ALERT: Explosive ICO market deserves a closer look – 13 Billion hiding in the Blockchain

(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:

  1. Hardcore Bitcoiners in for the long haul, waiting for Bitcoin to hit $50,000 OR
  2. 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.[51] In 2015 it was predicted that there would be over 2,000 crowdfunding sites to choose from in 2016.[52] 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.[47] Fundamental differences exist in the services provided by many crowdfunding platforms.[4] 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.[53]

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.

Here you can see a list of ‘dapps’ including a fun app named “Ponzi Unlimited” .. “Test your luck and win ETH”:

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:

  1. TEZOS

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.

  1. EOS

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.

  1. BANCOR

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.

  1. STATUS

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.

Click here to download / view EES Exclusive INVESTORS GUIDE TO BITCOIN

Open a Forex Account and practice trading of Bitcoin, for the day when the price isn’t going straight up and you actually have to make decisions.

Get involved – get an account at Coinbase

REFERENCE ARTICLES

http://www.zerohedge.com/news/2017-07-25/sec-cracks-down-initial-coin-offerings-concludes-tokens-are-subject-securities-laws

http://www.zerohedge.com/news/2017-07-28/some-firms-defy-sec-overstock-set-cash-wild-west-icos

http://www.zerohedge.com/news/2017-07-19/ethereum-suddenly-crashes-20-amid-chatter-more-ico-fraud-goldman-sees-bitcoin-testin

http://www.zerohedge.com/news/2017-08-24/sec-suspends-trading-publicly-listed-bitcoin-firm-canadian-regulators-crackdown

http://www.zerohedge.com/news/2017-09-02/crypto-carnage-bitcoin-plunges-pre-korea-missile-launch-levels-after-topping-5000

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

Cryptocurrency Presentation Autonomous by zerohedge on Scribd

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We've been closely watching the Crypto Currency Market if you can call it that, with all the fake data, fraud, and related problems.  One thing stands out - it's not so different than FX, commodities, futures, or stocks.  Market dyn...

Bitcoin and other cryptocurrencies flash-crashed Saturday night, one day after the US Commodity Future Trading Commission (CFTC) sent subpoenas four cryptocurrency exchanges in an ongoing probe into bitcoin manipulation that began in late July - following the launch of bitcoin futures on the CME, according to the Wall Street Journal
CME’s bitcoin futures derive their final value from prices at four bitcoin exchangesBitstamp, Coinbase, itBit and KrakenManipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.
In delay reaction, Bitcoin fell as much as $433 or 5.6% in Saturday night trading, with some noting that the flash crash happened shortly after a 90th ranked crypto exchange, Coinrail, had suffered a "cyber intrusion", and was likely the more relevant catalyst for the crypto price drop.
While major Cryptocurrencies were down from 4.5 - 5.5%, Bitcoin Cash dropped over 8.4%. 
The CTFC subpoenas were issued after several of the exchanges refused to voluntarily share trading data with the CME after being asked last December. Of note, the CFTC regulates the CTC. 
According to the WSJ, the CME, which launched bitcoin futures in December, asked the four exchanges to share reams of trading data after its first contract settled in January, people familiar with the matter said. But several of the exchanges declined to comply, arguing the request was intrusive. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the people added.
What is curious, is that if there was indeed manipulation since the launch of bitcoin futures, it was to the downside, as the price of cryptos peaked around the time the crypto futures were launched, and are down well over 50% in the 6 months since.
Coinbase in particular has been under the watch government regulators. On February 23, Coinbase sent an official notice to around 13,000 customers to notify them they were legally required to turn over their information to the IRS
The IRS had initially asked Coinbase in July 2017 to hand over even more detailed information on every one of its then over 500,000 users in an attempt catch those cheating on their taxes. However, another court order in Nov. 2017 reduced this number to around 14,000 “high-transacting” users, which the platform now reports as 13,000, in what Coinbase calls a “partial, but still significant, victory for Coinbase and its customers.”
Coinbase told the around 13,000 affected customers that the company would be providing their taxpayer ID, name, birth date, address, and historical transaction records from 2013-2015 to the IRS within 21 days. Coinbase’s letter to these customers encourages them “to seek legal advice from an attorney promptly” if they have any questions. Their website also states that concerns may also be addressed on Coinbase’s Taxes FAQ. The ongoing legal battle between Coinbase and the US government dates back to November, 2016, when the IRS filed a “John Doe summons” in the United States District Court for the Northern District of California.
On Feb. 13, personal finance service Credit Karma released data showing that only 0.04 percent of their customers had reported cryptocurrencies on their federal tax returns. 
And in April, former New York Attorney General, Eric "we could rarely have sex without him beating me" Schneiderman, launched a probe of 13 major cryptocurrency exchanges according to the Wall Street Journal - claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.
Former AG Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.
CFTC Commissioner: Crypto is a "modern miracle"
While the CFTC, IRS and New York Attorney General's office are all cracking down on cryptocurrency exchanges, it seems to all be part of the government's embrace of virtual currencies.  Last week CFTC Commissioner Rostin Benham called cryptocurrencies a "modern miracleat the Blockchain For Impact Summit held at the UN in New York last week. 
But virtual currencies may – will – become part of the economic practices of any country, anywhere.  Let me repeat that:  these currencies are not going away and they will proliferate to every economy and every part of the planet.  Some places, small economies, may become dependent on virtual assets for survival.  And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.
We are witnessing a technological revolution.  Perhaps we are witnessing a modern miracle. -Rostin Benham
Rostin hinted at the upcoming legal action against the exchanges during his speech:
Under the CEA and Commission regulations and related guidance, exchanges have the responsibility to ensure that their Bitcoin futures products and their cash-settlement process are not readily susceptible to manipulation and the entity has sufficient capital to protect itself.  The CFTC has the authority to ensure compliance. In addition, the CFTC has legal authority over virtual currency derivatives in support of anti-fraud and manipulation including enforcement authority in the underlying markets.

Meanwhile, the official Bitcoin website removed references to Coinbase, Blockchain.com and Bitpay, according to Crypto News - only one of which, Coinbase, was subpoenaed. 
http://Bitcoin.org  just removed/censored the 2 largest US Bitcoin companies (@BitPay Payment processing and @coinbase Bitcoin Exchange). It’s a good move: Bitcoin Core is obviously no longer Bitcoin, and should ideally be removed from both @BitPay and @coinbase too.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it went after Coinflip for operating a platform for trading bitcoin options without the proper authorization. Since the agency effectively asserted its dominance over the bitcoin market with that decision, this is the first time it has given its blessing to an bitcoin options trading platform. Expect a burst of institutional trading activity to follow - especially since they approved institutional options trading in July
This post sponsored by Total Cryptos @ www.totalcryptos.com  

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