If ICO’s Slow Can Ethereum Rise?

According to coinschedule October (~$400mm)had much less ICO issuance than November (~$800mm) Coincidentally the SEC is starting to go after the ICO scam artists, something thats been sorely needed as people (aka “Investors”) can’t be relied upon to do their own due diligence.  Regulation should help remove some scams and improve the quality of the ICO offerings.

While I had soured on the price of Ethereum as a result, it appears (its still VERY early) that if this ICO market can slow issuance the price of Ethereum could propel.

From a technical perspective you could argue a move through $350 would signal “breakout” and possibly higher prices.

Ethereum Price Chart
Ethereum Price Chart

Plus the Bitcoin fork is out of the way – it appears Bitcoin price was propelled by many looking to collecting a “free” bitcoin when the segwit2x for took place. Its common for traders to sell ethereum, litecoin or other “alts” to go long Bitcoin (and vice versa).

So Paris Hilton Did Call the Ethereum ICO Top?

Paris Hilton tweeted she was “participating” in the Lydian Coin ICO back on 9/3/17. Ethereums all time high was ~$390 and occurred just a day or two before this ominous tweet.

Paris Hilton “Involved” With ICO

We likely wont see anything like this ever happen again. The SEC has decided to step in and warn other celebrities to stop shilling ICOs.

Catalonia Crypto Isn’t #Bitcoin Bullish

“Catalonia is also considering adopting its own digital token or cryptocurrency” I saw this on zerohedge as an attempt to ascribe a reason to the Bitcoin price spike today.  First, not every single move in an asset must have news attached. Second, Catalonia isn’t even its own legal entity. So you could buy into this crypto and have the EU reject it or call it illegal. Also they are looking at an ICO:

From Coindesk

Blockchain experts in Catalonia have sought help from Vitalik Buterin, Ethereum’s founder, according to El Pais. Vitalik advised the Catalonians to create an ICO to offer a currency that would work in tandem with the financing of a business project for the virtual residence program. The e-residency ecosystem could create an economic community independent of a central bank.

Estonia recently proposed “Estcoin,” a national cryptocurrency. If the country follows through on this plan, it would be the first national government to launch an ICO.

Kaspar Korjus, managing director for Estonia’s e-residency program, posted a Medium blog in August claiming Estonia could offer Estcoins to residents. The coins could be managed by the Republic of Estonia, but accessed by anyone through the e-residency program. The program would launch an ICO to offer the coins.

Korjus also said the ability to start a location independent company is the main factor driving the growth of the e-residency program.

IF this were all to happen it would be competition for Bitcoin. Second there is no proof it would launch on Ethereum.

Any news like this is crypto-bullish but don’t read that to mean “Bitcoin bullish.”

3 Concerns about #Ethereum

While I own Ethereum and have belief in what the network can do I’ve come across a few recent developments that are casting shadows of concern as an “Investor” in Ether:

  1. Victim of its own success – I believe the ICO market is a huge bubble. This should be a short term problem as the market punishes those who commit fraud and don’t do their due diligence.  This report from Bloomberg shows that only 20 out of 226 ICO’s are actually running a network. The rest are pure speculation. However it also opens the doors to regulated competitors (here). I also think the ICO market is capping the current price of Ethereum as ICO’s cash out (they sell their ICO tokens for ETH, and then sell ETH for fiat). There is little to stop any exchange such as the Nasdaq form launching its own ICO market, just as Overstock has done with tZero.
  2. Competition – Private companies can launch their own private Ethereum network which does not require the use of Ether. Many love to point to the Enterprise Ethereum Alliance as proof that large companies are interested in Eth – and it is – but that does not mean this will have an impact on Ethereum price. On the contrary these companies seem to be getting a “free ride” in the public development of crypto/blockchain technology.
  3. Regulation – will governments crush the ICO market and make it impossible for ICO’s to crowdsource?

Because this technology and its progress is in uncharted waters its hard to pin down what happens next. While I’m hopefully we realize the full potential of the Ethereum network (and I make some $!) you have to watch every angle.

 

Edit: I hadn’t see this before Vitalik sees the ICO madness. He is an incredible guy and gives a lot of faith in the future of Ethereum:

The founder of the second most popular cryptocurrency in the world has always been skeptical about initial coin offerings, or when companies issue digital tokens to attract investment. Those digital tokens’ price is based only on the desire of people to have them, Mr. Buterin noted on the ETHWaterloo hackathon, dedicated, as one can guess from the title, to the structure of Ethereum.

As Vitalik Buterin believes, 90% of current ICO projects, even based on trusted ERC20 standard and even those listed on Coinmarketcap, will eventually crash. What we see right now is only the first version or first practical implementation of tokens, and “tokens 2.0” that will emerge somewhere between 2018 and 2019 will be much better. The hype around current token projects is doomed to fall, and after that, Buterin thinks, we all will finally understand which projects are worth investing and which are not. The ICO rating system is, indeed, one of the most serious problems the market is currently facing. But the market will mature, Ethereum founder assures.

Previously, when it became known to Buterin that independent Ethereum upgrade developers had launched an ICO, he immediately told this is not what he wants to see with his currency development and swiftly established a private fund that invests in decent Ethereum development projects.

#ICO launch Boosts Overstock Price #Ethereum

This ICO launch is not Ethereum what you think. It has nothing to do with ETHEREUM and highlights a potential issues with Etherum use in the future.

Shares of cryptocurrency pioneer Overstock.com climbed more than 5% on Tuesday after the company revealed that it will launch an ICO on Nov. 1 using its proprietary tZERO platform, a strategy that will allow Overstock to raise capital without diluting its float.

Overstock to launch ICO

tZero info here – it looks like one giant competitor to Ethereum’s ICO market – only it looks somewhat regulated. I dont see this as bullish for Ethereum.

This tZero has NOTHING to do with Ethereum – and if its successful will pave the way for other companies to go out and grab more cash. It also shows that Ethereum is just a guinea pig showing how much capital can be raised from pointless ICO’s. There is NOTHING to stop any copy from launching its own private Ethereum (or similar) network.

Another example of this is Microsoft launching private Ethereum networks. These networks dont require the use of Ether.

Which begs me to ask an open question: Is the general public that is buying Ethereum just paying for free development for major corporations and government?

Sure small companies can and will still launch using the Ethereum network but as for large companies using the public Ethereum network (and thereby driving up the price of ETH) its looking doubtful (I say this is a holder of Etherum).

 

ICO Nonsense Tops $3 Billion

According to CoinSchedule.com ICO sales have topped $3 billion on 201 “offerings”. As far as I can tell very little is being produced by any of the entities that cashed in on this craze. Sure, there are a few companies that might make it. Two problems with all these bets:

  1. The ICO’s you are investing are long shots to make it in and of themselves
  2. The ICO’s are (for the most part) launched on Ethereum which itself isnt guaranteed to survive.

So when investing in an ICO you’re making a bet on a bet. I’m not here to say it can’t all work out. But my feeling is that you have all sorts of gunslingers out there who want to get rich quick. Most people “investing” in ICO’s are looking to get rich quick and/or think they deserve a seat on Shark Tank. Most of these ICO’s don’t even give you equity or anything like a dividend. Essentially the ICO is a donation to the enterprise launching the token.

To me this all looks like a massive wealth transfer from guys who got it early on Ethereum and aren’t satisfied. The famous saying on Wall Street is “Pigs get slaughtered” and I fear thats what will happen here.

What annoys me most about all of this is that the ICO market threatens the respectability of Ethereum. I believe that Ethereum could be a game changer, but if ICO’s draw increased scrutiny and or regulatory issues it could hurt Ethereum in a major way. Not to mention there are some very interesting, sincere projects launching tokens which are being washed out by the noise of nonsense offerings.

The market will eventually regulate itself, punishing those who tossed money at bad offerings. Who knows when that happens or at what price – but the current state of things is unsustainable.

Ripple Shows How Disrupted Tech can be…Disrupted

Only a few weeks ago everyone was patting themselves on the back for “buying the dip in Ripple”.  If you bought the late September drop at 18 cents you were quite happy by early October when the price hit 28 cents. Easy call right? I mean, Ripple is obviously going to take over all banking.

But then, this happened:

“IBM’s Stellar Move: Tech Giant Uses Cryptocurrency in Cross-Border Payments”

Top chart below is Stellar and the bottom is Ripple. As you can see Ripple fans don’t like this news. This is only one little news item and certainly does not seal either companies fate. So, who cares? Read below.

Ripple price down on Stellar IBM News

Read Wikipedia about Stellar, and you see this tidbit:

“At launch, Stellar was based on the Ripple protocol. After making several changes to critical consensus code, the Stellar network forked.”

This is the problem with investing in anything crypto right now. You can take pretty much any coin/token and copy it to make your own. All these people investing in ICO’s think they are Warren Buffet because basically all ICO’s go up. Its a brand new market that is very rapidly saturating. Don’t believe me? Just scroll through this list of ICO’s. Very few of these will be winners long term. The ones that do start to win can just be cloned.

Think thats just ICO’s? I’d disagree. Governments are copying Bitcoin. I’m not sure what that does to the price, but I have a feeling the market doesn’t anticipate competition from the ruling class. See here for example:

Whats my point? The market now is pricing in all things crypto going up. The market does not appear to be concerned about competition both private and public. Its dang near 100% that crypto is the future, but its 100% impossible to state which coin or token is “the one”. So don’t put all your eggs in one basket.

Harvard Economist Says Bitcoins a Bubble

He brings up some valid points, particularly:

  • Governments will let the private sector develop the technology and then usurp it for their own use
  • Its not easy for alt-coins to beat Bitcoins lead in credibility and scale

People continue to say that Bitcoins value is in its anonymity – its not really anonymous. The IRS uses software to track people using it now. You can’t discount the value of speed and also owning your own money. This means not having to rely on a bank.

As for the bubble talk – I don’t think Bitcoin is a bubble. But I think ICO’s are definitely a bubble. 

Read the Guardian Here:

Is the cryptocurrency bitcoin the biggest bubble in the world today, or a great investment bet on the cutting edge of new-age financial technology? My best guess is that in the long run, the technology will thrive, but that the price of bitcoin will collapse.

If you haven’t been following the bitcoin story, its price is up 600% over the past 12 months, and 1,600% in the past 24 months. At over $4,200 (as of 5 October), a single unit of the virtual currency is now worth more than three times an ounce of gold. Some bitcoin evangelists see it going far higher in the next few years.

What happens from here will depend a lot on how governments react. Will they tolerate anonymous payment systems that facilitate tax evasion and crime? Will they create digital currencies of their own? Another key question is how successfully bitcoin’s numerous “alt-coin” competitors can penetrate the market.

In principle, it is supremely easy to clone or improve on bitcoin’s technology. What is not so easy is to duplicate bitcoin’s established lead in credibility and the large ecosystem of applications that have built up around it.

For now, the regulatory environment remains a free-for-all. China’s government, concerned about the use of bitcoin in capital flight and tax evasion, has recently banned bitcoin exchanges. Japan, on the other hand, has enshrined bitcoin as legal tender, in an apparent bid to become the global centre of fintech.

Bitcoin price
Bitcoin price Photograph: Project Syndicate

The United States is taking tentative steps to follow Japan in regulating fintech, though the endgame is far from clear. Importantly, bitcoin does not need to win every battle to justify a sky-high price. Japan, the world’s third largest economy, has an extraordinarily high currency-to-income ratio (roughly 20%), so bitcoin’s success there is a major triumph.

As of early October, Ethereum’s market capitalisation stood at $28bn, versus $72bn for bitcoin. Ripple, a platform championed by the banking sector to slash transaction costs for interbank and overseas transfers, is a distant third at $9bn. Behind the top three are dozens of fledgling competitors.

Most experts agree that the ingenious technology behind virtual currencies may have broad applications for cybersecurity, which currently poses one of the biggest challenges to the stability of the global financial system. For many developers, the goal of achieving a cheaper, more secure payments mechanism has supplanted bitcoin’s ambition of replacing dollars.

But it is folly to think that bitcoin will ever be allowed to supplant central-bank-issued money. It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity. Of course, as I note in my recent book on past, present, and future currencies, governments that issue large-denomination bills also risk aiding tax evasion and crime. But cash at least has bulk, unlike virtual currency.

It will be interesting to see how the Japanese experiment evolves. The government has indicated that it will force bitcoin exchanges to be on the lookout for criminal activity and to collect information on deposit holders. Still, one can be sure that global tax evaders will seek ways to acquire bitcoin anonymously abroad and then launder their money through Japanese accounts. Carrying paper currency in and out of a country is a major cost for tax evaders and criminals; by embracing virtual currencies, Japan risks becoming a Switzerland-like tax haven – with the bank secrecy laws baked into the technology.

Were bitcoin stripped of its near-anonymity, it would be hard to justify its current price. Perhaps bitcoin speculators are betting that there will always be a consortium of rogue states allowing anonymous bitcoin usage, or even state actors such as North Korea that will exploit it.

Finally, it is hard to see what would stop central banks from creating their own digital currencies and using regulation to tilt the playing field until they win. The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates. I have no idea where bitcoin’s price will go over the next couple years, but there is no reason to expect virtual currency to avoid a similar fate.

Kenneth Rogoff is professor of economics and public policy at Harvard University. He was the chief economist of the IMF from 2001 to 2003.

Why Bitcoin is Going Up & Alts Are Not

Bitcoin is on the move, up around 5% today while Alts (Ethereum, Litecoin, etc) have been stuck in the mud. As you can see here in this chart of Ethereum priced in Bitcoin, Ethereum has been going down. Why is this?

Bitcoin is Outpacing Ethereum

I’m going to add my speculation – my guess is that Bitcoin will continue to move up faster than Ethereum or litecoin for the foreseeable future. Don’t be a fool and trade on my opinion.

  1. Ethereum is “all about the ICO’s”. ICO’s creating selling pressure as people buy tokens, and those tokens are transferred back into Ethereum and sold for fiat. That fiat is used by the “businesses” which issues the tokens. In my opinion this creates major selling pressure on Ethereum.
  2. Litecoin – I just don’t get why we need it. At least yet. This whole pitch of “its Bitcoins silver” makes no sense. Bitcoin is still in its infancy. Yes its the gold standard of crypto but is it really not meeting peoples needs at this point? Lets face it – Litecoin was created as a competitor to BTC and Bitcoin is kicking its @$$.
  3. No other ALT has created that “killer app” or that “must use” case. Therefore its all just speculation. Bitcoin is the household name when it comes to crypto and that’s where the money – the big money – is going to be flowing.
  4. I think the more Bitcoin outperforms the more investors will be running to it as opposed to the alts. However if Bitcoin tanks you can bet selling will happen in the alts. Inherently this boosts Bitcoin the best crypto bet.

Thats my analysis. Could be (probably) wrong, but hopefully thought provoking.

Morgan Stanley is On the Other Side of Jamie Dimons Bitcoin Trade

Bitcoin prices are heading higher today which some are attributing to the ECB (Euro. Central Bank) saying that Bitcoin and crypto was outside of their jurisdiction. I’d point out that regulating and taxing are two different things. I also don’t think that regulation is bad per se – there are a lot of scam artists out there.

Something I found quite a bit more interesting was that Morgan Stanleys CEO said Bitcoin was “more than a fad” shortly after news came out that former Morgan Stanley CEO John Mack is looking into launching an ICO. If this is true its a huge boost to the credibility of crypto, ICO’s and could pave the way for other big names to enter.

This is in sharp contrast to JP Morgans CEO Jamie Dimon who has been shredding Bitcoin the past several weeks.