Sygnum Market View – 10 July 2020
Stable markets, but resurgence of PlusToken fears in the market
Trends for H2 2020: M&A, DeFi and Ethereum 2.0
Fears of a PlusToken sell-off
On the market front things have been fairly stable with neutral sentiment and low volatility. The only exception has been the recent fear of a potential sell-off of stolen PlusToken assets.
For those of you unfamiliar with the story behind PlusToken, here is what you need to know:
PlusToken was a Ponzi scheme disguised as a high-yield investment program which promised monthly returns on investment of 9% to 18%. It had a major following in Korea and China, especially among investors not familiar with cryptocurrencies. Early signs of trouble started surfacing in June 2019 as users reported delays in fund withdrawals and difficulties cashing out.
Platform administrators closed operations in mid of June 2019, taking with them over USD 3 billion in cryptocurrencies (Bitcoin, Ethereum, and EOS) and leaving the message “Sorry, we have run“. This led to an international manhunt and the arrest of six suspects. However, the stolen assets have not been recovered to this day.
Since then, fear of the market being flooded with stolen PlusToken assets has been responsible for a number of sharp sell-offs. Just a week ago, Whale Alert, and a number of blockchain forensics providers, flagged several transactions from PlusToken wallets. This triggered some panic among market participants, resulting in selling pressure and a drop in Bitcoin prices from USD 9,680 to a low just short of USD 9,000 and a recovery into the USD 9,200 range.
Outlook for H2 2020 – M&A/ partnerships, DeFi and Ethereum 2.0
As we move into the second half of the year, we see a few key trends emerging which we believe will shape the development of the digital asset ecosystem:
M&A and partnerships
Most have now realized that even the best exchange needs solid fiat rails and a good storage solution. As a result, we have seen M&A, JV and partnership activity heating up in the first half of 2020 and expect to see more going forward. Players are combining offerings to increase market share. Recently, SBI announced the acquisition of a USD 30 million minority stake in B2C2, the largest liquidity provider in the digital asset space. With more traditional banks venturing into digital assets, the hunt for gems in the market is on.
DeFi
Decentralised finance, or DeFi, is easily the most hyped sector within the digital asset ecosystem. This forms the foundation for the next wave of use cases and will drive a significant gain in competitiveness in most aspects of financial services. The space is still nascent and has a long way to go to become a serious competitor to commercial banks and their services. However, promising projects like Compound show the potential that exists already.
ETH 2.0
The launch of Ethereum 2.0 is long awaited – will it happen in 2020 or 2021? The anticipation is most certainly partially responsible for Ethereum’s positive performance during the first half of 2020 and it will be interesting to observe the dynamics as we approach the transition from Proof of Work to Proof of Stake for a coin and community of this size. Staking offerings will emerge on every corner new opportunities are sure to arise from such a major technological shift.
Disclaimer
This document was prepared by Sygnum Bank AG. This document may contain forward looking statements and may be subject to change. The opinions expressed herein are those of Sygnum Bank AG, its affiliates and partners at the time of writing. The document is for informational purposes only and contains general material. It is for use by the recipient only. It does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum Bank AG to purchase or sell assets or securities. It is not intended to be used as a general guide to investing, and should be used for informational purposes only. When making an investment decision, you should either conduct your own research and analysis or seek advice from an expert to make a calculated decision. The information and analyses contained in this document have been compiled from sources believed to be reliable. However, Sygnum Bank AG makes no representation as to its reliability or completeness and disclaims all liability for losses arising from the use of this information.