth century, and that several days later, the vice president ECB would once again refer to the bubble of the tulips of almost 400 years ago referring to the Bitcoin, calling it a mere speculative instrument and not being a coin.
In addition to these unsatisfactory statements for the global crypto-market, there are also positive (uncertain) future events: such as the new hard fork in Bitcoin (Segwit2x) that would operate in parallel up to three different BTCs in the market and the announced next bifurcation in Ethereum.
Taking into account these circumstances, we will analyze the weekly evolution in 2017, the capitalization of the two main crypto coins and the global crypto-market itself, to conclude with some conclusions.
ANALYSIS OF THE WEEKLY EVOLUTION IN 2017, OF THE CAPITALIZATION OF BITCOIN, ETHEREUM AND THE GLOBAL CRIPTOMERCADO
Below we will analyze the weekly evolution of the market capitalization (until September 22) of Bitcoin, of the Ethereum and of the total market for crypto-currencies and crypto-assets, for which we have had the information provided by coinmarketcap.com, from which we could try to obtain objective information on the behavior of this crypto market (summarized in the graph below) booming and the comparison we have made with its two main exponents: Bitcoin and Ethereum.
On January 1, 2017, total and total market capitalization for crypto currencies and crypto actives was $ 17,700,314,429, where Bitcoin accounted for 87.47% of the total ($ 15,482,057,104) and Etherum only one 4.08% ($ 722,829,967).
When comparing Bitcoin and Etherum in this period and considering the data handled in the present study (until September 22), we consider it interesting to know that on January 1, the difference in capitalization, in absolute terms, of these two crypto coins was 14,759 .227,137 dollars in favor of Bitcoin. The minimum difference between the two occurred on June 18 by a differential amount, in favor of Bitcoin, of $ 7,587,007,495. Also, the maximum difference between both occurred on September 3 by a differential amount, in favor of Bitcoin, of 43,313,871,638 dollars.
In the following sections, we will analyze in detail the evolution of the dollar capitalization of Bitcoin and Etherum, in order to finish with the global capitalization of the total crypto market.
Evolution of the capitalization of Bitcoin
On June 11, a capitalization of $ 47,284,222,690 was reached, when January 1 was $ 15,482,057,104, an increase of 205.41% (three digits!). This capitalization accounted for 42.98% of the total market for crypto currencies and crypto actives, when January 1 was 87.47%.
Among the important news until the beginning of June we highlight the following:
- Japan legalizes Bitcoin as a payment method (March).
- In March, the United States SEC rejected the proposal of the Winklevoss brothers to introduce a Bitcoin ETF, the immediate reaction was a sharp fall in the price of the crypto-coin with an increase in contracting volume.
- On March 28, the SEC also decided to reject the Bitcoin investment fund proposal introduced by SolidX in July 2016.
- On May 12, the world’s interest in Bitcoin grew as a result of the global ransomware attack called Wannacry, since payment was demanded in this crypto coin.
On July 16, the capitalization fell to 32,826,853,045 dollars, which means, since June 11, a decrease of 30.58%. This capitalization represents 47.61% of the total market for crypto coins and crypto actives.
On August 1 there was a forced fork in the Bitcoin Blockchain that resulted in a new criptomoneda called Bitcoin Cash.
On September 3 the capitalization increased to 76,620,461,968 dollars, which means since July 16 an increase of 133.41%. This capitalization represents 45.98% of the total market for crypto coins and crypto actives.
On 13 September, JP Morgan Bank CEO Jamie Dimon publicly declared to investors that Bitcoin was a fraud, associating it with speculation and illicit activities.
In mid-September, China’s central government banned funding through ICOs and announced the closure of exchange bureaus on its territory, notably tightening the crypto-coin and crypto actives legislation in China.
In addition, the advent of Segwit2X is influencing investors as they could operate in parallel up to three different BTCs in the market that maintain the same record history in Blockchain, each competing for being the legitimate Bitcoin in the market.
On September 22, the capitalization fell to 60,203,040,223 dollars, which means, since September 3, a decrease of 21.43%. This capitalization represents 48.15% of the total market for crypto coins and crypto actives.
By this date, the Vice-President of the ECB once again referred to the bubble of tulips of almost 400 years ago, as the CEO of JP Morgan did, and assured that the Bitcoin is an instrument of speculation, not a currency.
We see, according to the news and data that we have contemplated in this study (of weekly evolution) and that they are shown in the graph, as Bitcoin makes the ascents to three digits while the descents do them to two digits, besides counting on more 40% of the total crypto market, as we see from late May onwards.
Evolution of the capitalization of the Ethereum
On June 25, a capitalization of $ 30,219,170,765 was reached, when January 1 was $ 722,829,967, an increase of 4,080.67% (four digits!). This capitalization accounts for 27.67% of the total market for crypto coins and crypto actives, when January 1 was only 4.08%.
At the end of May, the Enterprise Ethereum Alliance announced 86 new members (Toyota, Deloitte, Samsung, Merck KGaA, Infosys, Mitsubishi UFJ and Rabobank, among others) which caused the ether to fire.
Around Ethereum, the Dapps sector is growing, in addition to the majority of ICO’s and new tokens in the market (Augur, Gnosis, Iconomi, Melonport, GameCredits, FunFair, First Blood, Storj, Siacoin, Filecoin, among others). ).
On July 16, the capitalization fell to 15,050,516,347 dollars, which means that since June 25 a decrease of 50.20%. This capitalization represents 21.83% of the total market for crypto coins and crypto actives.
On September 3, capitalization increased to $ 33,306,590,330, which means since July 16 an increase of 121.30%. This capitalization represents 19.99% of the total market for crypto coins and crypto actives.
On September 13, Vitalik Buterin, founder of Blockchain Ethereum and its crypto coin ether described the current market of ICOs as a bubble that would eventually explode as many of the crypto actives ones on the market could not be sustained in the long run. On that same date, Charlie Lee, founder of Litecoin and former director of engineering at Coinbase, said he would not support the ICOs and would not invest in any.
On September 22, the capitalization fell to $ 25,049,676,631, which means a decrease of 24.79% since September 3. This capitalization accounts for 20.03% of the total market for crypto coins and crypto actives.
By the end of September, Ethereum’s development team will conduct a hard fork for its Blockchain, called Metropolis, which promises significant improvements in terms of anonymity, mining, simplification of programming processes and increased network security.
We consider, according to the data that we have contemplated in this study (of weekly evolution) and that they are shown in the graph, as Ethereum makes the ascents to three digits (and even to four) whereas the descents do them to two digits, besides to have an approximate 20% of the total crypto-market, as we see from June onwards.
Evolution of total Criptomercado capitalization
On June 18, a capitalization of $ 112,023,564,520 was reached, when January 1 was $ 17,700,314,429, an increase of 532.89% (three digits!).
One of the main factors, in addition to the more than notable revaluations of Bitcoin and Ethereum since the beginning of the year, has been the extraordinary and growing boom of the ICO phenomenon.
According to data taken from coindesk.com, the new monthly financing of ICOs has experienced a spectacular increase between the months of March to June, as reflected by the following figures:
- On March 17, the new financing of ICOs amounted to 19.42 million dollars.
- On April 17, the new financing of ICOs amounted to 103.74 million dollars.
- On May 17, the new financing of ICOs amounted to 232.04 million dollars.
- On June 17, the new financing of ICOs amounted to 462.04 million dollars.
Among the various ICO’s that were launched until mid-June, we highlight Gnosis, Brave and Bancor among others.
The Gnosis ICO, a platform that allows the creation of decentralized predictive markets, was held on April 24, with a $ 12.25 million gain in just 12 minutes.
Bancor launched its Crowdsale on June 12, 2017 and raised $ 153 million in less than three hours.
Brave, a web browser that removes advertisements and substitutes them for micropayments in bitcoins, conducted an ICO on May 31 where it raised $ 35 million in 30 seconds to fund its Blockchain-based digital advertising project.
Another point to note, according to Coindesk, is Blockchain’s token sales increased by $ 729 million compared to $ 235 million in venture capital, setting a record both in the number of ICOs and in the size of agreements.
On July 30, the capitalization fell to 88,658,230,462 dollars, which means, as of June 18, a decrease of 20.86%.
The new monthly financing of the ICOs on July 17 was 574.48 million dollars.
The most typical example is the ICO de Tezos (decentralized blockchain that supports smart contracts), launched on July 13 and where it raised 232 million dollars.
On September 3, the capitalization increased to 166,644,412,610 dollars, which means since June 18 an increase of 87.96%.
The new monthly financing of ICOs was 134.14 million dollars on August 17.
The example we have in Filecoin (global storage and data storage network), the largest ICO to date. It took place in August and managed to raise 252 million dollars in an hour.
On September 22, the capitalization fell to 125,041,000,000 dollars, which means that since June 18 a decrease of 24.97%.
On September 17, the new monthly financing of ICOs was 516.87 million dollars.
In addition to all these data, for tokendata.io we can expect 2017 to close with 296 ICOs.
As conclusions of this study, we have to say that Bitcoin, Ethereum and other cryptoneses can not be compared to the tulip bubble, since they did not solve any social problem as if they are solved by the mentioned criptomonedas. Bitcoin contributes value as a supranational currency not controlled by regulatory agencies, as well as being a mechanism of sending the value that does not need bureaucracy, in addition to allowing people to cooperate freely in any part of the world.
Another element of high value with which the mentioned criptomonedas count are the technology Blockchain that employ, which will give rise to a new generation of applications and markets in Internet that could end up dwarfing the current giants of the network, where the rules would fix them the users and not the big technological companies.
Bitcoin, like gold, also serves as a store of value: they are appreciated over time, as they are finite and are likely to be easily exchanged coins in the market. Gold is not necessarily a better option than Bitcoin as an investment, since it has few advantages over virtual assets, apart from that it has held the role of shelter value for longer. In addition, it may cost investors who are over 40 years old to change their minds about traditional investments such as gold that we do not find in the millennials, which are accustomed to the Internet and which also understand the decentralized nature of crypto-currencies.
Following the inflammatory statements by the CEO of JP Morgan, reinforced by the ECB Vice President’s recent remarks, we find the demonstrations by Tom Lee, manager of JP Morgan Chase, where he predicts Bitcoin’s worth at $ 25,000 in 5 years, according to one interview that maintained in the chain CNBC. We do not know that he was dismissed by Mr. Dimon, his boss.
In addition, the Bank for International Settlements, popularly known as the central bank, issued a paper analyzing the nature of cryptographic money, urging central banks to consider issuing their own crypto coins.
Everything seems to indicate that Bitcoin has become a “Too big to fail” for some economies and their governments seem to be starting to realize, hence their reaction.
Another notable aspect is the SEMRUSUS search engine analytics study, with a database of 120 million keyword searches related to Bitcoin in the US, which indicates that there is a 91% correlation between the volume of searches on Bitcoin in Google and the behavior of the price of this criptomoneda.
According to this study, since April 2017, searches about Bitcoin have increased by 450%, while since June 2017 Google searches for Ethereum reaches similar numbers
More and more people are realizing the importance of the Blockchain phenomenon and the cryptocurrencies. Investors and entrepreneurs such as John McAfee and Mark Cuban start businesses in this crypto-market; as well as some celebrities such as Paris Hilton and Floyd Mayweather have assured to participate in ICOs of projects Blockchain, which supposes an extraordinary publicity impulse that awakes the global interest of the public.
We have no doubt, these new crypto finances that we will call Blockchain Finance or B-Finance have come to market to stay.
As an introductory support material to Blockchain technology, you can download the free book “The era of BLOCK dot COM”, by José Felip Darás on the web http://laeradelasblockpunto.com