Blockchain Update: Q1 in Review

It hasn’t been the start to the year that blockchain enthusiasts were perhaps hoping for, but the tumultuous first months of 2018 are not entirely surprising — at least according to some industry experts.

Looking back to the end of 2017, excitement bubbled in digital currencies cryptocurrency favorite bitcoin touched an all-time high of just over $19,000, blowing most other cryptocurrencies out of the water in terms of price tag per token.

So far in 2018, it’s been a bit of a different story for bitcoin, which has steadily declined ever since its record high of $19,200. Bitcoin dropped to as low as $6,194.33 in February, according to data from Coinmarketcap, and has remained relatively volatile ever since then.

At the time this article was written, bitcoin had recovered slightly to $8,500.92.

The overall sector has certainly faced challenges in the first few months of this year thanks to a number of regulatory crackdowns and US Securities and Exchange Commission (SEC) investigations into companies that added “blockchain” to their titles late last year.

On that note, with Q1 officially in the books and Q2 already under way, here the Investing News Network (INN) is taking a look back at what some of the biggest trends were in the first few months of 2018, and what to look for for the rest of the year.

Blockchain Q1 2018 update: ICOs continue making headlines

Initial coin offerings (ICOs) were top headliners in 2017, according to our year-end 2017 review, and this year the story has been no different.

In fact, already in the first few months of the year ICOs have left 2017’s numbers in the dust. Data from Coindesk shows that in the first quarter $6.3 billion went into ICO funding, representing a 118-percent increase from all of 2017.

Telegram’s ICO accounted for a large portion of that, Coindesk states, with a record-breaking $1.7 billion token sale. But even without Telegram’s ICO, the first quarter still saw $4.6 billion raised in tokens, representing 85 percent of 2017 in total.

The ICOs per month in the first quarter of 2018 are broken down as follows, according to Cryptosale:

• January – $1,528,463,335
• February – $1,349,743,790
• March – $2,946,645,000

So far in April, $223,589,000 has been raised in ICOs.

Blockchain Q1 2018 update: Regulations in focus

The biggest challenge the industry has faced so far this year are government regulations, particularly in Canada, the US and from governments in China and India.

That said, David Mondrus, CEO of Trive, told INN in a telephone interview that these regulatory moves weren’t particularly surprising, and that they are something that will likely continue.

“I think [the government is] going to continue their crackdown on ICOs,” Mondrus said. “I think they’re still going to try and regulate because that’s what they do.”

In mid-February, US Congress held a hearing to discuss blockchain’s potential in the government, which ignited some hope for the industry.

According to a Brookings Institution report, the firm found that most US states have “taken at least some form of regulatory stance concerning cryptocurrencies and blockchain technology.”

“However, many state legislatures have only introduced or passed regulations to clarify cryptocurrency exchange vis-à-vis existing money transmission laws,” the report states.

Kevin Hobbs, CEO of Vanbex, told INN that one of the biggest takeaways from last quarter is how much attention regulators are putting into the industry, but that they’re “getting it wrong.”

“They’re just trying to slow the market down so that they can catch up,” he explained.

In its efforts to become more strict, the SEC stated in February that ICOs would have tighter regulations, while “true” cryptocurrencies will be given “smart policies.” Similarly, the SEC said that when it comes to ICO projects and token issuers, stricter restrictions on the ICO ecosystem will also be imposed.

Canada recently acknowledged that its digital currency sector currently operates without “much regulatory certainty.” The Ontario Securities Commission stated, however, that it “will continue to foster new ways to raise capital and invest, while focusing on potential investor protection issues arising from cryptocurrency and blockchain-related developments” as part of its key areas of focus for 2018 to 2019.

Globally, the Chinese government has been one of the toughest on the blockchain sector. In February, the South China Morning Post reported that the country would be blocking all websites related to cryptocurrency trading and ICOs, including foreign platforms, in efforts to “quash the market completely.”

India has also been strict on cryptocurrencies: the Reserve Bank of India (RBI) allegedly banned financial organizations that may have any dealing with cryptocurrencies.

“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies,” a statement from the bank reads.

Beyond Q1 2018: What’s next

For digital currencies like bitcoin, Mondrus told INN that despite the volatile year cryptocurrencies have had, he still sees bitcoin reaching $100,000 over the next two years, and $1 million over the next five.

He did stress that what has changed is the short-term outlook, and how the industry feels over the coming weeks and months.

“Don’t invest more than you can lose,” he said. “The point of all of this is to hold it long term, not to cash out next week, so put your money in and then forget about it. Come back in a year or two.”

Michael Scott, a blockchain and digital economy journalist, told INN that he does expect prices to increase, but not at the levels many others have projected.

“I think the crypto crisis will inch back up, but in a more measured pace,” he explained. “Investors will begin to be a bit more thoughtful in terms of the potential of another run down in the prices.”

Similarly, Hobbs told INN that he thinks there will be a correction in the market in terms of cryptocurrencies with Canada officially hopping on board with regulations.

“I think the regulators [in Canada] are going to start to really get on side of this, hopefully, and start to be an ambassador for it to help build,” he said. “That’s kind of what I’m seeing right now is the adoption of this technology in mainstream-use cases.”

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article. 

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.