Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry

3,282 views

Published on

In 2018, the global market capitalisation of the cryptocurrency market fell sharply by nearly 60% between January and early February. In this report discover which established digital currencies have the worst online reputations and how they can combat this problem?

Published in: Internet
  • Be the first to comment

  • Be the first to like this

How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry

  1. 1. BLOCKCHAINDEFENDER the Global Market Capitalisation of the Cryptocurrency Industry How a Lack of Trust Affects
  2. 2. BLOCKCHAINDEFENDER Executive Summary Blockchain is a technology synonymous with transparency, traceability and trust. However, does trust really exist from the perspective of an outsider looking into the blockchain industry? Can protocols built upon trust truly evolve without first gaining public trust? In 2018, the global market capitalisation of the cryptocurrency market fell sharply by nearly 60% between January and early February. An Overview of the Market “It takes 20 years to build a reputation and five minutes to ruin it,” said billionaire investor Warren Buffet. “If you think about that, you’ll do things differently.” Bitcoin and other digital currencies have only been around for 10 years. Yet despite their chequered and often negative reputation (volatile and opaque, according to some critics), they’ve grown fast. In early January 2018, the cryptocurrency market reached a peak market capitalisation of nearly $800 billion. There are now more than 2,000 cryptocurrencies, including Bitcoin, Ethereum and Litecoin (according to CoinMarketCap), which are traded by millions of people on over 200 exchanges. Experts predict that a small number of select cryptocurrencies will eventually become globally adopted, replacing traditional, government-backed fiat currencies. Not bad for a new and unregulated financial asset. Yet 2018 has been a bad year for digital currencies, which have lost three-quarters of their value since their peak at the start of 2018. blockchaindefender.io 02How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  3. 3. Closing Summary Finally, why does the cryptocurrency industry have a bad reputation and how can cryptocurrencies combat this problem? How does market sentiment (the proportion of news/comments about digital currencies in the Google search results that are positive or negative) affect a cryptocurrency’s market capitalisation? Which established digital currencies have the most positive online reputations (and which have the worst)? How does the online reputation of digital currencies vary by country or region? Is the sentiment surrounding digital currencies more negative or positive in different countries? What types of website is negativity most commonly published to? Initially, the fall was attributed to South Korea’s government, suggesting that it planned new regulations for cryptocurrency trading. However, as time has passed it has become more apparent that the fall cannot be attributed to any one factor. Politicians have likened the cryptocurrency industry to the “Wild West” and said that it should be regulated to protect the public. In September 2018, the global market capitalisation of cryptocurrencies fell further after media reports that Wall Street financial institutions - including Goldman Sachs - were shunning cryptocurrencies. Yet despite persistent concerns about the long and medium-term future of digital currencies, relatively little is known about the link between their online reputation and their financial value (market capitalisation). $250B 0 $500B $0 May 17 Aug 17 Aug 18Nov 17 Nov 18Feb 18 May 18 24HVol MarketCap 1 Study 2 Study How does the online reputation of digital currencies compare to an established financial asset/market such as traditional exchange markets? 3 Study What impact does a crisis have on the price of a cryptocurrency? In this report, ReputationDefender will aim to answer the following questions: blockchaindefender.io 03How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  4. 4. BLOCKCHAINDEFENDER The Impact of Google Search Results So, how does the prominence of content about a cryptocurrency or crypto exchange in the Google search results affect its reputation? The higher a website ranks in the Google search results the more clicks it will get and the more potential investors will read about it. Our research analyses how users interact and form opinions on the information they find via a Google search for a cryptocurrency. In the online reputation industry, it’s widely accepted that 75% of search engine users will choose whether or not to engage with a brand, product or service based on the search results shown. However, this percentage is likely to increase for digital and online services due to a lack of offline material. Therefore, if 1,000 investors read negative content about a cryptocurrency, wallet or exchange, we can safely assume that 750 (75%) of them will choose not to invest. Also, it’s important to remember that a lack of positive search results has the potential to be just as damaging as negative search results. This knowledge helped us measure each cryptocurrency’s online reputation and compare it to their financial performance (market cap). At a time when digital currencies are under growing scrutiny, how they manage their online reputation can affect their growth and whether they attract enough external investment. ReputationDefender has conducted extensive research into the online reputation of thousands of digital currencies - including Bitcoin, Ethereum and Litecoin - in four countries: The United States, Germany, Japan and the United Arab Emirates. These countries were chosen because they have large and growing cryptocurrency markets, and because ReputationDefender services blockchain clients in these countries. The team at ReputationDefender used its expertise to analyse and quantify online sentiment about digital currencies and track any connection with their financial performance. First, ReputationDefender calculated the total search volume for cryptocurrencies based on Google AdWords data. Then, using pre-determined criteria, online mentions of each crypto brand were categorised into positive, neutral and negative categories. Two pages (positions 1-20) of Google search results about each cryptocurrency were analysed in the research. Negative online content included keywords such as ‘hack’, ‘scam’ and ‘Ponzi’ when they were used in articles about a cryptocurrency. Other types of negative content can include abusive comments about a cryptocurrency on an online forum or the comment section of a news article, or on a company’s Wikipedia page. Positive content included words and phrases such as ‘ICO’ (Initial Coin Offering), ‘ROI’ (Return On Investment), ‘sound investment’ and ‘milestone’. This market sentiment was then cross-referenced with the market capitalisation of digital currencies. 1 Study Market Trend, Market Sentiment & Market Capitalisation blockchaindefender.io 04How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  5. 5. The Results of Our Analysis: The graph below shows the digital currency market between 1st January 2017 and 31st July 2018 The graph tracks three metrics: • The blue columns shows Google’s ‘trend data’, the anonymised data showing how often people searched for the term ‘cryptocurrency’ • The orange line shows ‘sentiment’ about digital currencies; whether online content about digital currencies was positive or negative • The red line shows the market capitalisation for the digital currency market The first section, on the left of the graph, shows three things happening simultaneously : • Google searches for digital currencies became more common (shown in Google’s ‘trend data’) • Positive online sentiment about cryptocurrencies increased • The global cryptocurrency market cap increased In the second section of the graph (between September 2017 and December 2017) this trend continued. However, between January 2018 and March 2018, the opposite occurred. As search volume declined and online sentiment about digital currencies became much more negative, the market entered a bearish trend and market capitalisation fell sharply as a result. Feb 17Jan 17 Jun 17 Oct 17 Feb 18Apr 17 Aug 17 Dec 17 Apr 18Mar 17 July 17 Nov 17 Mar 18May 17 Sep 17 Jan 18 May 18 Jun 18 Jul 18 $800B $400B $0 $600B $200B $700B $300B $500B $100B blockchaindefender.io 05How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  6. 6. BLOCKCHAINDEFENDER In the final phase, between April and July 2018, all three factors (trend data, sentiment and market capitalisation) stabilised and plateaued. An increase or decrease in the search volume of cryptocurrencies - and whether online sentiment about them is positive or negative - directly correlates with market capitalisation. By analysing a cryptocurrency’s online reputation, investors may be able to better predict its future financial performance. Key Research Findings: • There’s a clear correlation between an increase in negative online sentiment about cryptocurrencies and a fall in their market capitalisation. • If there’s high search volume and positive sentiment, a cryptocurrency’s market capitalisation increases. • If there’s negative sentiment about a cryptocurrency that becomes more prominent, market capitalisation decreases. blockchaindefender.io 06How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  7. 7. Crypto Reputation by Country Our research analysed online sentiment surrounding digital currencies (whether coverage is positive or negative) in four countries: the United States, Germany, the United Arab Emirates and Japan. ReputationDefender carried out this analysis using the native language of each country ( English, USA, German, Germany etc.). As you can see from the graph below, there were significant differences in sentiment between the countries surveyed. Sources of Negativity The most common online destinations ReputationDefender found for online negativity towards cryptocurrencies were: • Cryptocurrency industry news websites • Social media platforms and blogs • Discussion forums e.g. Reddit, Bitcointalk • Cryptocurrency review websites • Cryptocurrency company websites and directories 0 55 48 29 26 USA Germany United Arab Emirates Japan 10 20 30 40 50 60 Negative Count Leaderboard blockchaindefender.io 07How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  8. 8. BLOCKCHAINDEFENDER Bitcoin’s Global Reputation ReputationDefender analysed online sentiment towards Bitcoin in the US, Germany, Japan and the UAE. The UAE had the most positive search results for Bitcoin, followed by Germany, the US and Japan. The US had the most negative search results, followed by Germany, the UAE and Japan. Impact Count USA Germany Japan United Arab Emirates (Arabic) Possible Negative 2 4 4 6 Positive 5 4 2 3 Neutral 6 6 12 7 Negative 7 6 2 4 United Arab Emirates (Arabic) Japan Germany USA 0 2 4 6 8 10 12 14 70% 50% 30% 10% 60% 40% 20% 0% USA Germany Japan United Arab Emirates (Arabic) Negative 37.25% 19.65% 10.70% 17.95% Neutral 29.25% 16.50% 64.45% 23.85% Positive 19.40% 27.20% 16.10% 35.35% Possible Negative 14.10% 36.65% 8.75% 22.85% blockchaindefender.io 08How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  9. 9. BLOCKCHAINDEFENDER Leaderboards: Best and Worst Performers 240.55% 196.70% 188.15% 191.70% 172.25% 149.95% 145.40% 130.40% 119.50% 109.55% 99.05% 98.85% 98.05% 97.30% 89.00% 88.00% 87.80% 84.05% 83.80% 81.80% 80.80% 73.40% 72.45% 72.30% bitcoin cash bitcoin gold ethereum cardano droxne bitcoin digibyte carvertical eos binance coin litecoin power ledger tether substratum iota octanox ethorse hacken iconomi wetrust neo ripple stratis dash zilliqa jio nxt stellar lumens omisego naga zcash 0% 50% 100% 150% 200% 250% 300% 63.50% 57.85% 55.00% 53.00% 51.90% 36.80% 24.20% 202.65%bitcoin cash bitcoin gold ethereum cardano droxne bitcoin digibyte carvertical eos binance coin litecoin tether substratum iota octanox ethorse dash iconomi wetrust neo ripple stratis zilliqa jio stellar lumens omisego naga zcash 201.65% 201.30% 191.55% 174.95% 167.90% 132.75% 108.10% 100.45% 98.10% 89.00% 89.00% 71.25% 65.90% 60.10% 10.60% 7.35% 5.75% 5.25% 2.75% 0.25% 0% 50% 100% 150% 200% 250% 44.20% 47.05% 45.90% 41.90% 34.15% 29.50% 26.10% blockchaindefender.io 09How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  10. 10. Crypto Market Social Media Blog Client Owned Direct Site News Forum Review Directory Crypto Market Blog Pricing News Exchange Encyclopedia Social Media Other Forum Positive - Iconomi - Highest Number of Positives Negative - BitcoinCash - Highest Number of Negatives 2.75% 10.45% 1 2 3 3 5 8 9 17 23.05% 23.05% 34.65% 55.95% 76.50% 3.00% Positives Split by Count Negative Split by Count Negative Split by Impact 17 9 8 5 3 3 2 1 Crypto Market Social Media Blog Current Owned Direct Site News Forum Review Directory Crypto Market Social Media Blog Current Owned Direct Site News Forum Review Directory 0 5 10 15 20 76.50% 14 8 6 4 4 3 1 1 1 55.95% 34.65% 23.05% 23.05% 3.00% 10.45% 2.75% 0 2 4 6 8 10 100% 91.15% 34.20% 28.15% 16.25% 11.30% 10.55% 6.05% 2.50% 2.50% 80%60%40%20%0% 12 14 16 70%60%40%20%0% 80%50%30%10% Crypto Market Blog Pricing News Exchange Encyclopedia Social Media Other Forum Crypto Market Blog Pricing News Exchange Encyclopedia Social Media Other Forum Positives Split by Impact 91.15%% 10.55% 11.30% 16.25% 28.15% 34.20% 2.50% 4 4 3 1 1 1 14 8 6 2.50% 6.05% blockchaindefender.io 10How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  11. 11. BLOCKCHAINDEFENDER If an exchange isn’t trusted and respected, traders will often choose to use a competing exchange. Coins listed solely on these exchanges will potentially inherit this negative sentiment and could therefore underperform at crucial stages in their development. Traders have increasing options and new exchanges are appearing daily. Crypto exchanges aren’t only in competition with each other either; they also compete with more established traditional financial exchanges and trusted trading platforms. ReputationDefender studied and compared the online reputations of 10 cryptocurrency exchanges and 10 traditional exchanges in four countries: the US, Germany, Japan and the UAE. Our research found that there was far more negative content in the Google search results about crypto exchanges than traditional exchanges. Traditional Exchanges: Solid Reputations, Well Managed Traditional exchanges have more control over their online reputations. This control is largely driven by positive ownership such as official exchange websites and social media channels. Over one third (34.38%) of the content is officially owned. Our analysis also shows that traditional exchanges benefit from a healthy volume of positive commentary from third party websites. Nearly 30% of the online content we studied can be categorised as positive in sentiment. Negative 19.63% 34.38% 11.50% 5% Potential Negative Official Neutral 3rd Party Positive 29.50% 2 Study Reputation Matters: Crypto Exchanges vs Traditional Trading Exchanges blockchaindefender.io 11How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  12. 12. 20.5% 17.75% 19.50% 18.75% 23.50% Negative Potential Negative Official Neutral 3rd Party Positive A major contributing factor to this is the additional channels of negativity which traditional exchanges do not suffer from, such as social media, blogs and pricing websites. This lack of control has resulted in potential investors and customers being faced with 275% more negative coverage about crypto exchanges than they would about traditional exchanges. In addition, crypto exchange ownership of search results is just 17.75%, which is nearly half that of traditional exchanges. In comparison, crypto exchanges seem to be struggling to protect and improve their online reputations. blockchaindefender.io 12How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  13. 13. Where Is Most of the Negative Sentiment Coming From? For traditional exchanges, just over half (51%) of negativity comes from review sites, which is typical for a consumer industry. Encyclopedia 27% Review 51% Forum 1% Market Specific 4% News 13% Other 4% Negative content about crypto exchanges comes from more sources than negative content about traditional exchanges. Crypto industry websites account for about one quarter of negative search results, followed closely by blogs, forums and social media channels, which together account for 23% of overall negative content. In some ways, crypto exchanges have become a victim of their own success. Their rapid growth and excitement about their future means that they are subject to far more scrutiny from bloggers, crypto enthusiasts and the media than the traditional market is. Blog 10% Social Media 8% Crypto Market 24% Directory 1% Encyclopedia 6% Forum 5% News 8% Other 2% Pricing 16% Review 20% blockchaindefender.io 13How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  14. 14. Before Crisis Before the digital currency’s crisis, there was little to no negative content (1.3%) published about it in the five countries we analysed. In fact, the cryptocurrency in question had one of the better online reputations within the industry. The amount of positive content shared online about the company (16.4%) was significantly better than the industry average. 37.5% 34.2% 10.8% 1.3% 16.4% Negative Potential Negative Official Neutral 3rd Party Positive After Crisis Immediately after the crisis was made public, there was a big increase in negative sentiment (up 22.1%) about the company in five countries. At the same time, positive content about the digital currency decreased by 14%. 2.4% 43.2% 30.6% 23.4% Negative Official Neutral 3rd Party Positive ReputationDefender analysed the online reputation of a cryptocurrency which faced a crisis in 2018 after it was hacked. Our research was based on a before and after crisis analysis of the brand search term in five countries: the US, the United Kingdom, Japan, the UAE and Germany. 3 Study Case Study: A Crypto in Crisis blockchaindefender.io 14How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  15. 15. BLOCKCHAINDEFENDER East vs West Interestingly, there was a significant difference in how the crisis was perceived in different parts of the world. There was a huge swing in negative sentiment about the currency in the West compared to the East. 52.9% 32.8% 14.3% GOOGLE UNIVERSAL JAPAN 72% 22.75% 5.25% GOOGLE UNIVERSAL UAE 28.4% 30.95% 40.65% GOOGLE UNIVERSAL UK 21.2% 2.25% 29% 47.55% GOOGLE UNIVERSAL USA Negative Official Neutral 3rd Party Positive blockchaindefender.io 15How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  16. 16. Negative News Sources We analysed the search results for the digital currency in question before and after the crisis. The charts below break down and categorise the sentiment of the sites in the search results. In one week, we can see how positive search engine ownership decreased from 22% to just 3%. On the other hand, negative search engine ownership increased dramatically from 2% to 28%. By breaking down negative search engine ownership we can see that: 20% of negative sites have been categorised as crypto market news e.g. cryptocompare.com 5% of negative sites have been categorised as mainstream news e.g. Bloomberg.com 3% of negative sites have been categorised as forums e.g. Reddit.com The combined average search volume for the brand was 250,000 searches per month. The increase in negative content about the brand may have deterred nearly 65,000 potential engagements. BEFORE CRISIS 40% 27% 22% 9% 2% 28% 31% 3% 38% AFTER CRISIS Negative Neutral Official 3rd Party Positive Potential Negative blockchaindefender.io 16How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  17. 17. BLOCKCHAINDEFENDER Coin Price During the Crisis How did the crisis affect the coin’s trading price? Our analysis of the week during the crisis shows the devastating effect a crisis can have on the market value and share price of a digital currency. The coin price fell sharply overnight and by about one third during the week, resulting in the loss of tens of millions of dollars from the company’s value. Market Cap: 160,313,254 USD Price USD: 3.20 Price BTC: 0.00047549 BEFORE CRISIS Market Cap: 104,760,132 USD Price USD: 2.05 Price BTC: 0.00032773 AFTER CRISIS Market Cap: -55,552,520 USD Price: -1.15 USD Price BTC: -0.00014776 IMPACT $3.00 0.0004 $2.70 0.0004 $2.40 0.0003 $2.10 0.0003 $1.80 0.0002 MarketCap Price(USD) 150 M 135 M 120 M 105 M 90 M Price(BTC) blockchaindefender.io 17How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  18. 18. Why Does the Blockchain Industry Have Reputation Issues? The blockchain industry has earned a bad reputation as a result of the numerous scams, hacks and shady characters operating within it. There is a continuous spread of misinformation, commonly referred to in the space as fear, uncertainty and doubt (FUD). This has resulted in a severe lack of trust. The industry has been tarnished by the very problems it sought to eradicate in the world of finance, and as a result the public has been burnt. It is essential that investors regain confidence to achieve mainstream adoption. How Can Cryptocurrencies Combat Reputation Issues? It is crytical for cyrptocurrenices to focus on building a credible and durable online reputation. A shift in reputation sentiment – or a PR crisis which damages your brand online – can devastate the price a coin is trading at and deter adoption. Engagement Blockchain projects pride themselves on being community driven and funded. For this reason, it is essential that community members feel like they are active participants of the project and that their voices are heard. To achieve this, any respectable blockchain project should have a clear and robust social media strategy that interacts and engages with its audience. A Global Approach The majority of blockchain projects aim to be adopted internationally. A key part of this is to interact with the target audience in their native language, adhering to cultural practices and differences. 85% of search engine users expect to see information in their own language before deciding whether or not to engage with a brand. Closing Statement As a result of ReputationDefender’s research, it is clear that potential professional investors and the public are researching blockchains, cryptocurrencies and tokens online. They’re making investment and adoption decisions based on what they find. blockchaindefender.io 18How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry
  19. 19. BLOCKCHAINDEFENDER Being Heard for the Right Reasons Due to the prolonged bear market, many blockchain projects have halted or slowed down their marketing efforts. Doing this can be extremely detrimental to the success of a project and can lead to the collapse of a coin. Cryptocurrencies must broadcast their news, updates and progress in a clear and concise manner to authoritative and trusted industry websites. This not only helps to cement and maintain a positive reputation for the project; it also makes it stand out from the competition as a respectable project with a long-term vision. BlockchainDefender by Reputation Defender BlockchainDefender is a new product offering from ReputationDefender that offers a tailored reputation management solution for the cryptocurrency and blockchain industry. Your brand search results are your online shop window. They define what potential clients think about you within seconds. Current clients, associates, prospective business partners, employees, investors and your network are measuring you against what appears online, and what they discover can be the difference between losing or winning their trust. Don’t let critical articles, misleading blogs and outdated news ruin your reputation. By creating a global framework of relevant content about your business hosted on new and established assets in multiple languages, ReputationDefender will promote material which will limit the coverage and visibility of any harmful information. BLOCKCHAINDEFENDER Industry Expert – Opinion Pascal B van Knijff, CEO & Founder Future of Trust Proposition Builder and International Keynote Speaker Trust is often time perceived as an intangible property; it is hard to quantify and prove, yet it is one of the most important pillars in the marketplace today. However, this industry report does a good job of visualising and even quantifying trust. Throughout this report it is very interesting to see how the cryptocurrency and blockchain industries have failed to deliver the solutions to the very problems they sought to eradicate. Another important takeaway is the need for blockchain, token and cryptocurrency projects to have a long-term vision and understand the need for a post-launch strategy. As the industry matures and more organizations adopt blockchain propositions, it is important to demonstrate what trust looks like. As a cryptocurrency industry professional, token proposition builder and international speaker, I want to encourage every reader to include the key learnings and insights of this report in their communication and online strategy. I am certain we will! blockchaindefender.io 19How a Lack of Trust Affects the Global Market Capitalisation of the Cryptocurrency Industry

×