CryptoAM: Crazy ICO returns, EOS issues, and Coinrail

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Good morning friends. Let’s pour one out for all the people we lost this past weekend. Actually, would be pretty nutty to chart CryptoAM’s open rate vs. 24hr returns of BTC. I’ll get back to you guys on that.

3 things you need to know:

One: Coinrail, a Korean exchange, loses $46m in a hack. If we started a donation fund for victims of hacks, do you think that would get traction?

  • One note: Hackings like this make bad headlines and scared investors, the last two things we want in a bear market. This is just another reminder to be safe with your crypto! Make sure that you’re not storing the majority of holdings on an exchange, and consider investing in a hardware solution.

  • Two note: Reading the news, you may see headlines that imply this hack caused the dump. That is blatantly false. Coinrail is a tiny Korean exchange, and doesn’t have enough volume or name-recognition to cause a 10% dump in a day. It is unfortunate it happened at the same time, and very well may have exacerbated the dump…but it did not cause the dump.

  • Three note: Hello exchanges. This is Avi. If you stopped getting hacked that would be fantastic, thanks.

  • Read more…

Two: EOS block producers vote to launch EOS mainchain. Over the weekend a self organized group of over one hundred EOS block producer candidates unanimously voted to launch the EOS blockchain after two prior “no go” votes.

  • Slight problem: In order to vote, token holders must use a voting tool which has to have access to their private keys. The only widely audited tool which can be used to vote is the CLEOS command line tool released by Unsurprisingly, many in the community are not using it. (Command line = scary) Currently, around 3% out of 15% of tokens needed have been staked.

  • Another problem: The majority of EOS tokens are held on exchanges. These tokens can’t be used for voting unless the exchanges decide to vote for block producers themselves tokens they are holding for their customers. This could provide exchanges with a ton of voting power.

  • Solution: Progress towards the 15% minimum is being made slowly but steadily. It will likely take around a week for the 15% to be reached at current rates, unless a simple GUI voting portal receives a thorough audit making. As far the exchanges having undue influence goes, it is up to people to withdraw their tokens from exchanges. EOS is not only an experiment in blockchain technology, it is an experiment in decentralized governance.

  • Read more…

Three: US regulators are coming after trade data. All in the name of finding Spoofy. The CFTC is demanding access to detailed trading data pertaining to Bitcoin trading on Bitstamp, Coinbase, itBit, and Kraken to aid in their investigation of price manipulation.

  • Fighting back: There has been resistance from the exchanges in handing over all of that data to the CME. One of the main reasons why they are opposed is because the CME is looking into creating it’s own cryptocurrency exchange.

  • CFTC vs CME: The CFTC is frustrated that the CME did not have agreements in place beforehand that would compel the exchanges to hand over this data. As the BTC Futures are regulated under US securities laws, it should come as no surprise that the CFTC would want detailed information on an asset that has been repeatedly accused of being heavily manipulated. 

  • Read more…

Also in the news:

What I’m reading today:

Here’s something a little more happy: Returns to Investors in Initial Coin Offerings

A report published last week by researchers at Boston College found that ICOs on average produce abnormally positive returns. Of the 4003 ICOs that were planned in executed since January 2017, only 26% have had their tokens listed on an exchange. This may seem to suggest that 3/4 ICOs you invest in will make you money but that isn’t quite true. The 74% of ICOs that don’t get listed on exchanges include ICOs that will be listed on exchanges but haven’t yet, ICOs that didn’t reach their soft caps and will return all investments, and ICOs that are straight up scams (which are easily avoided by most investors) Of the ICOs that get listed on exchanges, the stats are overwhelmingly positive.

The quick stats are…

  • $12 Billion in capital raised since January 2017

  • 179% average return from ICO price over a 16-day holding period starting on the first day the token was listed

  • 82% average returns for ICOs which don’t get listed on an exchange within 60 days of the ICO

  • 48% average returns for buyers who buy a token the first day it is listed on an exchange and hold it for 30 days

  • 180-day average returns for ICOs ranged from 150% to 430%

The report also found a statically significant relationship between the number of twitter followers and market capitalization. "for each 1% increase in users, the market capitalization increases by 1.2%, which is consistent with the increasing returns to user adoption in peer-to-peer platforms where these tokens are to be used for economic activity.”

The researchers concluded that ICOs are consistently underpriced, but the degree to which assets are underpriced has declined over time. They also suggest that the average ICO returns make sense as far as returns go for investing in unproven, unstable, and potentially regulated assets. 

Around the corner:

Market Outlook:

My oh my, we are fearful today. I hope you guys listened to the CryptoAM on Friday and sold out of some positions when we broke 7.4k in a solid fashion.

Here’s a reminder of what these criteria mean

This position is actually quite a interesting trade R/R wise. The overwhelming sentiment has swung fearful, indicating a possible overreaction of price. There is strong support around 6.6k, so taking out a long and setting a stop loss at around that level is definitely something to look at. I personally have no position right now.

If we break 6.6k, we’re looking to levels of support at 5.8k. A break of 6.5k would induce mass market panic, so we may even go lower than 5.8k if that were to be the case (although unlikely).

Note: Generally, people calling exact prices that are > 10% move are not going to be correct. Too little data, and too far out. Don’t listen to people that are calling for 3k or calling for 12k. You have to take things day by day with Bitcoin. TA is unlikely to be useful over longer timeframes due to event risk.

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