CryptoAM: AT&T Gets Sued, ETNs, and VeChain Vaccines

Friday, August 17th

Happy Friday everyone! Hope you’re having a great day. I’m writing this from the Megabus I’m taking up to NYC from DC. That’s how much I love you guys.

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Winner (loser? Idk. Lets say best story) will be featured (anonymously!) in Mondays newsletter and win .001 BTC :)

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3 things you need to know:

One: AT&T sued for $240mm in crypto theft case. Michael Terpin, CEO of Transform Group, is suing AT&T as the liable party in a $24mm crypto theft that allegedly occurred as a result of a visit to an AT&T shop in Connecticut.

  • A simple mistake: Terpin’s account was labeled as high-risk, and during a phone number switch and sim card transfer, the AT&T staff member did not carry over the extra protection designated for high-risk accounts. The oversight allegedly led to the subsequent hack and lost funds.

  • Precedent: This decision will set a precedent in case-law and will answer the question – who is liable, the service provider or the end-user in a situation similar to Terpin’s?

  • Extra damages: Although Terpin lost what is worth $24mm in today’s market, it was worth north of $200mm at the time of the hack in January; therefore, Michael has charged AT&T for an additional $216mm in damages. It will be interesting to see the precedent that is set in this case – will Terpin receive the current market value of his lost holdings, or will he be awarded the fair market value of his stack at the time of the hack?

  • I am not a lawyer: but this dude is! Palley is a well respected crypto focused lawyer. Check out his thoughts.

  • Palley@stephendpalley

    My seriously wild eyed guess is that this case gets moved to arbitration.

    August 15, 2018

  • Read more…

Two: No ETF? How about an ETN. Despite recent ETF rejections and delays, investors may have something to rejoice about – a Swedish bitcoin ETN, Bitcoin Tracker One or CXBTF, that has been listed on the Stockholm Exchange since 2015, is now quoted in USD.

  • A debt-like security: The ETN is a security with debt-like characteristics and is backed by the force of the issuer’s balance sheet rather than a pool of underlying assets (i.e. BTC). With stronger collateralization and debt-like characteristics, it is amazing to me that CXBTF is offered at a significantly reduced premium to GBTC, which is backed by the underlying pool of BTC rather than Greyscale’s balance sheet. Wanna know more about ETNs? Check this out.

  • The gates are open for US investors: Now that the ETN is dollar denominated under the ticker CXBTF, US brokerages will be able to offer it to American investors. Despite recent ETF woes, investors can find some solace in this ‘new’ opportunity for US institutional money to enter the BTC markets.

  • No premiums, please: The ETN is a vast improvement over Grayscales Bitcoin Investment Trust (GBTC) which at time has posted premiums as large as 90%+ over the underlying. GBTC had a 52% premium over BTC prior to the CXBT announcement, and post-announcement, the premium fell to 40%. Previously, GBTC was the only way for the average retail investor to buy Bitcoin through traditional accounts, which was the reason for the large premium.

  • Price gouging: There is no reason that exchange traded products should be quoted at such large premiums, as apart from custodial and admin fees, there is not much in terms of upkeep expenses for the provider; however, Grayscale charges significant fees on top of the already hefty price premium.

  • In the words of Jay Hack of Gallet Dreyer & Berkey LLP:

    "Once you have committed to buying bitcoin, why buy the fund and flush 65% of your money down the toilet?"

Three: VeChain and Chinese Vaccines. VeChain announced a vaccine tracking solution for China powered by the blockchain. At the time of publication, VeChain is up ~45% over USD on the huge announcement. VeChain HODLers woke up to a big fat green surprise this morning, as VeChain continues to build its infrastructure and partnerships.

  • Faulty vaccines: Hundreds of thousands of school-age children in China received faulty vaccines because of poor supply chain management and product standards by the manufacturers who are to blame for this crisis. This is the third large-scale health crisis in a decade, and Chinese citizens would benefit from more supply-chain and sourcing transparency to prevent future issues from arising. This is a huge scandal for the Chinese government, and they are racing to fix it.

  • Enter VeChain: In a blog post published earlier this month, VeChain announced that it had been "tasked to achieve" a blockchain-based solution for recording data related to vaccine production in China.

  • Tread slowly: The Chinese government has not officially confirmed the partnership yet, but the company has gained official endorsement from several Chinese agencies and has a history of collaborating with the Chinese government in the past. VeChain’s vaccine solution is highly likely to see strong considerations from officials as the official platform for China’s solution to this problem.

  • Read more…

Also in the news:

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Market Outlook:

Quick Take

BTC has been trading at around 6.5k after bouncing off support at 6.25k. A 1D close above the yellow box and we’re going to 6.8k. If we close within (or below) the box, we’re more likely to see retracement towards the 6.25k level. RSI indicates that we have some room for further price appreciation.

Daily Chart

Fear & Greed

We’re not even halfway to greedy yet. Plenty of room for some run-up. Based on our speculation index, the market is gearing up again. I expect a bounce to 6.8k sooner rather than later.

Here’s a reminder of what these criteria mean

Overall Picture

With BTC trading sideways, alts managed to take off. Volume and price action on alt coins looks promising, as people seem to be willing to take riskier bets in the market.

The market is looking much better than it was a week ago, with the market cap stabilizing around the $200B level. The next week will be crucial in determining the overall direction of the market for the next few months. I see four main possibilities:

  1. We pass by 6.8k and rocket up to 8k (if the pump through 6.8k is fast)

  2. We pass by 6.8k and make a lower high around 7.5k before coming back down (if the pump through 6.8k is slow)

  3. We trade between 6.2k and 6.8k

  4. We break down below 5.8k

Based on the bounce off of 6.2k and the trading around 6.5k, I’m leaning toward #2.

Around the corner:

What I’m reading today:

The Great Filter: Why You Shouldn’t ICO on Ethereum

In this post, Christian from StellarX explains his reasoning as to why Ethereum is a bad platform for most current applications. He claims the vast majority of projects built on top of ethereum will end up failing, as they haven’t taken into account the true scalability and cost issues of Ethereum.

Today, as in 2014, if you’re building a distributed computer program, something with no sole owner and no centralized decision-making apparatus, Ethereum is a great choice. For the perfect use case, think something like Augur — they needed a fully automated, ownerless way to make truth-decisions about real world events…so they could circumvent regulatory enforcement for what is basically a gambling platform.

But most blockchain companies don’t need smart contracts to execute their core business logic or want to dodge some legal or jurisdictional problem. They just want to issue digital assets and process transactions. That’s exactly where Ethereum will let you down. If you’re building something where:

  • you issue a token

  • that users will trade back and forth, and

  • you want those trades to happen cheaply and in real-time

Ethereum is the wrong choice. It’s slow and it’s really f’ing expensive, and it fails to act like you want in both the “one account doing a lot” and the “many accounts doing a little” cases.

The rest of the post are a series of tests that the StellarX team ran on Ethereum, which are pretty interesting.

Let’s be real here for a second — A lot of people don’t realize that Ethereum doesn’t really work that well outside of incredibly simple applications (like fundraising). Vitalik and co are hard at work trying to solve the scaling issue through proof of stake and sharding, but if they can’t solve it in a meaningful and effective way, it’s a death knell for Ethereum.

Luckily, Ethereum has the biggest dev community behind it, and some of the smartest minds. Only time will tell whether they can pull it off.

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