CryptoAM: Crypto Goes Mobile, Drugs say no to Bitcoin, and Thai Exchanges

This newsletter is brought you by the letter W. W is the 23rd letter of the Alphabet, and one our favorites here at CryptoAM.

3 things you need to know:

One: BTC has gone mobile. Financial software company, Intuit, has just filed a patent for processing BTC payments through text message (SMS).

  • Good for business: Small businesses and merchants will be able to process bitcoin payments through their mobile devices, allowing for a more broad range of consumers to purchase goods and services. The value of many cryptos is highly speculative, and a robust network to transact easily with BTC would introduce more fundamental value based on usage.

  • Infrastructure is key: For Bitcoin and crypto in general to perform well, there must be infrastructure in place to facilitate transactions in an easy way. Ideas Iike the new payment processor that provide novel and simple ways to transact with Bitcoin will bolster the network value of the BTC ecosystem.

  • Read more…

Two: People have stopped using Bitcoin for drugs. According to the DEA, the amount of people speculating on Bitcoin now far outstrip the amount of people using it for illegal activity. When the DEA first looked at Bitcoin transaction data in 2013, they found criminal activity was behind about 90 percent of transactions. Now, illegal activity has shrunk to about 10 percent and speculation has become the dominant driver.

  • The illicit start: In the beginning Bitcoin was viewed by many as an anonymous currency that allowed criminals to commit nefarious acts. This untruth was perpetuated by those who lacked understanding of blockchain technology, who did not realize that every transaction posted to the blockchain can be tracked and followed. Seeing as there are only a few fiat on/off ramps for Bitcoin, it became trivial for law enforcement to find where criminals were offloading their Bitcoin by tracking transaction data present on the blockchain. They would follow transactions from individuals to exchanges, where people would sell BTC for cash.

  • Rise of privacy coins: As people began to realize Bitcoin was no longer secure from law enforcement, they started to switch to more robust privacy currencies such as Monero and Zcash (where transactions are obfuscated). This dynamic has led to a dramatic fall in illegal use of Bitcoin…but a massive increase in usage of privacy coins.

  • Time to celebrate? Not quite yet. The majority of people interested in Bitcoin are investing purely for financial gain. Moving forward, true usage of Bitcoin for value storage or commerce will be needed to buoy prices.

  • Read more…

Three: 20 new Thai crypto exchanges have applied for licenses. Thailand’s new, progressive licensing system has encouraged a flurry of digital asset licensing applications, including 20 applications for new exchanges.

  • ICOs galore: The country’s new regulations are encouraging for ICOs, with 50 new ICOs seeking to issue compliant tokens. All it takes is clear, well-intentioned regulation to encourage issuers to continue to go to market in a compliant, legal way, setting precedent for future issuances in the country.

  • Portals: Before approval can be granted for new ICO applications, the government must choose the first compliant online portals where issuers can conduct their token sales. Five companies have expressed interest in becoming portals, with three applications already submitted. With compliant ICO sales being held on pre-approved platforms, it will be much easier for the country to keep track of deals done within its borders.

  • Join the party: Thailand is the latest of many Southeast Asian countries, like the Philippines, to explore regulatory frameworks for ICOs. As more and more countries attempt to introduce new regulation, we will see what works and what doesn’t from a regulatory standpoint and apply those lessons to future endeavors. Crypto is a massive experiment, and we’re all just along for the ride!

  • Read more… 

Also in the news:

What I’m reading today:

Valuing Productive Cryptoassets

There are generally two types of cryptoassets.

  1. Productive crypto assets, which are more akin to real estate, equity, or bonds, etc.

  2. Non-productive assets which are meant to be mediums of exchange or stores of value.

In this post, Phil breaks down the five main types of tokens and how to apply valuation models to them.

  1. Native Profit Sharing Tokens. Similar to traditional equity, definitely securities. NPV model for fees earned over time is best.

  2. Work Tokens. These allow users to access a service through a staking or lock-up mechanism. Service providers are rewarded or penalized in proportion to the quantity of tokens staked. NPV model for revenue earned through staking is appropriate here.

  3. Discount Token Models. These are straightforward. Tokens that give you a discount for using a platform (like BNB). You can see how much is given to token holders over a period of x years and calculate the fair value of the token.

  4. Burn and Mint. In the burn and mint model, tokens are used as a payment currency for the network, but users do not pay service providers directly. Instead, users burn tokens in the name of their specific service provider. No model works here because this is a totally arbitrary and terrible system (my words).

  5. Governance Tokens. Governance tokens allow holders to vote for changes in the network in which they belong. Typically, the number of tokens one holds is proportional to the number of votes they have. The model for price per token here is postulated to be (cost of forking the network) / (# of tokens).

I chose this article because it made me think a lot about how to group cryptoassets.

These insight here in my opinion are not the models, but the frameworks. The models are all essentially the same (there is a revenue stream and the tokens tap into part of that revenue stream), but the splitting up of tokens into non-productive and productive stands out as an interesting thought exercise.

Work tokens for example are just a way to access of system that theoretically provides value. One could make the argument that Bitcoin is a work token that allows you to access the Bitcoin network, whose main product is trust. The price of trust is set by the market, and shows you how much trust in the system is worth. You can look at trust built over time using historical data, and get a sense of the future value of the BTC network. Requires just as much guesswork as predicting cash flows for a start-up…

Around the corner:

Market Outlook:

Quick Take

We seemingly bottom out around 6200, with wicks breaking the bottom level. This is a classic no trade zone, as we have very tight boundaries that could break at any time. The bottom support is 6380, and the top resistance is 6550.

If we close daily below 6380, I’m inclined to believe we will continue the run down to 5.8k. If we close above 6550, a retest of 6.8k becomes likely.

1hr Chart

Showing the 1hr chart today because it’s easier to see where the crucial levels are.

Fear & Greed

The fearfulness of the market is apparent. It looks like we may be due for a bounce to 6.55k and beyond based on our indicators.

Here’s a reminder of what these criteria mean

Overall Picture

Avi Felman@AviFelman

Some investor psychology:

In a bear market, good news makes no impact (@ICE_Markets) and even seemingly bad news makes a huge impact (@SEC_News) In a bull market, the reverse is true.

Make your trades accordingly.

August 8, 2018

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