The Unrealized Value of Unicorns Surpassed $1 Trillion Globally in 2018
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Continuing our deep dive into the pre-IPO space, we have learned that in 2018 the unrealized value of unicorns globally surpassed the $1 trillion mark for the first time. As shown in the chart below, the valuation of private firms valued at over $1 billion each totaled $1.15 trillion, up more than $300 billion during the year ended 2018. Coincidentally, the unrealized value matches the $1.1 trillion in dry powder that private equity firms have to deploy.
The number of unicorns has been growing steadily since 2010 and is now at 327, 68 of which were added in 2018, as shown below. Notably, the number of unicorns exiting the private world is lagging the number going public or being acquired: in 2018, only 27 went public and 9 went through the mergers and acquisitions (M&A) process.
The valuations depicted above probably are overstated. As discussed in last week’s newsletter, some researchers argue that the majority of unicorns are overvalued when adjusting share prices for special consent and other rights.
Uncertainties about fair value add to the challenges that unicorn investors face. Sooner or later, the companies will have to be sold or go public to deliver the returns their investors expect. Combined with a valuation of more than $1 trillion, low exit rates will challenge investors’ return expectations.
Ethereum Classic Prices Held Up Even After a 51% Attack
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This week, Ethereum Classic (ETC) experienced the cryptocurrency world’s largest double-spend or 51% attack to date, including 15 reorganizations, 12 of which were double-spends totaling $1 million. A cogent explanation of 51% attacks can be found here. The double-spend was newsworthy enough, but its aftermath raised important questions about the impact of double-spends on proof of work (PoW) chains.
After news broke of the double spend attack, ETC's price dropped only 7% and then recovered. Was the muted response because investors don’t understand the threat of such attacks to the security of the underlying chain? This explanation is plausible because in the past 51% attacks have had little impact on cryptocurrency prices.
Perhaps a better explanation is that the only parties impacted by a double-spend are exchanges. A realistic and damaging 51% attack would take place as follows: deposit cryptocurrency on exchange -> withdraw to another chain or convert to fiat -> ‘publish’ the longer chain, invalidating original cryptocurrency deposited. Because the average holder would not be affected by such an attack, the impact on pricing is de minimis.
That said, PoW chains seem to be secure only for cryptocurrencies with high hash rates that are traded actively on exchanges. First highlighted by Nic Carter, if 51% attacks aren't going to kill chains, exchanges delisting them after 51% attacks may be the antidote.