In the blockchain industry this quarter, it’s difficult to ignore the incidents with QuadrigaCX and Tether calling for scrutiny in the digital asset sphere.
Regulators in Canada and the US have begun obtaining feedback and consultation from experts in the industry, while initial coin offerings (ICOs) have practically steered to a halt.
Despite Bitcoin prices having risen 53 percent year-to-date to US$5,031.01 and Ethereum prices have risen by 22 percent higher over the year to US$163.72 both as of April 11 according to CoinMarketCap, the two crypto heavyweights are not steering the most recent rally. Instead, it is altcoins, such as Litecoin that are leading the way.
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Meanwhile, security tokens are continuing to enter this space. Security tokens are a form of digital assets that can provide access to a network, rewards or inclusion in profit sharing within the network, for example. These tokens are gaining market share, adding a new shift in the market, while the onset of stablecoins are also garnering interest.
Stablecoins are a form of security tokens. These tokens have multiple capabilities, including the ability to grant access to a network, receive rewards within the network or be a part of a profit sharing scheme within the platform.
With the first quarter over, here the Investing News Network (INN) looks at some of the major trends and takeaways in the blockchain space that have taken place over the year so far. Read on to find out what happened in Q1, including looking ahead on the sector as we move into the second quarter.
Blockchain update: Q1 2019
The first quarter saw Bitcoin and Ethereum slip out of the ‘crypto winter’ seen in 2018. We saw prices rebound after precipitous drops of over 70 percent last year for both major coins. Reversing this downward trend, Bitcoin has risen in price over the quarter. In parallel, more companies are beginning to offer and accept payment in cryptocurrencies.
For example, in March Swedish firm, Bitrefill announced in a tweet that users are now able to pay for Airbnb and Netflix (NASDAQ:NFLX) services with five cryptocurrencies through its app.
Beyond cryptocurrencies, experts are talking about new additions to the blockchain family—the aforementioned Stablecoins and security tokens.
Barclay’s analyst Ross Sandler told CNBC in March that rumored Stablecoin developed by Facebook (NYSE:FB) could generate upwards of US$19 million by 2021 for Facebook. “Merely establishing this revenue stream starts to change the story for Facebook shares in our view,” Sandler told CNBC.
As such, a number of Stablecoins have now entered the marketplace. Stablecoins are coins that are asset-backed, for example by real-estate, gold or fiat currencies. Emerging stablecoins include TrueUSD and Goldman Sachs-backed Circle coin USDC.
The first quarter saw controversy surrounding Tether, which had claimed that it was backed 100 percent by the US dollar. However, the company has yet to release any audited financial reports.
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“The USDC coin is fully audited. It’s brought to you by two of the most credible sources in the industry and it brings tremendous value because … it gives you all of the things that people look for when transferring assets from one place to another without the inherent volatility, because it’s backed by dollars,” David Martin, chief investment officer of Blockforce Capital, told INN.
Henry James, Deputy CEO of Fincross International, also told INN in an interview that the market share for security tokens is getting very interesting.
“The two things holding back the security token market today are the lack of infrastructure to support that market and to make it an efficient market actually enter and to then trade on the secondary market and also regulations,” James told INN.
Meanwhile, both the US and Canada’s security regulators issued reports in the first quarter calling for feedback on regulation for crypto-assets.
“I think the regulation is needed for the space to grow, 100 percent,” Martin told INN. Exchanges including Coinbase and Gemini are welcoming regulation, as it brings more legitimacy into the digital asset space, Martin notes.
Blockchain update: Beyond Q1 2019
A key takeaway moving ahead into the rest of 2019 and beyond is that blockchain will have the ability to be used in a number of new and different ways.
“I think that we’re going to see more and more of a digital securities marketplace,” Jeff Ramson, CEO of PCG Advisory Group, told INN. I think it’s a great way for companies to be able to raise capital in a more efficient manner.”
Case in point, Ripple allows banks to do transfers internally. It added 13 new financial institutions to its customer base in January. Additionally, in February JP Morgan (NYSE:JPM) created a coin that enables its customers to make cross-border payments.
As new coins and tokens come to the forefront, investors can begin to evaluate and compare against each other.
“You’re seeing differentiation between different projects and coins, which leads to the fundamental portfolio manager picking stocks,” said Martin.
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In furtherance to this, education is becoming more vital within this space.
“The most important things I think that we’re discovering on our side is that there’s a need for education within the financial community—whether that’s a financial advisor, whether they’re institutional traders or portfolio managing traditional assets,” said Martin.
With the industry still very nascent, the emergence of clear valuation, methods and fundamentals will become important for the industry and investors. Maintaining and establishing a network remains one crucial pillar for digital assets going forward.
“I firmly believe that the use of cryptocurrencies will increase over time and therefore, with the network effect of more people using these networks where these coins are running and operating and providing utility value to end users and consumers,” said James.
Blockchain update: Investor takeaway
Blockchain developments continue to take shape beyond the digital asset realm. For example, blockchain could transform the insurance and shipping industry.
E&Y is currently involved in building Insurwave, the first maritime blockchain-backed insurance platform. The company is working with industry professionals from Microsoft (NASDAQ:MSFT), Guardtime, Acord, Maersk (CPH:MAERSKA), MS Amlin, AXA XL and Willis Towers Watson (NASDAQ:WLTW).
“If asset data can be collected and shared across a blockchain network, in real time, it gives participants in shipping a much better view of how their assets are behaving – and, significantly, how they interact with insurance mechanisms,” E&Y reports.
Bottom line, so far 2019 has seen a number of trends evolving from security tokens to advancements in regulation. Additionally, big corporations to startups will continue investing in blockchain systems to integrate into their operational fabric.
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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