Is Crypto Summer Back in Switzerland?

Recent data suggests that the Swiss blockchain industry is making impressive gains. The latest report by the country’s main industry body, Crypto Valley Venture Capital (CV VC), for example, points to increased valuations and rising employment figures. On releasing the report, CV VC exclaimed that “the summer is back.” But is it really time to start celebrating?

According to the report, published in collaboration with the Big Four accounting firm PwC and its partner Inacta, the top 50 blockchain companies have doubled their valuations in the first half of 2019 to $41 billion. Furthermore, it estimates that the Swiss ecosystem as a whole now encompasses 800 entities, employing 4,000 people, including six so-called “unicorns,” each with valuations in excess of $1 billion.

But before we get too carried away, it is important to draw attention to some nuances in these figures. Firstly, the term “valuation” in this context means something different to its conventional meaning in traditional industries. The methodology section of the report clarifies that sometimes this figure is based on funding, sometimes on traditional valuation metrics, and sometimes on the market cap of tokens.

It is in the third case — market capitalization — where things become a little murky. Utility tokens are a form of digital asset that provide access to a network or service. In this respect, by using utility token sales as a proxy of valuation, there is a danger that valuation becomes conflated with revenue. So, while we can take these figures as indicative of a broadly positive trend, we need to bear in mind that the margin of error is likely to be higher than for conventional initial public offering valuations, which is understandable given that we are dealing with a diverse, and largely nascent, emerging industry.

Beyond the headline figures, however, what really matters are the use cases. The so-called “crypto winter” was a necessary and beneficial sanity check for the blockchain industry. Many of the projects that were based primarily on hype or speculation have died off and most of those that have survived and thrived are attempting to solve real problems.