The first quarter of 2018 was marked with continued protocol layeru00a0 innovations, with heavy declines in prices across the board.u00a0Emerging and recurrent themes included transaction fees, microtransactions, increased fiat on-ramps, and regulatory changes.u00a0The Commodity Futures Trading Commission u00a0(CFTC) and Securities and Exchange Commission u00a0(SEC) in the U.S., as well as Japanu2019su00a0 Financial Services Agency (FSA), made sweeping announcements or changes to the cryptocurrency milieu.
In caseu00a0you missed it: The Biggest Stories of Q1 Honeypot Drained, Regulators Take Notice In late January, Coincheck u00a0was hacked for~US$400 million in NEM.
T he exchange u00a0reimbursed users with operating profits, which is becoming common practice after a heist. Japanese regulators became increasingly concerned with unregistered exchanges as well as exchange security following the hack.
On March 8th, Japanu2019s Financial Services Agency (FSA) suspended two Japanese exchange operationsu00a0 for 30 days , FSHO and BitStation. In April 2017, Japan passed legislation recognizing BTC as legal tender and as of September 2017, the FSA officially recognized 11 companies as registered cryptocurrency exchange operators. The United States Securities and Exchange Commission (SEC) also released au00a0 statement u00a0on the unregulated nature of cryptocurrency exchanges. The SEC is particularly interested in exchanges which offeru00a0 ICOs , which may or may not represent unlicensed securities. While not a direct enforcement notice, the statement was seen as a shot across the bow of any exchange not currently registered in accordance with securities law. Theu00a0 second hearing u00a0regarding cryptocurrency regulation with CFTC chairu00a0 J.
Christopher Giancarlo u00a0occurred in Washington, D.
C. on February 15th. Giancarlo remains focused on six elements: (1) staff competency; (2) consumer education; (3) inter-agency cooperation; (4) exercise of authority; (5) strong enforcement; and, (6) heightened review of virtual currency product self-certifications.
In March, Chinau00a0 announced u00a0it will begin slowly regulating cryptocurrencies, as opposed to an outright ban. Zhou Xiaochuan, governor of the countryu2019s central bank, the Peopleu2019s Bank of China, has admitted that cryptocurrencies are inevitable but added; u201cwe do not currently recognize Bitcoin and other digital currencies as a tool like paper money, coins and credit cards for retail payments.
The banking system does not accept it.u201d China is rumored to be working on u00a0their own cryptocurrency .u00a0 Thailand has taken a softer approach to regulation, recently enacting a u201cspecial lawu201d that u201cwill regulate the purchases and sales of cryptocurrencies and ICOs in order to avoid market manipulation, money laundering, tax evasion, as well as multi-level marketing schemes.u201d The Thai Finance ministry recently released a final version of a tax framework which includes a 7% value-added tax (VAT) and a 15% capital gains tax.
Jack Be Nimble In February, Squareu2019su00a0 Cash.
App u00a0began allowing all users to buy and sell Bitcoin through the mobile app, which also released anu00a0 explanation u00a0of how Bitcoin was created and how it can be used. In au00a0 survey u00a0of 100 U.S. Square merchants, 60 percent said they would accept Bitcoin as payment.u00a0 The CEO of Square and Twitter, Jack Dorsey, remains strongly bullish on the future of Bitcoin.
In an interview with The Times, Dorsey stated that the world will ultimately have a single currency, as will the internet, adding u201cI personally believe that it will be bitcoin.u201d Dorsey will be a keynote speaker at one the industryu2019s biggest conferences,u00a0 Consensus ,u00a0on March 14th-17th in New York City. Payment integration between Square and Twitter using the lightning network remains a likely possibility in the future. n Source: Cash.App n
Gox Creditor Sells Bitcoin experienced a rather large supply shock .
As discovered by au00a0 Reddit user , the Mt.
Gox bankruptcy trustee, Nobuaki Kobayashi, moved 36,000 BTC, which according to the wallet address transaction times, was sold in five lots (*) between December and February. The most recent Mt. Gox creditor meeting report can be viewedu00a0 here . The next court proceeding related to the bankruptcy isnu2019t scheduled until September 18th, 2018.
Lightning Network Goes Live After years of research and development, Bitcoinu2019s Lightning Network (LN)u00a0 went live in March . LN offers bi-directional, off-chain, hub and spoke payment channels on layer 2 of the protocol.
u00a0 The team behind LN, Lightning Labs, also announced that it raised US$2.5 million in seed financing, with investors including; Jack Dorsey; David Sacks, former COO of PayPal; Bill Lee, angel investor in Tesla and SpaceX; Jacqueline Reses, head of Square Capital; and Charlie Lee, creator of Litecoin. n Source: https://rompert.com/recksplorer/ n Poloniex Sold For A Lint Roller and Pack Of Chewing Gum In February, Boston-basedu00a0 Circle u00a0boughtu00a0 Poloniex u00a0for US$400 million. Circle is one of three companies thatu00a0holds a New York bitlicense, and has plans to release au00a0 retail trading app u00a0later this year. Having launched in 2013, following a US$9M Series A funding round, Circle was created to increase mainstream adoption of cryptocurrencies like Bitcoin, by providing a payment platform for consumers and merchants. The company has since raised a total of US$140 million in venture capital from investors including Goldman Sachs, IDG Capital Partners, Breyer Capital, Accel Partners, General Catalyst Partners, Baidu, CICC Alpha, EverBright, WangXiang and CreditEase.
Goldman has since started development of a cryptocurrency trading desk of their own. Circle cited Poloniex as an important bridge for u201can open global token marketplace.u201d Poloniex was unable to keep up with market demand in 2017, having problems with exchange uptime and answering customer support tickets. As a result, Poloniex lost much of its market share to other exchanges. Binance Eats the World and Remains Hungryu00a0 After gaining 7 million users in 100 days, Binance has decided to move out of Asia due to regulatory concerns. Au00a0 warning from the FSA u00a0has prompted CEO Changpeng Zhao to moveu00a0 the Hong-Kong based exchangeu00a0 and team tou00a0 Malta . The geographic shift will also allow for a fiat-to-crypto trading pair, allowing people to purchase crypto directly with USD or the Euro.
Binance also has its own coin, BNB, which is set to become an integral part ofu00a0 future expansions of the business , including a foray into the realm of a decentralized exchange.u00a0 More Forks Than An Estate Sale, More Airdrops than Normandy A Cambrian explosion of forks and airdrops peppered the landscape throughout Q1. Expect even more forks and airdrops in Q2.
u00a0 n Source: BraveNewCoin.com n n Source: btcdiv.com n Consensus Algorithms Got Harder to Solve Most Proof of Work coins reached record levels of both hash rate and difficulty in Q1, in large part due to ongoing development and use of application-specific integrated circuits (ASICs).
u00a0 Source: BitInfoCharts.com n
u00a0 n Source: BitInfoCharts.
com n n Source: BitInfoCharts.com n n Source: BitInfoCharts.com n On-Chain Transactions Plummeted Daily transactions for all coins decreased throughout Q1. This was likely due to a reduction in general use, but was also partially due to batching transactions and the use of off-chain vehicles like the Lightning Network.
n Source: BitInfoCharts.com n Transaction Fees Decreased In direct relation to declining prices, transaction fees also decreased.
These fees can also be influenced by network usage. Bitcoin experienced the greatest reduction in transaction fees.
This was in large part due to SegWit adoption which allows for smaller sized transactions and a larger block size. n Source: BitInfoCharts.com n n Source: https://jochen-hoenicke.de/queue/#0,3m n n Source: http://segwit.
party/charts/# n n Source: http://segwit.
party/charts/# n Market Caps Fell The total market cap of all coins peaked around US$835 billion in Q1, and have fallen almost 70%, to US$267 by Q2. Most altcoins pulled back harder than Bitcoin. n Source: CoinMarketCap.
com n n Source: CoinMarketCap.com n n Source: OnChainFX.com n Stratospheric ICO Raises Continue Unabated
Of the 158 ICOs thus far in 2018, a total of US$4.9 billion has been raised.
Q1 raises have eclipsed the sum of funds raised in all of 2017 by over US$1 billion.u00a0 n Source: CoinSchedule.com n
The messaging app Telegram, which has 200 millionu00a0 active users , is set to raise over US$2 billion, having raised US$850 million in their first round pre-sale.u00a0 Another messaging app, Kik, which has 15 million active users, raised US$35 million in 30 seconds in 2017, and went on to eventually raiseu00a0 US$100 million .u00a0 The President of Venezuela,u00a0Nicolu00e1su00a0Madurou00a0Moros, issued au00a0 Petro ICO u00a0andu00a0 claimed u00a0to have raised US$735 million. The tokens are on the NEM blockchain andu00a0 remain untouched.
The Petro ICO was seen by many as au00a0 scam u00a0and by U.S. lawmakers as au00a0 workaround to U.S. sanctions .
The ICO prompted U.S. President Donald Trump to issue anu00a0 executive order u00a0barring U.
S. citizens from participating in the ICO or transacting with the token.
u00a0 Trends Shifted Every coins broke below the daily Ichimoku Cloud, entering bearish territory. Bearish 50/200 moving average crosses (DEMA) are a certainty in Q2. This will be Bitcoinu2019s first such cross since October 2015.u00a0 dApps,u00a0lApps, and automobiles
Cryptokitties, one of the most popular decentralized apps to date, descended on the world in Q4 2017.
Q1 2018 brought about even more games and crypto collectibles. Based on available dApp data, decentralized exchanges hold the highest number of transaction and ETH volume currently. Several dApps will continue u00a0to be released throughout Q2, including another cryptocollectible ,u00a0 CryptoPets . n Source: dAppRadar.com n Blockstreamu00a0 announced seven new LN apps ( lApps ) at the end of Q1: FileBazaar u2014 enables Lightning micropayments for creators who are producing digital files like photos, videos, or documents. n Lightning Publisher u2014 a WordPress plug-in that enables content creators, businesses, or anyone with a WordPress website to accept bitcoin payments for their content instantly via LN. n Nanotip u2014 enables Bitcoin users to tip atomic amounts of bitcoin to anyone on LN instantly. n Paypercall u00a0u2014 allows web developers to request payments for specific, programmatic API actions.
n Nanopos u2014 point-of-sale system intended for businesses with fixed-price items, such as restaurants or retail vendors. n Ifpayttu00a0 (If Pay Then That) u2014 using theu00a0 IFTTT u00a0(If This Then That) infrastructure, Ifpaytt allows users to create applets by combining triggers and actions. n Lightning Jukebox u2014 a video jukebox that enables users to request songs (or videos) for a micropayment. n Jack Mallers u00a0has also developedu00a0 Zap , which enables payments via LN. Au00a0 WooCommerce LN plugin u00a0was one of the first payment rails to be demoed on the product.u00a0 Avenues for micropayments are critical for the development ofu00a0machine to machine payments on the internet of things . Payments on the IoT are set to disrupt several industries, several of which are directly connected tou00a0 automakers .
u00a0 Looking Forward Regulators around the world finally begin to catch up with everything from exchange and ICO regulations to taxation.
Countries with blossoming crypto businesses will likely have a friendly regulatory stance, whereas as overreaction or over-burdensome regulations will cause a mass exodus.u00a0 With the increased use of chain-analysis, privacy on the blockchain has become an increasing concern. Expect to see more stories in 2018 in relation to crimes or tax evasion being discovered through the use of chain-analysis. The fiat on-ramps coming online via exchanges or apps will allow for increased adoption and awareness of all cryptocurrencies, not just Bitcoin. When the buying mania returns, infrastructure previously unavailable will be ready for new market participants to enter.u00a0 Technicals are broadly bearish for the entire market, more so for altcoins.
Q1 has historically been a down quarter, with Q2 and Q4 showing significantly more bullish price action.u00a0
The post Hacks, tax, and forks the biggest drivers of crypto in Q1 .
