Security Token Offering (STO) on Laptop Slovenia, November 17, 2018
One area of potential excitement for the evolution of crypto markets in 2019 is the coming fruition of issuing securities using blockchain technology. Many crypto enthusiasts believe one of the next big things in the cryptocurrency markets is the expectation that Security Token Offerings (STOs) could become the eventual replacement for Initial Coin Offerings (ICOs). While this expectation is contingent upon a number of key issues and barriers being overcome, with the largest hurdle being clear regulations, STOs could drive the next wave of blockchain innovation. Could an upcoming STO wave drive the utility and pricing of existing cryptocurrencies such as Bitcoin (BTC), Etherum (ETH), XRP (XRP), and others?
In late 2017, and early 2018, the total size of cryptocurrency markets started to approach nearly $1 Trillion after several years of explosive, exponential growth. A good portion of that increase could be attributed to the Initial Coin Offering (ICO) wave that contributed to the euphoria and demand that drove Ethereum to over $100 Billion in market capitalization in late 2017 into early 2018. Ethereum, along with Bitcoin, was one of the key assets used by investors to participate in ICOs. Purchasing ICOs became the primary key utility of Ethereum during the time period.
The Rise in Ethereum Coincided With the ICO Wave forbescrypto.com
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Shy of $1 Trillion at its peak, the value of all cryptocurrencies is a drop in the bucket when compared to approximately 60 global equity markets at nearly $80 Trillion in size
While there has been a lot of hope for widespread adoption of blockchain, the practical usage of the vast majority of cryptocurrencies is just speculative trading and potential store of value. STOs could be one of the key killer mainstream applications of blockchain and cryptocurrencies that could change this.
If the ICO wave is any indication, STOs could have much broader ramifications for the future growth and adoption of several key cryptocurrencies that could become key participation methods for purchasing and trading these securities. Similar to the effect that ICOs had on the demand for Ethereum, STOs could be a rising tide that once again gives a significant boost to the overall expansion of the cryptocurrency market.
A few key questions remain before speculation as to what tokens, companies, exchanges or other participants might possibly benefit. The first is what is the timing of regulations that will allow advisory, issuance and legal trading of these blockchain-based securities? Another is what will be the key funding mechanisms used? Will existing cryptocurrencies such as Bitcoin, Ethereum, XRP be used, will stablecoins be the key medium, or will new tokens emerge? How will existing ecosystem providers such as exchanges, advisors, and other platforms or technology providers participate?
Clearly, when and if STOs gain traction, it could be many multiples larger than the ICO wave that preceded it. But, what could this mean for existing individual cryptocurrencies and blockchain companies remains to be seen?
Jim Preissler Contributor