To the LPs of Fission Capital:

It has been a turbulent and thought-provoking year for crypto-currencies, and a tough year to launch a fledgling new fund. In 2018, on a BTC basis, our ROI is 73.3% year to date. In other words, for every bitcoin invested in our fund, we will be returning 1.73 BTC to our investors. While too much attention should not be paid to the results in any single year, the aggregate results and correlations built over many years is of significance.

This year we saw thousands of ICOs raising up to $22 billion in capital[1], but 1 in 2 of those ICOs are already failing[2]. Our investment thesis preferred teams that were planning on launching their own main-net, and each project had to bring something unique to the real-world economy. These main-net, or underlying protocols are akin to the infrastructure that has given us the internet. When all the incentives are built at the base protocol level, we see 20 or more incredibly competitive teams all vying to build a better “internet”, but not enough companies building the equivalent of ‘Facebook’ or ‘Amazon” of the blockchain era. As a result, the underlying decrease in transactions for the industry overall of 30% has become a major cause for concern.[3] The use-case for ETH and Bitcoin has remained at the level of ‘speculation”. Some of the current barriers to real-world mass adoption includes: scalability, material use-cases, fiat connectivity, institutional participation and suitable cyber security. Throughout the year, we have moved to source, invest in, and help build some of the more promising teams and products. We moved with the most talented players in the space believing their growth would advance the industry overall.

Cutting through the noise and chaff was difficult, during the first half of the year securing allocation in key projects was a cut-throat and competitive process, but in the second half of the year, maintaining the courage to keep investing through the deafening sound of FUD (Fear, Uncertainty and Doubt) was equally challenging. At the point of writing, SEC (Securities and Exchange Commission) will likely deem a majority of ICOs as securities unless they have their own main-net, thus making companies and teams with the ability to negotiate licenses or build their original protocol all the more valuable.

The single most important factor in determining whether an ICO can survive the winter is whether they planned and managed their funds raised. A successful ICO typically would have raised enough funding for a 3-6 years run way if they had cashed out, but if most of that fund was kept in Ethereum, and saw an evaporation of 80% in value, then they are suddenly facing a runway of less than a year. The so-called ‘small cap’ ICOs that were very popular earlier in the year will face this issue the soonest.

In 2019, we will see the market lay waste to more ICOs, we also foresee more talent becoming available for hire or acquisition. Therefore, big ICOs that have managed their cash reserves well will be facing an increasingly competitive hiring landscape.

One of the main issues that is limiting the growth of the industry right now is that the number of active participants is small. Even the top performing crypto games in the market only has unique users per day in the thousands.[4] Compared to any real-world games with up to 1 million players daily, this number is wanting.[5]

A distinctive and extraordinary year with so much promise in project value being created and destroyed by hype and FOMO. Those projects that focus on building elegant solutions and user value will continue to reap benefits in real world adoption and long-term growth.

A fair amount of our projects have decided to delay their listing or delay release. While we understand their rationale for so in the bear market, we believe it will eventually turn out to hurt the team’s credibility and standing with the investor community. Returning funds to the investors if you decided not to continue is perfectly respectable but withholding investor money and not meeting the timeline previously promised is egregious.

Next year, we expect to see fewer protocol layer projects, a growth in Dapps being developed and an expansion of existing institutions building on consumer facing products joining the mix.

On behalf of all the partners of Fission Capital, I appreciate the opportunity to manage your Bitcoins. Our goal for starting the fund was to deliver considerable value to our bitcoin centric LPs by providing unique opportunities to increase their bitcoin holdings. With a lot of dedication and hard work we managed to achieve a little bit of that this year. As we move into 2019, we are poised to provide additional opportunities and enhanced returns.

Wishing everyone a Merry Christmas and Happy New Year!

Finally, a poem that sums up our feel for the cryptocurrency market this year.