“[Block]chain of Events” — May Edition
As an entirely new asset class, it is difficult to frame the unusual qualities and characteristics of digital assets into existing and accepted investing frameworks. One such example is the dissemination of information. Token communities are far-flung and decentralized, and there are no shareholder ledgers to track asset owners, and no requirements to provide material updates to shareholders (such as proxy voting, annual financial filings and shareholder meetings). Crypto projects have had to get creative with how they tap into their communities.
Traditional Earnings Calls
In the traditional world of equities, companies provide updates to shareholders through quarterly earnings calls. These calls are intended to satisfy investors and analysts and include a discussion of the earnings reports (which have already been publicly released) and a question and answer session. The entire process is not necessary since much of the content of the call is required to be released by the SEC, however, these calls allow the management of a company an opportunity to connect with their community and supporters.
A company’s quarterly results either accompany the start of the earnings call or slightly precede it (usually about 48 hours in order to avoid having to file an additional form). Earnings calls are typically held outside of trading hours in order for investors to hear the results before trading around the stock. Despite this, earnings calls have become tradable events, with investors anticipating outcomes based on the results of others, and reacting quickly to the actual results themselves.
Digital Asset Communication
Companies and projects that issue digital assets are a unique hybrid between private and public companies. They have no regulatory requirements for earnings reports as public companies do. But crypto projects generally have a large and distributed base that is difficult to reach unlike private companies that can email their small list of investors. Crypto is often called the “Wild West” since there are no rules and regulations to follow regarding basic practices such as updating investors. Projects who are dedicated to doing things right by their supporters still struggle with how to best engage with their communities and provide updates.
Enter conferences. The Bitcoin Conference, organized by BTC Inc. began in 2013, very early in the life of digital assets. It is one of the earliest examples of a conference intended to bring together community members in one place. More recently, starting in 2015, Consensus, the annual conference organized by crypto publication CoinDesk, has become one of the most well-attended and publicized events of the year.
As the number of projects and interest in the space grew in 2017, individual projects began to hold their own standalone conferences. In the beginning, conferences, which are primarily hosted by protocol-level projects, were intended as a means to attract projects and dapps to build within their ecosystem. However, they quickly evolved into serving more of the purpose of an earnings call where projects make updates, announce new initiatives, and drum up support from their communities. As such, conferences have become investable events as projects build hype and visibility in the lead-up.
Below we explore example tokens which have successfully harnessed their conferences’ power.
Tron (TRX) — niTRON Summit, San Francisco — January 17–18, 2019
Tron is a Proof of Stake (PoS) blockchain that aims to improve speed and scalability over older blockchains and focuses on the media sector. The Tron project is most well-known for its incredible marketing machine in the form of its founder and CEO, Justin Sun. Sun is considered the biggest “hype man” in crypto, constantly using any and all mediums to talk up Tron. Despite the questionable marketing tactics, Tron has seen massive success following its conference, niTRON, held at the beginning of this year.
In the weeks leading up to the conference, daily Twitter posts from Sun advertised the conference and engaged the community. As can be seen in charts below, Tweet Volume and Sentiment Scores* increased ahead of niTRON. Finally, to sweeten attendance, Sun announced that the keynote speech for the conference would be given by Kobe Bryant. No one was confident that Bryant was in any way involved with crypto projects, let alone Tron. However, the conference flyer picturing Sun and Bryant, was plastered all over Crypto Twitter, leading many to assume that there would be some announcement related to Bryant’s endorsement or involvement in the project at the conference. At niTRON it became apparent that this was not the case and Bryant’s participation was just a paid appearance.
However, at the start of the actual conference, Justin Sun appeared on stage to deliver opening remarks where he announced that the BitTorrent network would launch the following week with monthly airdrops of the BitTorrent Token (BTT) to TRX holders. Many expected such an announcement after Tron purchased BitTorrent for $120m in early 2018. The resulting price action for TRX was overwhelming as the community embraced the milestones the project achieved and a potentially promising 2019.
Cardano (ADA) — IOHK Summit, Miami — April 17–18, 2019
Cardano is a third-generation blockchain smart contract platform utilizing Proof of Stake instead of Proof of Work. It’s founder, Charles Hoskinson, set out to create a smart contract platform that remedied the issues Ethereum encountered. Cardano’s code is peer-reviewed and audited by a third party before it is deployed, something that is very unique to this blockchain. It is considered an incredibly promising project but has been slow to move and stay apace with other smart contract blockchains, hampering community sentiment.
Promotion of Cardano’s IOHK Summit began in February, a time when the overall crypto market was inching back to recover losses from the previous few months. Communities for tokens like Cardano, which had been fairly quiet throughout November and December, welcomed what a conference might mean. It was also no coincidence that the conference coincided with the launch of Shelley, the next major milestone in Cardano’s technology roadmap.
The conference brought new attention to Cardano as expectations mounted for an event that would include many positive progress updates. During the event itself, Cardano announced the launch of it’s Atala project — an enterprise version of Cardano. In addition, IOHK, the group behind Cardano’s development, revealed an MoU with the Ethiopian government to develop a cryptocurrency for Ethiopians. Despite these milestones, all eyes were set on the release of Shelley, scheduled for two days following the conference on April 20.
However, Shelley did not launch on time as expected and the token began to lose momentum. A disappointed and frustrated community saw the token price stall with the launch of Shelley (Chart 3 shows how the Sentiment Score quickly turned negative following April 20). As of now, the launch date of Shelley is still TBD.
Ethereum (ETH) — Ethereal and Consensus, New York City — May 10–15, 2019
Blockchain Week held in early May included a plethora of events culminating with Consensus, one of the largest crypto gatherings of the year. Although an industry-wide event, Consensus has always been a massive positive for Ethereum and everything within its ecosystem. With the growing popularity of crypto in recent years, the Ethereal Summit was created as a dedicated Ethereum conference. Both these large conferences had a positive impact on Ethereum’s price leading into Blockchain Week.
Besides the star-studded lineup for the conference, Ethereal became the platform for the Ethereum Foundation and ConsenSys to lay out their plans for Ethereum 2.0, the upgrade to Proof-of-Stake. This included a $30m budget from the Ethereum Foundation that will be used to fund projects over the next year aimed at developing the technology and raising awareness. Specifically, their strategy includes involving academic researchers via research and development grants.
Crypto conferences have become investable events following a set pattern of promotion, in which awareness and sentiment for tokens increases in the preceding weeks. This increased attention and engagement leads to price appreciation, however, the hype itself did not necessarily equate to a change in the fundamental value of these tokens. As a result, tokens often experience a post-conference decline. With that in mind, the conferences of TRX, ADA and ETH attempted to push out news or announcements that could have a fundamental effect on their respective tokens. In some cases this worked (TRX, ETH) and other times it did not (ADA). But one thing is certain, we’ll continue to see conferences take a leading role in community engagement for token projects and a correlated pre-conference price appreciation for many years to come.
— The Arca Research Team
*A note about sentiment score: the Sentiment Score from The Tie is a measure of how many standard deviations from the mean positive or negative conversations on Twitter are today vs. a 7-day moving average. Continual periods of positive sentiment means that conversations are becoming increasingly positive. As sentiment score compares Tweets over one day vs. a 7 day look back period they are highly volatile, and therefore a 30-day MA is used for better visualization.