2018 September 24 - Volume.2 Issue.38

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2018 September 24 - Volume.2 Issue.38

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Burning Billions: Tokens Cents on the Dollar Against Raised Capital

While Initial Coin Offerings (ICOs) have to date raised double in 2018 what they did last year, the controversial fund-raising vehicle is seeing its popularity diminish to select projects. Diar number crunching shows that 70% of tokens are now valued at less than what was raised during their ICO. And with tokens having no equity representation, markets have shrugged off cash-on-hand as part of an enterprise valuation.


Public ICO statistics collected by TokenData suggest that August 2018 saw the number of projects successfully completing a fund-raising round hitting a one year low, standing at just 17 tokens (see chart). Ricky Tan, Founder of TokenData tells Diar that’s it’s unlikely that public ICOs and pre-sales will pick-up any speed for the remainder of 2018.

Still, despite the never-ending bear market of 2018, investors have dropped a hefty $12Bn into ICOs (see chart). And returns outside of projects with Ogilvy marketing know-how have, unsurprisingly, not been stellar by any means.

|| UNDER THE FOLD, UNDER WATER

Outside the Top 100 cryptocurrencies being traded, there is a $5 Billion shortfall against the total amount raised during an ICO for the 562 tokens with reliable information about their fund-raising. 7 out of 10 tokens that are sitting below the screen fold have valuations that are now under their initial raise.

The story is quite telling when accounting only for the tokens that are below the funding teams received. 402 out of 562 projects that raised over $8.2Bn are now worth $2.2Bn – an eye watering $6Bn loss in market capitalization value against actual cash paid out to development teams.

Depending on when the funds were raised, teams might be sitting on even larger crypto coffers (Diar, 10 September). Of course, bad treasury management and holding onto crypto for speculative purposes could also have backfired in 2018.

Even if one is to assume zero capital raised for all the tokens currently listed outside the Top 100 with no ICO information, markets have spoken and tallied a $1.3Bn loss against the funding raised. In fact, outside the Top 20 cryptocurrencies, market capitalization stands below ICO fund-raising totals to the drum of over $700Mn.

|| WHO DECIDES WHAT’S ABSURD?...

While the market cap board shows crypto to be valued at over $200Bn, Diar estimates outside the top 5 cryptocurrencies, exchange tokens and Stablecoins, that cryptocurrencies have, supposedly, a value just over $35Bn. Yet no project has taken off and sustained any sort of audience (Diar, 20 August).

|| MR AMBASSADOR, DID YOU GET THAT PAID IN BITCOIN?

Sirin Labs, the third largest ICO which raised $158Mn, had deep enough pockets to persuade football/soccer superstar Lionel Messi, arguably one of the most popular athletes in Europe to be their brand ambassador. It hasn’t helped keep up the company’s token price.

In fact, the project’s token, aimed at funding a “blockchain phone” is literally the worst performing token in total dollar value with their market cap losing $141Mn (see table). The phone is slated to launch at the end of November.

|| UNLISTED, UNACCOUNTED – UNREAL?

324 tokens, over a third of tokens that completed an ICO and that raised over $2.3Bn in 2017-18 have yet to have their token listed on any exchanges. Half of these projects have completed their funding rounds in 2017.

And 44 tokens that have raised $1Bn sit on the bottom of the table due to practically zero liquidity, and no information about distribution of token supply. Bankera, which raised $150Mn in February is one of them - the fifth largest ICO outside of private sales.

|| MORE THAN MEETS THE EYE

With the mega raises that the ICO market has witnessed over the past 12 months, the funds raised by some of the top cryptocurrencies, at first glance, almost look humble. Outside of EOS, the top projects raised $380Mn – their market capitalization stands at $6.7Bn.

However, the success of the tokens prices has done well for the foundations and development teams. The projects teams are sitting on over $2.6Bn from their own token holdings as financing for future development (see table).

Top 10 Losers Against Capital ICO Funding

wdt_ID Token Raised Market Cap Loss
1 Sirin Labs 158Mn 17Mn 141Mn
2 PumaPay 117Mn 15Mn 102Mn
3 Envion 100Mn 4Mn 96Mn
4 Paragon 95Mn 3Mn 92Mn
5 Bancor 153Mn 73Mn 80Mn
6 Bankex 71Mn 5Mn 66Mn
7 Cryptosolartech 60Mn 1Mn 59Mn
8 Kin 99Mn 46Mn 53Mn
9 Olympus Labs 58Mn 6Mn 52Mn
10 Leadcoin 50Mn 1Mn 49Mn

Foundation Token Holdings Prove Valuable at the Top 5 -$2.6Bn Worth

wdt_ID Cryptocurrency ICO Raise ($) Token Holdings Value ($)
1 Cardano 63Mn 5.1Bn ADA 369Mn
2 IOTA 584K 139Mn MIOTA 74Mn
3 TRON* 70Mn 59Bn TRX 1.18Bn
4 NEO* 3.7Mn 50Mn NEO 857Mn
5 Tezos 230Mn 76.3Mn XTZ 114Mn

Notes: TRON burned 1Bn tokens, and is said to have locked-up 33Bn TRX until 2020. NEO has released 15Mn from their holdings.


Successful Completion of ICOs Tumble


324 Projects Raise $2.3Bn but Remain Unlisted


Top Privately Funded Projects

wdt_ID Token Raised Period
1 Telegram 1.7Bn Apr-18
2 Filecoin 200Mn Sep-17
3 Polkadot 144Mn Oct-17
4 t0 134Mn Aug-18
5 Basecoin 125Mn Apr-18
6 Hedera Hashgraph 100Mn Aug-18
7 DFinity 61Mn Feb-18
8 Blockstack 52Mn Dec-17

Analysis for this article was used from a 20 September 2018 Market Snapshot from CoinMarketCap. ICO data from TokenData.io.

US Government Agencies Up Blockchain Analysis Contracts

US government agencies have upped the need for expertise from blockchain analytic firms to assist them in honing down on potential tax evasion, money laundering, terrorist financing, drug dark markets, among the other illicit activities. 


As Bitcoin’s popularity continued to grow last year and the daily number of confirmed transactions reached nearly 500,000 in December, the demand by government agencies for blockchain analysis consequently increased as well. And investors have taken note as companies that are focused exclusively on blockchain analysis have collectively raised $28.8Mn to date.

The technique is mostly used by financial institutions and banks to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. But blockchain analysis is also frequently used by law enforcement agencies to identify illegal activity and attempt to link identities to pseudo anonymous bitcoin addresses.

According to Diar’s research, public records indicate that the US government agencies have entered purchase orders and contracts with blockchain analysis companies to the tune of $5.7Mn to date. Since the beginning of the year, the amount that the government agencies paid to blockchain analysis companies more than tripled (see graph). The vast majority of government deals have been contracted to New-York based Chainalysis.

Chainalysis has inked deals amounting to $5.3Mn, while the largest contract of $1.6Mn came in August from the Internal Revenue Service (IRS). Chainalysis is followed by Elliptic and CipherTrace. According to Diar’s information, none of the other blockchain analysis companies have been directly cooperating with intelligence agencies in the United States.

Unsurprisingly, the IRS has written the largest portion of checks accounting to 38% of the total spend. Perhaps a little more surprising is the U.S. Immigration and Customs Enforcement (ICE) who is the second highest spender. The IRS, ICE and Federal Bureau of Investigations (FBI) have a combined 85% of the total spending. Still, other government agencies have sought analysis and expertise.

The pseudo anonymity of cryptocurrencies provides intelligence agencies with a paper trail, which can very often be decrypted by blockchain analysis companies. That information can be used as actionable intelligence with the possibility of leading to criminal prosecution. And the rapid rise in cumulative spending of intelligence agencies indicates that they are paying very close attention.

Blockchain Analysis "Moons"- Cumulative Funding by US Agencies ($)


Tax Man Spending Tax Dollars

wdt_ID Agency Spend # of Contracts
1 IRS 2,191,835 9
2 ICE 1,537,945 9
3 FBI 1,142,671 12
4 Fiscal Service 330,552 3
5 DEA 215,333 9
6 SEC 184,480 7
7 CFTC 117,372 5

Blockchain Analysis Scoring Big Funding

wdt_ID Company Funding
1 Chainalysis $17.6Mn
2 Elliptic $7Mn
3 CipherTrace $3Mn
4 Scorechain $570k
5 Coinfirm** $4Mn
6 Blockchain Intelligence Group $100k
7 Bitfury (Crystal)* $90Mn
8 Bloq (Skry) -
9 DMG Blockchain Solutions -

Notes* Not exclusively a blockchain analysis company. **Updated 25 Sep from $500k to $4Mn.


Mining Equipment Producers Spark Arms Race

Bitmain, Ebang, Bitewei and Bitfury have all taken the stage in the past two weeks and announced the next generation of ASIC chips (see table). Bitmain will use the most advanced 7nm semiconductor technology while the power consumption of the chip itself is said to be as low as 42J/TH. The realistic power consumption of the whole mining unit will likely be about 10-20% less efficient.

Ebang E11++ will use a 10nm chip with the power consumption of 45 J/TH. Bitfury and Bitewei announced that the power consumption will be 55 J/TH and 64 J/TH respectively. The power consumption of Antminer S9, the most common mining unit, is more than 90 J/TH. This means that the new generation of miners will be close to two times as efficient as the miners in circulation now.

The Bitcoin mining hashrate has momentarily surpassed 60Mn TH/s in late August. The 7-day hashrate average has grown by 260% since the beginning of the year. After the next generation of miners hits the market, it can be expected that the hashrate will further continue to increase as it will be cheaper to mine at the same hashrate.

Bitcoin Mining Equipment Offerings

wdt_ID ASIC Miner/Chip Power Consumption (J/TH) Technology Node
1 Bitmain Antminer S9* 98 16nm
2 Bitmain BM1391 (chip) 42 7nm
3 Ebang E11++ 45 10nm
4 Bitewei WhatsMiner M10 64 16nm
5 Bitfury Clarke (chip) 55 14nm

Notes: *As reference.

Gemini Eyes UK For Exchange Expansion Plans

The Financial Times reported that the Winklevoss brothers are looking to possibly expand their operations into the United Kingdom. While Gemini did not confirm the potential jurisdiction, FT sources say that advisors have been hired and that the exchange is close to filing their request with the UK Financial Conduct Authority.

Competitor Coinbase made headlines this year when in March the popular exchange confirmed it had secured banking with Barclays. The Brits haven't warmed up completely to Bitcoin, trading volumes suggest (see chart). Bitcoin trading volumes have hit below a 2-year low and remain a tiny fraction of global volumes.


Coinbase Overtakes CoinFloor BTC/GBP Trading Volume

Source: Bitcoinity

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