In part of a long read series on quarter three (Q3) reports from a handful of different perspectives, BTCManager will flesh out some of the summer trends as well as give a better idea for future steps. In the following analysis, CoinGecko provides some insight into which projects are earning the most attention ICO-wise, the rise of masternodes, as well as a few exciting metrics on non-fungible tokens (NFTs).
BTCManager spoke with one of the founders of CoinGecko back in June 2018 to get a better idea behind the CoinMarketCap competitor. Ultimately, TM Lee and his team are pitching themselves as the David to the metric market’s current Goliath. Although CoinMarketCap has enjoyed first-mover influence since it’s inception, a smattering of commentators has critiqued the platform for its often misleading metrics.
Good morning. Bitconnect is 8th on coinmarketcap, ahead of Monero. 🤦🏻♂️🤦🏻♂️🤦🏻♂️#DelistBitconnect
— nic carter (@nic__carter) October 13, 2017
The market for measuring circulation and market cap is thus nascent and, in many ways, still up for grabs as communities continue trying to wrap their head around why a coin has value in the first place. Among the competitors includes CoinGecko, who promote a “360 [degree] market overview” by providing statistics on the number of forks, code contributors, Reddit subscribers, and even Twitter followers. Lee has admitted that it’s a work in progress, but the experiment does seem to be gathering the right kind of data to better inform the community about the more than 3,097 cryptocurrencies in circulation.
With this in mind, it seems natural that they would also participate in the Q3 reports from the summer. In similar roundups, BTCManager will also be synthesizing Outlier Ventures’ and GrayScale’s report, both of which are investment firms with very different theses on the space.
Crunching the Numbers: Market Dynamics and Exchange Activity
The never-ending bear market was naturally a major factor in much of the reported data, but the top five coins (excluding ether), enjoyed year-on-year returns. The same, however, cannot be said for the year-to-date returns, which reported negative returns across the board. The former refers to investment returns that began in October 2017, while the latter refers to investments made in January 2018. The fever pitch of December 2017 is still keeping some bag holders relatively optimistic.
Another development included in the report was the compare and contrast of exchanges that offered transaction-fee mining rewards with those that didn’t.
For the uninitiated, the trans-fee mining approach helps fund an exchange by exchanging a native token on the exchange with the fees paid in BTC or ETH. A buyer or seller on each side of a trade, no matter the platform on which they are trading, must pay a small fee to execute the fee on an exchange. This is how most exchanges operate and turn a profit.
In the case of trans-fee rewards, though, the trader has reimbursed this fee in a native token. The most notable instance of this model, as mentioned by CoinGecko, has been FCoin and BitForex. The latter offers a 110 percent return on trading fees in FT token, while the latter provides 120 percent.
It is a dubious practice on many fronts, but it also does an excellent job of gaming CoinMarketCap’s algorithms and attracting new traders. CoinMarketCap doesn’t list zero-fee exchanges as it skews their data, and as FCoin and BitForex aren’t technically “free” exchanges, their listings are included when comparing exchanges. Eventually, CryptoExchangeRanks (CER) performed an investigation in August 2018, the details of which can be found here.
The above graph indicates a “+2900% jump in BTC/USDT Trade Volume from 35K BTC to over 1 million BTC” following the exchange’s announcement of a 120 transaction fee reimbursement.
While it may be subject to manipulation, the model is trending in a big way. As reported by CoinGecko, of the “top 30 exchanges, 12 exchanges offer trans-fee rewards.” The group of exchanges handing out tokens in return for trade fees are also enjoying a “~25 [to] 28 [percent]” rate of growth. Comparatively, the cluster of exchanges that aren’t doing this is only experiencing growth within the 15 to 20 percent range.
The daily trading average of BitForex and FCoin are also noteworthy. BitForex boasts an average volume of $4,554,993,700.48 while FCoin reports an average volume of $1,297,487,170.95. Binance, on the other hand, an average of $1,157,417,451.60 for Q3.
With so many innovations, being as alert as possible of upcoming trends means observers are also aware of how to measure “successes” in the world of crypto. Indeed, keeping an eye on the rise of trans-fee exchanges, and what they mean for the ecosystem, should be a notable point for participants moving forward.
Where There’s Smoke, There’s an ICO: Whos Building What?
CoinGecko, as is to be expected, reported a tremendous drop in funds raised via initial coin offerings (ICOs). Comparatively, a total of $1.59 billion was raised in Q3, whereas Q2 boasted a whopping $7.73 billion. The bear market has also turned investors into the sharp-minded figures that will better shape innovation: “[CoinGecko is] seeing investors being savvier and investing in ICOs that are solving real-world problems such as the supply chain industry and P2P lending marketplaces.”
Practically speaking, this meant that the biggest ICO earners from Q3 included London Football Exchange ($71.32 million), GSC Aviation ($53.59 million), online.io ($50 million), alchemy ($46.62 million), and 4NEW ($45 million).
Outside of these sectors, investors are also pouring funds into bridgeware development and finding blockchain solutions for “existing business operations,” according to CoinGecko. As such, business platforms raked in $183 million, and cryptocurrency infrastructure came up second with $165 million raised in total. Ironically, the sector in which the least amount of funds were invested, were exchange-based tokens who pulled in a meager $1 million.
Regionally, Singapore (35), the United Kingdom (18), and the U.S. (15) attracted the highest number of ICOs globally. Overall, however, the ICO market was far less bullish than previous quarters. Investors have also realized that the only thing that matters for a token is that it gets listed on an exchange, as “only 7 ICOs managed to sustain their market capitalization valuation above the total amount raised” following an exchange listing.
Finally, if an investor had invested $100 into the 34 ICOs that were listed on exchanges in Q3, they would have ended with a net loss of $749 on September 30, 018.
Masternodes and Non-Fungible Tokens
Unless spectators been following DASH and CryptoKitties closely enough, it’s possible that the discussion around NFTs and masternodes likely skipped past unobserved. Despite the underwhelming response to these two sectors from the mainstream conversation, TM Lee is convinced that they will be rising to the top very soon. He explained to BTCManager in an interview that:
“While observing the space, the topic of Masternodes and NFTs have always been at the back of our head. We hear a lot about people running masternodes, both as a mean of supporting a network and also as a method of earning some yield.”
The incentive model for running a masternode with a network makes sense. Operators earn a small return for maintaining the integrity of the network and the bottleneck that faces much larger public blockchains is skirted. However, CoinGecko’s Q3 report revealed that of the top ten masternode coins, only three showed positive gains.
Regarding the rise of NFTs, Lee reminded that “with the influx of projects like collectibles, games, land, asset tokenization, and many more; we think this is a space that will only continue to develop moving forward.” He also pointed out that for founders, the space looks promising despite its handful of faults:
“The NFTs space is relatively new and young, which points to potential future growth. However, there are still plenty of problems that remain to be solved, which also means more opportunities for founders to build something in this space.”
As for the rest of the crypto industry, security tokens and their regulation were a hot topic, and CoinGecko covered the rise of this. Like the rest of crypto, many still aren’t sure how these tokens and their subsequent offerings will pan out. The exclusion of stablecoins wasn’t lost on the team either, and Lee explained that “the recent introduction of new stablecoins coming into the market, and also what is happening over with Tether, the market demands more understanding regarding this space.”