Blockstack (STX) rallies 85% as fundamentals improve ahead of mainnet launch

Blockstack's STX might not be on every investor's radar, but the 72nd-ranked cryptocurrency by market capitalization has been doing some serious work behind the scenes.

The company behind the token was founded in 2013 and raised money from Union Square Ventures, Naval Ravikant, Lux Capital and Digital Currency Group.

The initial coin offering actually happened in September 2019, and the fundraise was $28 million at $0.30 per token. At the time, the Blockstack ecosystem had over 165 applications in place and 78.3 million tokens were sold pre-ICO at $0.12 apiece.

The project aims to serve as a replacement for centralized cloud services that require user information storage, thereby building full-stack solutions for decentralized applications (DApps).

Despite having its own blockchain, most computing is done on client devices, allowing Stacks to scale. A browser portal is all a user needs to get started using the Blockstack ecosystem.

According to Blockstack co-founder Muneeb Ali:

"Stacks 2.0 is a unique layer-1 blockchain that has a native bridge to Bitcoin."

In future, Ali said the team plans to "narrow our focus to building tools for developers that are building apps and smart contracts on Bitcoin."

Network fundamentals continue to improve

In July 2019, Blockstack launched its first token offer under the Securities and Exchange Commission's Reg A exemption. Investors' expectations now lay on Stacks v2 launch, introducing a new smart contract language and a new consensus mechanism.

Regarding the token’s value, since November, STX has gained 85%, and its market capitalization rose from $100 million to $188 million in nine weeks.

The quiet rally actually started in June, when Blockstack announced a joint open-source project to develop a smart contract language called Clarity. This partnership with Algorand aims to build something more reliable and predictable than current solutions available in the market.

On Sept. 24, the team successfully launched Phase 3 of the Stacks 2.0 testnet, including the proof-of-transfer (PoX) and "stacking" (staking) mechanisms. A week later, Blockstack announced the integration of Chainlink as its "preferred oracle solution."

The PoX mechanism allows independent STX miners to secure the network by pledging Bitcoin (BTC) as collateral. In exchange, those miners will have a chance to earn newly minted STX tokens.

On Oct. 9, just a couple of weeks after the launch, Blockstack announced its economic model behind Bitcoin rewards for staking STX tokens. In November, the company also announced a partnership with Staked, an infrastructure services provider for institutions seeking to earn rewards on their crypto assets.

Take notice of how the tweet activity usually peaks ahead of the upward price swing. A noticeable peak happened on Nov. 10 when Coinbase's open-source tool Rosetta was integrated into Blockstack.

A few issues to consider ahead of the mainnet launch

More recently, on Dec. 7, the company published a legal memorandum in which the firm argued that its Blockstack's STX tokens will no longer qualify as securities.

After rebranding its parent company to Hiro, Blockstack announced its 2.0 mainnet code completion will occur by Dec. 15 and has set a launch date for Jan. 14, 2021

All this goes to show that there are a good number of fundamental drivers that support the strong rally seen in STX, and it's worth noting that the token’s issuing schedule until Oct. 2021 is very aggressive.

This situation exerts immense pressure on the token price, as noticed by the discrepancy in the market capitalization versus the BTC price chart.

While there is a good amount of substance behind the recent positive price swing, investors need to watch out for the "buy the rumor, sell the news" dynamic as STX approaches the v2.0 launch date.