Crypto is in. There is a spotlight being shone on the world of digital currencies and blockchain technologies. In the first half of 2017 alone, the cryptocurrency market cap grew by 800%. This has been driven by the high incidence of ICOs, inbounding public excitement and accelerating profits realised by investors. Although there is opposing opinions to the market’s exuberance, the presence of such debate is indicative of market attention.
This intrigue represents interest. And this interest dovetails into a signal for local startups to take notice.
The adage goes that talent follows money. Financial incentives, although not the monomaniac driver of creativity, can be a leading indicator for innovation. Investors are drawn to opportunities where there is yield and this often creates a self-fulfilling cycle that draws in the necessary talent to realise this potential.
Tellingly, cryptocurrencies are showing similarly seductive characteristics.
The growth of the market in 2017 exemplifies a swelling investment enthusiasm. This seems to have a cascading effect. Through a herding psychology, where market participants follow the collective’s behavioural leads, the injection of new capital sends a signal that there is an opportunity. As new entrants follow this purported positivity, their investments catalyse greater enthusiasm from the majority, which consequently leads to more investments. This cycle repeats itself as the appetite for these digital assets gain momentum.
But whether this optimism is justified or not is subject to time. Crypto assets are still an embryonic asset class, and despite an accelerating bullishness, there is a lack of precedent to which the market can be compared.
Counterintuitively, this ambiguity is the opportunity for startups.
If there are no definitive laws by which the boundaries of innovation can be restricted, startups therefore have freedom to create. Coupled with the availability of capital, entrepreneurs are rewarded for ambitious visions as a means to further develop a relatively infantile eco-system.
Australia is showing signs of developing such companies.
The following are Australian startups looking to capitalize on the rise of this new industry.
Coinjar was founded in 2013 and allows users to exchange and store Bitcoins — one of the industry’s most recognized digital currencies. The Melbourne based startup is considered one of Australia’s most well recognized exchanges, as they aim to simplify the trading experience for new users in the space. Coinjar have over 70,000 customers and have processed over $100 million worth of transactions, which demonstrates the scale of their operation. The popularity of Bitcoin, having increased almost twenty-fold in price this year, appears to be advantageous for this Australian startup.
Power Ledger is Australia’s first startup to raise money through an ICO. Based out of Perth, the startup allows businesses and households to trade excess solar power through the use of blockchain technology. They successfully raised $27 million in October via an ICO and have since seen an eight times increase in their market capitalization.
In a recent interview, Jemma Green, co-founder of Power Ledger emphasized that maintaining the value of her startup amidst a saturating ICO market was important.
“We’re honestly delighted with the market’s response. Many companies do ICOs with concepts when they haven’t actually developed the platform, where we have a platform with real-life applications.”
Blockbid is an exchange that aims to provide the largest spread of cryptocurrency pairings worldwide. Based out of Melbourne, the startup has identified the dearth of user-friendly exchanges that allow users to easily trade alternative coins other than the primary cryptocurrencies such as Bitcoin and Ethereum.
With an ICO currently in progress, Blockbid director Gabriel Govinda expressed in a recent interview the problem he was hoping to solve.
“In the crypto world there are really only two types of exchanges: ones that convert dollars into currencies like Bitcoin and Ethereum, and ones that convert Bitcoin and Ethereum into various ‘alt coins’.”
But ultimately, despite the market’s attention, this asset class is still being born.
Relative to the size and scale of other markets, cryptocurrencies have much maturation remaining. The recent interest suggests an upward trajectory of optimism. Whether the utility proves ubiquitous or not is still an unknown. But irrespective, market winds are signalling change. And with this change comes an opportunity.
Startups are being empowered to innovate and imagine value in a new, untapped market. A market which has proven to have a growing appetite for new entrants.