2014 Outlook Report: Digital Asset Funds Continue Growth Trajectory

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9th Feb 2014




Hub Culture is pleased to announce its 2014 Outlook Report regarding the status of digital asset portfolios, including coverage of Hub Culture funds and pools operating in the realm of Bitcoin, Ripple, Ven and other digital assets.

Overview

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Media attention, consumer adoption and financial market integration for digital assets are set to continue in 2014, with rapid growth expected in corollary services for both established and emerging products. Growing consumer demand for digital assets, coupled with large scale investment from both Silicon Valley and established financial players, is changing the scope for wide consumer adoption of digital currency.  

The new frontiers of these currencies are rapidly shifting to emerging markets, where a clear need for access to inexpensive financial tools is readily apparent. The corresponding rise of connected devices, internet enabled phones, and bot payments are expected to underpin fantastic growth in the sector for years to come.

After growing from a Hub Culture estimated market of $15 billion in 2013, the digital asset market is projected to pass $50 billion in 2014, led in part by Bitcoin and other alt-currencies experiencing rapid appreciation.

The rise of ASIIC mining has greatly affected returns for Bitcoin mining production, prompting a 2013 shift toward scrypt mining for secondaries in the crypto-coin market. With the 2014 arrival of ASIIC scrypt mining, a rapid deterioration in mining returns should be evident, potentially depressing price growth for alt-coins in the short term.

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Bitcoin

In particular, the Bitcoin ecosystem appears to be approaching a tipping point where both incumbent financial services providers and upstart services begin competing to provide services and products to financial institutions, the corporate world and consumers alike against the backdrop of sharpening clarity from global regulators.  While granulation is expected to increase for these products and services, a variable expansion in the type and quantity of products and services appears certain.

Chief among these changes is the evolution of Bitcoin from the perception as an 'anonymous' crypto-currency to a 'validated' payment ecosystem. Central to this is the thesis that the Bitcon blockchain will evolve to enable additional types of proxy transactions representing a wide variety of assets. This idea of a validated ledger could include transactions of other crypto-currencies such as Ripple and Ven, and other leading currency standards.

Beyond that, transactions of represented fiat currencies, such as the USD or EUR (and beyond), equities, commodities, and new contract forms, funds, derivatives, property contracts, insurance, and more are all possible.  At its heart, Bitcoin and Ripple offer the world new payment network rails that promise a set of new highly networked, transparent and intelligent global payment capabilities.

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Ripple

For Ripple, this distributed asset transfer protocol is already in place.  Uptake of Ripple appears strong for 2014, fueled in part by the 2013 strategic investment by Google Ventures into Ripple Labs, the primary authority business managing the Ripple protocol.  While the core technology of Ripple and the Ripple Labs strategy for issuance is highly divergent from Bitcoin, the ability to transact multiple asset types, with XRP as the base or reserve asset for those transactions, bodes well for the future of the currency.  

The pre-mined nature of Ripple, currently published at 100 Billion units, combined with a lack of clarity about issuance and pricing targets, appears to encourage a drag on speculation and clouds the view for future performance. Macro indicators suggest that demand growth for Ripple could provide value appreciation for the underlying currency values if properly managed in 2014. At the core of this is the expected introduction of Ripple into consumer profile sets linked to Google+, Youtube and other online assets managed by Google, which could provide liquidity absorbtion of Ripple XRP in the bilions of units.

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Alt-Coins

Hub Culture's digital asset portfolios include emerging assets in the crypto-currency space, including Litecoin, Namecoin and others.  The explosion of over 150 alt-coins featuring derivative Bitcoin technology provides a potential wrinkle to the long term success of Bitcoin, especially if these assets crack authentication and viral expansion in a different or more successful way.  

While Litecoin enjoyed a wild ride in 2013, these and other alt-currencies have their work cut out for them to find a permanent place in this evolving world.  Of particular note are the continued feverish developments around 'colored-coins' - systems that effectively re-label Bitcoin Dust (such as last digit past .0 Satoshis) into alternative assets.  This should allow infinite coin-supply creation, and could weaken the vitality of Bitcoin as a fixed value horizon digital asset, for which it is so prized.  

Mastercoin and Ethereum, new entrants to the category, address these issues in varying scope and herald the vanguard of more such products on the development horizon.  The arrival of Chroma - colored coins in whatever format, will provide scope for diversification of investment, but the opportunity for aggregate growth for digital assets as a category.

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Ven

For Ven, Hub Culture's digital currency, 2014 is anticipated to provide another year of 'radical stability' linked to the currency's position as an Internet Reserve Asset.  With its 100% asset backing of a mix of currencies, commodities and carbon futures, even with rapidly accelerating issuance tied to financial exchange trading, price stability is expected to remain a fundamental hallmark, with net pricing variation of less than 1% from previous years in the expected outlook.

On the other hand, Ven Glacial Melt (issuance) is growing rapidly due to the currency's entrance to regulated high frequency FX trading markets.  Demand for Ven (at current market indicators) is expected to top 750 Million in total trading for 2014, up from a total of 30 million in the previous seven years combined.

As Ven successfully enters further trading exchanges and markets in 2014, anchored by Kraken and LMAX,  trading volume of the currency could easily exceed 1 billion units.  Plans are underway for identity related issuance for macro-exchange, as well as a concerted move into retail markets beginning in 2015.

Digital Asset Funds

Currently Hub Culture manages 14 digital asset fund pools, all denominated in Ven. The first class of pools are focused on traditional investment pools tied to old-economy product types, ranging from gold to land to venture development. Total investments in these properties passed 1.5 million Ven in 2013.  The second class includes investments in digital asset classes, which proved extremely popular in 2013, with investments exceeding 1.65 million Ven just in the last six months of the year. 

Asset Type

Ven Aggregate Pool Value

Commodity Syndicates

1,500,000

Venture Syndicates

500,000

Digital Asset Syndicates

Bitcoin/Ven

300,000

Ripple

1,300,000

Digital Aggregate

50,000

 

For the year ahead, dynamic expansion and growth in Ven denominated assets under management for these funds is expected to exceed 500%, with the potential arrival of new funds managed on behalf of the Hub Culture community.  Chief among opportunities is the expansion of Stake Vehicles for development of new types of usage around Ven, especially related to acquisition and development of social projects, micro-finance and environmental reserves tied to Ven issuance at large.

Hub Culture's pricing guidance for 2014 on the ecosystem anticipates fundamental pricing appreciation resulting from strong underlying growth demand.

For more on Hub Culture, digital asset funds, and Ven, contact a knowledge broker or Valet via your local online Hub

Digital Asset 2014 Pricing and Market Cap Outlook

 

Asset

2007 

2009

 2011 

2013

 2014e

 2015e

 MCap

 2014ye  MCap

Ven

0.1000
0.1000
0.1050
0.0980
0.0975
0.0970
4,500,000
500,000,000

Bitcoin

 
0.0500 
5.0000 
1240.00 
5500.00 
8900.00 
8,137,991,550 
15,000,000,000 

Ripple

 

 
 
0.0250
 0.1250
0.5000
1,750,000,000
2,500,000,000

Litecoin

 

 

.0769 (2012)
48.4799
45.0050
50.0050
439,282,337
800,000,000

Mastercoin

 

 

 
61.2033
80.5050
125.5050
34,563,234
75,000,000

Namecoin

 

 
0.5560 (2012)
14.8940
15.0000
20.0000
52,000,000
75,000,000

Dogecoin

 

 

 

.0012
.0020
.0010
57,132,630
75,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices reflect historical annual highs and estimate projections for digital assets held in Hub Culture portfolios as well as other popular assets.

Market cap summaries as of February 10, 2014. Sources: Kraken, DATA, CryptoCoin Charts, LMAX.

2014 year-end estimates courtesy Hub Culture Knowledge Brokerage