Quarter Two 2017 in Review: massive growth in the blockchain industry - Smith + Crown
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Quarter Two 2017 in Review: massive growth in the blockchain industry

The second quarter of 2017 was a record breaking period for the blockchain industry. In this quarterly report, Smith + Crown takes a closer look at the data from last quarter.

The second quarter of 2017 proved to be a period of growth for the blockchain industry. Across the board, crypto-token markets rose, doubling and tripling in value in the span of just a few weeks. The Smith + Crown Index (SCI) over Q2 2017 reflected a bull market, more than doubling in value between April and June.

  • The value of crypto-token markets, as reflected by the SCI, increased steeply from April to June before leveling out and then falling in the first week of July.
  • Even with the recent fall in crypto-token markets, the SCI index provides evidence of a bull market. At its lowest point in July, the SCI is about 1.5 times higher than it was at the beginning of the quarter.

Increases in the value of the Smith + Crown Index (and the bull market in general) were lead by Bitcoin, which almost doubled in value between March and June. However, Ether’s growth outpaced that of bitcoin, tripling in value in the same period. Below, two graphs show the price of Bitcoin and Ether throughout the second quarter of 2017. The top graph shows price, in USD, of Bitcoin and Ether from March to the first week of July. The bottom graph shows the price of Bitcoin and Ether indexed to their respective values on April 1st, 2017 such that the price on April 1st equals one hundred. This graph shows the change in price for each currency from March to July in respect to its value at the start of quarter two.

  • Bitcoin’s price increased by about $2,000 over the course of the quarter. Major movements in price coincided with the Consensus conference in New York City (Event A) where the Segwit 2x agreement reached more than 80 percent consensus from network participants.
  • Ether’s price increased by about $230 over the course of the quarter and by as much as about $350 since the beginning of March.
  • Overall, the price of ETH increased almost sevenfold since March, whereas BTC increased by less than twofold in the same period.
  • Major movement the price of ETH took place at the same time as Token Summit (Event B) when the Kik/KIN token sale was announced, the first token sale launched by a major mainstream social media company.
  • Other token sale news from quarter two also had a correlated relationship with major price movements in ETH. ETH peaked and then began to fall in tandem with the Bancor token sale (Event C). The Bancor token sale broke all previous records for token sale raises. Token holders may have interpreted this as a sign that the market was overheated.
  • ETH markets dipped again as the Status token sale concluded (Event D). The Status sale congested the Ethereum Network, reminding the community of issues with scaling. An important post by Fred Ehrsam about Ethereum’s scaling helped put concerns in perspective.
  • In the first weeks of July (Event E), ETH markets broke a month long growth trend. However, the markets are still up more than 200 percent since March.

This growth of the capitalization in crypto-token markets was accompanied by a frenzy of activity in the token sale market. By all accounts, the second quarter of 2017 has been a record breaking period. The chart below shows a timeline of record breaking token sales.

Not including The DAO, which raised $150 million that was later returned to investors, Ethereum had held the record for the most raised in a token sale ($15.2 million) since 2015. However, starting with Qtum’s token sale at the end of March, that record was broken again and again. Already in the first weeks of the third quarter of 2017, the record has been broken twice: first by EOS and then by Tezos. Note: the EOS token sale is ongoing so their final valuation is pending.

  • Interestingly, every token sale on this timeline is a platform project of some kind. Qtum and Cosmos are building blockchain infrastructure platforms aimed at solving scalability and interoperability challenges facing the industry. Aragon, MobileGo and Bancor are all building protocols for launching specific types of ERC20 tokens.
  • Qtum and Cosmos are both launching new blockchains. They represent a trend this quarter projects raising funds to build new blockchains that will compete with or complement Ethereum.
  • MobileGO was the first to launch simultaneously on Ethereum and Waves, a strategy that has since been repeated by Ong.Social, Primalbase, and Bowhead Health.

The second quarter of 2017 broke records for the broader token sale market as well. The graph below summarizes token market activity since the second quarter of 2016.


  • The number of token sales that successfully raised more than $25,000 increased every month since March, reversing a downward trend that began at the beginning of 2017.
  • Month by month, the number of token sales for Q2 2017 are more than twice what they were a year ago.
  • Only midway through 2017, there have already been more token sales (80) than in all of 2016 (69).
  • The amount raised in token sales in Q2 2017 dwarfed all previous quarters. In June alone, more funds were raised in token sales than in every other month combined going all the way back to 2013.
  • Token sale raise amounts have been increasing month on month since March, again reversing a downtrend that began at the end of 2016.

Early stage investment in blockchain projects also increased the over last quarter. However, funds raised through more traditional venture capital channels were dwarfed by those raised by token sales. The graph below compares the amount of investment capital raised to fund early stage blockchain projects by venture capital and token sales.


  • Funds raised in venture capital increased more than five times compared to Q1 2017, reversing a decreasing trend that began at the beginning of 2016.
  • Even so, token sales raised more than three times as much capital for blockchain projects in Q2 2017 compared to early stage venture capital.

All in all, the data from this quarter suggest that capital is pouring into the blockchain industry at unprecedented levels. The majority of that capital is being captured by a cohort of some eighty odd blockchain projects that raised funds through a token sale.The types of projects that launched in the second quarter of 2017 are extremely diverse.

  • Blockchain venture fund, Blockchain Capital, issued the first tokenized security offering on Ethereum, the BCAP token.
  • Projects like WeTrust aim to disrupt the banking industry by bringing new types of financial services to the mainstream.
  • Storj, iEx.ec, and Mysterium could potentially lay the foundation for the distributed cloud computing and storage market.
  • Aeternity, Cosmos, Internet of Coins, and BOScoin are developing additional blockchain infrastructure services.
  • Basic Attention Token, Status, and Civic are all building tools that will enable internet users to take control over their personal data in a new, decentralized internet.
  • TokenCard and Monaco want to make spending crypto tokens as easy as spending fiat by creating a crypto debit card.

With so many interesting and promising projects launching, there is a lot to be excited about in the blockchain industry. That being said, there have been concerns that the rapid growth seen in this quarter might be a bubble. Some of those fears were realized at the beginning of July when markets fell; however, for the quarter and for the year, markets are up considerably and capital continues to flow into new blockchain startups. Be this as it may, many of the fundamental limitations facing the blockchain industry have yet to be overcome.

  • Many of the projects launched in this quarter are highly experimental and ambitious, often working on the fringes of multiple fields, industries and even what is legal in the current regulatory environment. It’s hard to tell which of these experiments will be successful, which will fail, and which will attract the ire of regulators and law enforcement agencies.
  • Precious few token sale projects launch with anything resembling a minimal viable product. Nonetheless, this doesn’t seem to stop them from raising huge sums of money the likes of which would normally not be seen by start-ups until they had a more mature product and existing customers.
  • Scaling limitations for Bitcoin and Ethereum are significant and will continue to cause problems in the near future. In Q2 2017, the industry saw network overload events in both Bitcoin and Ethereum. This raises serious questions for projects launching on Ethereum. Will the Ethereum network be able to keep up with the increased transaction volume that will result from more widespread use of Dapps?
  • The legal status of token sales is still in question. Participants in token sales may not enjoy the same  legal status or protections as investors in private and public equity sales. Uncapped token sale raises and structures which allow projects to raise large sums of capital while retaining majority control over their token economy could exacerbate this problem by drawing attention from regulatory agencies. A number of countries are actively exploring new regulatory frameworks for token sales, and several groups, including Smith + Crown, are developing guidelines for best practices and self-regulation.