(GLOBALINTELHUB.COM) — 9/3/2017 We’ve been inundated with comments and questions about Crypto since the Bitcoin surge higher, caused interestingly by Fidelity. Elite E Services is not really interested in Cryptocurrencies but as an FX technology developer and consultant for 15 years, that gives us an advantage in a space filled with unregulated clowns (mostly). Our perspective of FX and that is inclusive of Crypto is that it’s impossible to trade / invest in Currencies and so we develop algorithms that do well, creating a virtual asset class which isn’t fair to be considered ‘FX’ because just investing in Bitcoin, or Swiss Francs for that matter, is not a solution (just like buying Gold is not a solution).
What really is an ICO or “Initial Coin Offering”? It can be a number of things, what it really is – just another fad, a reason to create hype around a new potential bubble. Most ICOs (but not all) have been ponzi schemes, fraud, or just vapor. Why so much money flowing into them? The reason is simple – investors are kicking themselves for not buying Bitcoin for $1 in 2011. A 500,000% return is rare, and yes that’s the percent in question. Bitcoin’s move from $1 to $5,000 is 500,000%, unheard of returns even in penny stocks. Maybe a few people did it (and we will speculate here about them) and are still sitting on it – but anyway those who didn’t do it, now want to recreate this opportunity and they see a new wave of innovation and blue markets opening up on ‘platforms’ like Bancor and ETH.
42,000 + Zombie Investors WHO ARE YOU
One interesting thing about Bitcoin compared to Euros for example is the public Blockchain. So anyone with computer skills can analyze the Blockchain. Here’s one interesting analysis, there are about 42,000 + ‘dormant’ addresses (think: accounts) that represent about 3.3 Million Bitcoin, worth now about $13 Billion USD. The biggest account worth nearly $400 Million (this may be the ‘prime mover’ account from Satoshi). Who are these 42,000 account holders and why are they not doing anything? There’s 2 likely scenarios – they are either:
- Hardcore Bitcoiners in for the long haul, waiting for Bitcoin to hit $50,000 OR
- They lost their keys, and have no way to retrieve them (we hope, that’s not the case for the $400 M account)
It makes one wonder what’s worse – not investing in Bitcoin in 2011, or investing $1,000 which is now worth $5,000,000 and losing your keys! Imagine the anguish, your laptop was destroyed by a virus or fire, and you didn’t backup!
Here’s a link to the spreadsheet, with our included calculations above: Dormant Bitcoin Addresses with a balance of 25btc or more
Looking at this is both upsetting and invigorating. It really makes one wonder, why anyone would walk away from project Bitcoin – leaving $400 M on the table is not wise even for the egalitarian anarchist, it certainly would finance a revolution (if that’s what one wanted) – or buy a lot of trees and animals to save. This points to a large institutional creator, as we have pointed out in previous articles (such as the NSA) which 400 M is not significant, compared to ‘power’ which cannot be ‘purchased’ outright on the open market. Bitcoin provided NSA (or whoever) with something far greater, opening new markets and tracking criminals around the globe.
Going back to ICOs, the hype is understandable, considering the 500,000% return, which ETH and others have tried to replicate. But that’s all it is – hype. ICOs are just a new form of crowdfunding combined with Cryptocurrencies. Due to the fact that it’s unregulated and there’s practically no fees because there are no banks or lawyers involved, and an investor can invest $1 or even a few cents, it’s gone viral on the internet. But something else is going on here – institutional investors from the Bay Area are jumping in too. The timing is just such that there’s so few places to invest, the stock market is toppy and the traditional economy is on the verge of collapse. The only thing holding the stock market at these levels is the Fed’s QE program, which is all fine and good but the reality is that the new IPO market is dead. Companies like Uber are not even going public, if Uber had been a startup around the .com boom you can bet they’d be fighting for the IPO even before their first ride. The game is clearly changing, CryptoCurrencies are NOT the game changer as some may claim, but simply they are in the right place at the right time, and fuelling a lot of interest from tech savvy investors (many from the Bay Area) who have saturated common markets with their portfolio (Think about Calpers – how do you invest $300 Billion of Pension money? It’s not easy, you can only buy so many stocks and so much real estate).
And heck, for the 1% who has gone parabolic with their wealth, what’s dropping a few million into a Bitcoin startup just for fun. Although many of the ICOs are scams not all of them are, although the ones which are ‘based’ on something are highly overvalued, like Bancor for example. Take a look at statistics about crowdfunding in general:
In 2012, there were over 450 crowdfunding platforms operating. In 2015 it was predicted that there would be over 2,000 crowdfunding sites to choose from in 2016. Project creators need to exercise their own due diligence to understand which platform is the best to use depending on the type of project that they want to launch. Fundamental differences exist in the services provided by many crowdfunding platforms. For instance, CrowdCube and Seedrs are Internet platforms which enable small companies to issue shares over the Internet and receive small investments from registered users in return. While CrowdCube is meant for users to invest small amounts and acquire shares directly in start-up companies, Seedrs pools the funds to invest in new businesses, as a nominated agent.
Now what is the genius behind Ethereum, they’ve taken their Blockchain and encouraged use as a hybrid app development and crowdfunding platform, using Crypto as a means of payment, but payment is a consequence, not a cause:
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk.
The project was bootstrapped via an ether pre-sale during August 2014 by fans all around the world. It is developed by the Ethereum Foundation, a Swiss nonprofit, with contributions from great minds across the globe.
I don’t know about you, but if you’re in the financial services industry whether you are regulated or not, being on the same platform as “Ponzi Unlimited” and “NU Earth Lotto” is not exactly resume defining. Or to say it differently, is it wise to have your RIA office next to a check cashing store? But ETH is about the platform – not the money. So we’ll roll with it for now – just sayin’ – it’s understandable why the financial establishment has been weary to jump on the crypto bandwagon.
A small aside about the security establishment. The FBI was originally founded to stop Anarchists, and Hoover, who was a corrupt, evil, and twisted leader – was also a patriot and loved USA and hated Anarchists above all. He created an establishment hatred of Anarchists that resides in the FBI and other institutions today. Communism was not as bad as Anarchists – you could do business with Communists (ask Armand Hammer – Must read book if you don’t know that USA did business with Soviet Russia very secretly) – anyway the real enemy of Capitalism is not Communism, it is Anarchy. A decentralized platform that isn’t controlled by anything represents Anarchy. And, many of the founding developers of Bitcoin who were critical to the development of Cryptocurrencies initially (without which we may not have this article right now or Bitcoin 5,000) happen to be Anarchists.
If these Anarchists had a political agenda for Bitcoin, as if it would destabilize the system or ‘rebalance’ wealth, they need an education in Finance. Before Crypto it was thought that Quantitative Easing from the Fed was Wall St.’s greatest ‘frankenfinance’ – just wait until they start issuing their own Morgancoin, these Anarchists will be turning in their graves (as they will probably all be ‘disappeared’ or die of cancer, heart attacks, stabbed themselves in the back 20 times, or like Matt Simmons drown in their own bathtub).
What, if any, are successful ICOs? Here’s a list of 5, all pertaining to Blockchain improvements, in various forms:
Tezos is a new a blockchain that fixes the governance issues that blockchains like bitcoin face. Instead of relying on off-chain debates, compromises and consensus to improve, scale or change the core software, Tezos has self-governance mechanism built into the protocol.
The Tezos ICO launched on July 1. At the end of the 14-days sale period, the project had raised about $222 million in bitcoin and ether. That became the new ICO record.
Block.one is a start-up building a blockchain that meets the specific needs of the businesses and companies in the corporate world. It plans to provide blockchain solutions that offer efficiency, security and data integrity.
The start-up carried out its ICO in June to support the project development. Its EOS tokens raised $183 million. That held the record until Tezos overtook it three weeks later.
As more cryptocurrencies and tokens get into the crypto market, the need to transact and move value from one to another is growing. While current cryptocurrency and token exchanges facilitate the process, their centralized nature expose users to insecurity and don’t support all the tokens out there.
Bancor seeks to build a decentralized exchange ecosystem that will enable holders of digital assets to trade peer-to-peer with ease and with little risk to the security of their assets. It will also support any token that is issued regardless of the number of users. Its June ICO raised $153 million.
Status is a browser, wallet and a messenger app. It is also a gateway to decentralized applications that are built on top of Ethereum. The Status app will be available for mobile to enable on-the-go use. The team behind Status held an ICO on June 20th and raise $95 million.
With more start-ups choosing ICO and the public’s interest growing, at least some of the ICOs in this list might end up not being in the top five of the biggest ICOs in 2017.
Even companies that have had little to do with blockchain until recently are now interested in ICO. For instance, the messaging App Kik has released a whitepaper explaining its plan to hold an ICO.
Note that when they say “183 Million” raised that’s in Cryptovalue, based on the rising token price, not in cash. Due to the fact that there is no required reporting, or to say opposite reporting requirements, ICO fundraising is extremely exaggerated and misreported. Let’s take an example from Bancor:
40 M in BNT or USD or ETH? If ETH based on what ETH/USD price? Lots of confusion here, but the numbers are big for sure. But where is the $200 Million claimed? Because of the high ETH/USD price? Their blog post on Medium isn’t more clear about this, but what does it matter – they are developers, and they need money.
What is clear is that the majority of ICOs recently are promoted by unregulated clowns. The SEC clearly stated in its recent warning, that ICOs were not forbidden explicitly, that they ‘may’ be subject to regulation, if the ICO is for capital raising. What the SEC is saying is no different than the IRS – you can use Bitcoin but that doesn’t mean you can’t follow the law.
The point is that, even some of the bigger capital players in ICOs recently, are from places and groups that might not want to go through SEC registration, or cannot (due to disclosure requirements, or background checks, etc.) we don’t want to name names but for example being from places like Russia where compliance rules are extremely different (most corporations owned by Oligarchs are owned on paper by dead people).
We’ll be digging further into this topic, and looking to partner with regulated players in this space. Like anything new, as Forex was in 2006, it attracts a criminal element and a ‘bad’ element, of people just using it as a means to get money and nothing else. For the real investment bankers, for the real hardcore developers, the Crypto wave supercycle is just beginning.
ETH App Universe: https://dapps.ethercasts.com/
Ledger X first CFTC approved Bitcoin derivatives exchange: https://ledgerx.com/trade-on-ledgerx/
Interesting Crypto Resource: https://www.cryptocompare.com/
Official SEC on ICOs: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings