Wednesday, September 12, 2018

CryptoAM: SEC Charges Two, Canadian Hostages, and Securities on Binance

Wednesday, September 12th


🐪 Happy hump day! These past few months of this bear market have been trying. Trading these markets feels sort of like trying to dodge a literal bear while snowboarding down a mountain. Why yes, that is an oddly specific metaphor.



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3 things you need to know:

One: SEC hits two crypto firms with formal charges. The two firms include a digital asset investment management firm and a self-proclaimed ICO superstore.

  • False claims: The crypto hedge fund proclaimed during it’s (unregistered) public offering that it was the first regulated crypto fund in the game. They raised $3.6mm over a period of 4 months while making false claims of being SEC compliant. After investing 40% of their capital into digital assets, they were hit with a cease and desist and were forced to halt operations and pay a $200,000 fine.

  • Unregistered BD: The ICO superstore, Token Lot, which was marketed as a way to buy ICO tokens, was not registered as a broker dealer while offering access to ICO tokens that are considered securities. The founders voluntarily halted operations and offered refunds on unfulfilled orders, which granted them a little lenience on the penalty - a $470,000+ fine on the company and $45,000 each, personally, from the founders.

  • More action is coming: With the wave of unregistered ICOs brought to market in the last year or so, regulatory agencies have been working diligently to conduct investigations and make an example of those who are found to be operating outside the confines of the existing regulatory frameworks. Expect to see more cases like this come up in the future.

  • Read more…


Two: Malta and Binance sign an MoU. Malta has signed a memorandum of understanding with Binance to launch a security token trading platform.

  • Legit: Malta’s exchange has a 26 year long history as a regulated stock exchange, and Malta, AKA: Blockchain Island, has been passing favorable regulations with regards to cryptocurrencies, blockchain, and crypto exchanges/capital markets. It comes as no surprise that Binance would choose the small island of Malta as the perfect place to host its new exchange.

    “Malta [...] has become a global hub for blockchain technology through active and transparent crypto regulations. This partnership will allow Binance and MSX to host traditional financial assets on blockchain technology through security tokens.”

  • Tokenize the world: I hope to see the small island hit by a tidal wave of tokenization. With a legit, regulated exchange infrastructure soon to be in place, I expect to see assets such as real estate, equities, debt, and artwork, to name a few, become tokenized and hosted on the exchange.

  • Read more...


Three: Something ridiculous for your Wednesday morning. An entire Canadian town was recently held hostage by a malware hacker, and was forced to pay up ransom in BTC.

  • Pay up, pay up, pay up: The entire small town of Midland in Ontario, Canada, was rendered inoperable after ransomware viruses infected critical computer systems and encrypted important files. The town has agreed to pay the BTC ransom to regain access to their systems. Sometimes being bad pays, because the hackers are still at large, likely enjoying a nice vacation courtesy of Midland’s BTC payment.

    “Midland’s computers became inoperational for approximately 48 hours and this prevented users from making online payments and accessing their email services. Other services that became inaccessible included the processing of transit cards, marriage certificates, and various other permits. Fire response, wastewater management, and most other vital, or high priority, services were not shut down due to the cyberattack. However, the small town has reportedly agreed to pay the undisclosed ransom amount in bitcoin to the hackers, in order to bring its computer system back online.”

  • Geico, so easy, a caveman could do it: On the bright side, Midland had a cyber insurance policy in place for situations just like this. What if this whole thing was a scheme by Midland to cash out on its insurance policy by holding itself hostage?

  • Read more...


Also in the news:


Market Outlook:

Quick Take

Direction: We’re currently stuck in the same position as the past few days. Volatility continues to decrease, and I’m expecting a large move soon. We are increasingly fearful, and unable to break below bottom support. I’m expecting a retest of 6.4k soon.

Key Support:  6175, 6100

Key Resistance: 6400, 6480

Actions: Taking out a small long in the 6300 area. Will close it below 6200 and hedge short at 6400.

Fear & Greed

According to F&G, it’s likely we will experience a short term bounce due to the oversold nature of the markets.

Here’s a reminder of what these criteria mean

Around the corner:


What I’m reading today:

A look into ICO treasuries

Over the past 30 days, Ethereum is down almost 45%. We’re currently trading at price levels not seen since last July. The wider crypto community is becoming increasingly bearish on Ethereum’s prospects, and many are calling for the “demise” of Ethereum.

Personally, I think this is incredibly overblown. Price will come and go — ethereum is all about the applications of it’s tech, and the community (which is stronger than ever). It’s unlike Bitcoin in that way. The price of Bitcoin directly correlates to how “successful” it is, because it’s meant to be a currency. Since Ethereum is meant to be a platform, price means less.

That being said, it’s interesting to dive into the dynamics of why Ethereum has been affected so heavily by this bear market. A lot of it has to do with who holds Ethereum. Bitcoins holders are mostly individual buyers, who have incentive to hold, as they are “investors” with a long term bias.

In Ethereum’s case, there is a large concentration (about 3.5% as of September) of Ethereum held by ICO projects, that raised the Ethereum to fund their ambitions. Now that they’re seeing a rapid depreciation of their treasury, they are incentivized to sell off quickly. It’s not a good feeling (for you or your investors) when 10 years of runway suddenly turns into 2.

Diar (linked above) has compiled a great breakdown of current ICO treasures, detailing how much they currently hold and how much they’ve already sold off. Based on the amount of Ethereum held by these ICOS, ETH may continue to underperform the market quite a bit moving forward.


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