CryptoAM: Probing ICOs, ICON Takes on Insurance, and Square Pays Attention

Wednesday, August 29th

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3 things you need to know:

One: US and Canadian regulators just announced a probe of over 200 ICOs. The North American Securities Administrators Association (NASAA) announced that there are "more than 200 active investigations" by state or provincial-level agencies into initial coin offerings (ICOs) and other crypto-related investment products.

  • Whatcha gonna do: This is a continuation of the ongoing investigation by NASAA called “Operation Cryptosweep” which I can only assume they named after a night of hardcore brainstorming. So far, this operation has resulted in 46 enforcement actions involving ICOs or cryptocurrency-related investment products.

  • Some good, some bad: NASAA President Joseph P. Borg wanted to remind people that they’re only going after the bad guys.

    "While not every ICO or cryptocurrency-related investment is a fraud, it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum; state and provincial laws or regulations may apply, especially securities laws. Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”

  • US ICOs in Trouble: We have seen a downturn in ICO volume from the United States, in no small part due to regulation. One of the draws of ICOs was the opportunity for low cost funding — throw 20k at promoting your ICO and reap potential millions. Now that ICO legal costs are ballooning in the U.S (some put estimates of 250k for running it the right way), less people are able hold an ICO. Regulation has definitely cut down on the amount of scams, but also dampened one of the main draws of ICOs.

  • Read more…

Two: ICON is making big moves in Korea. ICON secured a partnership with Kyobo Life and Samsung to develop blockchain based insurance services.

  • Automated claims: The partnership with Kyobo Life, South Korea’s largest insurance firm, is aimed at automatic insurance claims services. ICON will be working alongside the insurance provider and up to 25 security firms to roll out large scale DApps. The pilot is scheduled to undergo its test in September with a formal launch the following month. Currently, the claims process relies on outdated networks and paper infrastructure to process and pay out on claims. Integrating blockchain and smart contracts will automate the process, saving money and adding a layer of trust and transparency to existing networks.

  • Difficulties to overcome: In South Korea, insurance companies are prevented from storing data directly due to concerns over security breaches and privacy. To create a blockchain for insurance, the ICON team and the devs will have to work around these regulations so that data settlement protocol will be in line with local rules around that space.

  • Trail blazers: South Korea is very progressive in the blockchain space, and has started an initiative to include blockchain as one of the core technologies in the ‘fourth industrial revolution’. The country will aim at facilitating growth in the blockchain space to gain an edge over competitors globally. The ICON and Kyobo Life partnership is the first step in the widespread integration of blockchain in the nation’s insurance sector, and a great success should encourage large players in other sectors to roll out blockchain pilots.

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Three: Square and their shiny new crypto payments patent. Square has recently won a patent for a payments network that allows merchants to accept payment in any currency, including digital currencies like bitcoin.

  • Big for adoption: One of the main criticisms of cryptocurrencies is that they are a speculative instrument rather than a true currency used to hold or transfer value. With a widespread crypto payments ecosystem, the network value of transactions will increase dramatically, strengthening fundamental valuations of effected crypto assets.

  • Speedy fast: The company will maintain a private blockchain running on a POS consensus mechanism to identify and record transactions from square wallets in real time (as fast as a credit card) before they are recorded to the public blockchain - this eliminates latency in crypto transactions in currencies like BTC that uses POW and has a long block time.

  • Jack Dorsey, the visionary: Dorsey is a strong proponent of cryptocurrencies and blockchain, and although there is no guarantee that Square will actually implement its patented payment network into its POS service, there is a higher likelihood than with other companies, such as BoA, who have filed successful patents. Jack is on record saying that the internet deserves a native digital currency, and he hopes it is bitcoin or another crypto. Dorsey’s firm sees crypto as a transformational technology, and we doubt that they will allow themselves to be left out of the economic growth that digital assets and blockchain will bring us.

  • Does scaling even matter? With the rise of easy to use payment channels for Bitcoin such as the Square, Coinbase Commerce and the lightning network — do we need to worry about the scalability of Bitcoin? While people may wax poetic about the inefficiency and speed of Bitcoin payments, underlying scalability doesn’t matter much to me. What matters to me is that the underlying currency of these new payment technologies is decentralized and not controlled by a single government. Think about it like this. Credit cards make cash scalable. Square is making bitcoin scalable. Credit cards require trust in two centralized institutions, your government and the card issuers. Square requires that you trust one centralized institution. Square. Smells like progress to me.

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Also in the news:

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Market Outlook:

Quick Take

Direction: We climbed upwards to 7.1k as predicted, but rejected the 7.1k level and stayed within the trading range discussed yesterday of 6950 to 7050. I’m updating this range to the 6980 and 7080 range. We have attempted to break below 6980 a few times over the past day and I expect to test that level again soon. After the repeated rejection, Bitcoins next move is uncertain, but is more likely to consolidate around the 6880 level an then make a run for 7200.

Key Support:  6980, 6880, 6750

Key Resistance: 7020, 7080, 7200

Actions: We are currently in a no trade zone, based on the rejection of the 7.1k level. I’m watching closely for a break of 7100 or a break below 6880 and a 4h close above/below those levels before trading again.

Daily Chart

Fear & Greed

Here’s a reminder of what these criteria mean

Overall Picture

As predicted, there was a slight retracement in alts — hope you took some profit off the table. I’m expecting a little bit more retracement and have moved some holdings to Tether. Here’s a primer for picking alts…from DonAlt himself :)


A simple guide on alt pumps

1) Don't FOMO into coins that already pumped
2) Look for coins that did pump
3) Check their chart history (How they looked before they pumped)
4) Buy the ones that look similar
5) Profit
6) Be happy because you didn't even have to join a paid group

August 27, 2018

Around the corner:

What I’m reading today:

Chasing Fake Volume: A Plague

This is an oldie but a goodie. In this article, the epidemic of faked volume on cryptocurrency exchanges is explored. This article uses the concept of “slippage” to test whether or not exchange volume is faked or not.

“I expected that slippage should generally be a decreasing function of volume, but that some differences might show from one currency to another. After all, if you have a gargantuan volume on a given pair, there has to be a very high competition between market makers to satisfy the avid buyers and sellers. And that kind of competition is bound to densify orderbooks and reduce spreads.”

As it turns out, for the majority of Chinese exchanges — this doesn’t hold true. Volume has no impact on slippage, indicating there is large amount of fake volume.

Here, in chart form:

It’s a representation of the average slippage and volume of all pairs among a selection of a score of cryptocurrencies with a daily volume over $100k over four major exchanges: OKex, Kraken, Bitfinex and GDAX, over the course of 24 hours.

You may for example read that the blue dot at the bottom right represents a GDAX pair, with a volume close to $200m, and a slippage of less than 0.1%

The chart is striking. It shows how, although all first three exchanges seem to behave rather similarly, OKex pairs, in red, all have a massively higher slippage with regards to their volume. Like I explained before, this can only mean that most of the volume OKex claims is completely fabricated.

As always, be skeptical of things in crypto. Nothing is ever as it seems.

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