Tag Archives: ICO

China Bans All ICOs And Digital Currency Launches As ‘Illegal Public Financing’

The hype around ICOs or initial coin offerings has reached fever pitch in the US, with celebs like Paris Hilton endorsing new digital currencies and mainstream outlets such as CNBC offering viewers advice on how to build their own “cryptocurrency portfolio.” In China, though, the authorities have had enough, and today the Chinese government took the bold move of banning ICOs all together.

The ruling comes from China’s central bank, which issued a statement criticizing ICOs for “disrupting” the country’s financial order. The regulator described initial coin offerings as “a form of unapproved illegal public financing” that “raises suspicions” of fraud and criminal activity, reports the Financial Times. Although the valuation of bitcoin fell in response to the news, the regulation does not directly target the popular cryptocurrency.

In the past year, there has been a boom in ICOs, driven in part by the soaring value of more established cryptocurrencies. While projects like Bitcoin aim to offer an alternative to state-backed currencies, ICOs often have narrower and more gimmicky uses. Lydian Coin, for example, (the ICO that Paris Hilton endorsed this morning) is supposed to be used solely for buying advertising campaigns; while Filecoin (an ICO backed by the Winklevoss twins) is a digital token that’s exchanged for data storage.

Financial experts say ICOs range in quality from serious (if overambitious) attempts to build new digital currencies, to projects that are little more than pyramid schemes. The Financial Times’ Alphaville blog compared ICOs to Kickstarter campaigns for “crypto-nerds,” where investors are persuaded to fork over cash for a product that hasn’t yet been built and that could go nowhere.

If investment in ICOs constitutes a bubble, though, it hasn’t burst yet. It’s estimated that coin offerings have raised $1.6 billion in 2017 alone, with 65 launches in China totaling some 2.6 billion yuan or $398 million (according to a report from the National Committee of Experts on the Internet Financial Security Technology). This rush of money is why the technology has invited the wrath of Chinese regulators, who are enforcing the government’s orders to make “financial security” a top priority.

Similar regulation may soon be coming to America, too. This July, the US Securities and Exchange Commission (SEC) warned that ICOs were being used to sidestep the law, and last week the agency issued another statement describing coin offerings as “potential scams.”

Jehan Chu, a partner at Kenetic Capital who advises on the sale of tokens, told Bloomberg that “China needed to act first “due to its size.” However, he added that today’s news is “somewhat in step with … what we’re starting to see in other jurisdictions — the short story is we all know regulations are coming.”

By James Vincent | The Verge

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Goldman $3915 Bitcoin Target

Having ‘nailed’ the price action recently in Bitcoin (calling the recent pull back, extension beyond $3,000, with a target of $3,915), Goldman notes that it’s getting harder for institutional investors to ignore the rise of cryptocurrencies.

Last month Goldman’s chief technician, Sheba Jafari, issued their forecast of where bitcoin is headed next. Recall, that as we first reported three weeks ago, Jafari said that “due to popular demand, it’s worth taking a quick look at Bitcoin here” and warned that “the market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134.” She concluded that she was “wary of a near-term top ahead of 3,134” and urged clients to “consider re-establishing bullish exposure between 2,330 and no lower than 1,915.”

She was right: on the very day the note came out, both bitcoin and ethereum hit their all time highs and shortly after suffered their biggest drop in over two years.

So what does Jafari thinks will happen next? According to the Goldman technician, Bitcoin is now “in wave IV of a sequence that started at the late-’10/early-’11 lows. Wave III came close enough to reaching its 2.618 extended target at 3,135. Wave IV has already retraced between 23.6% and 38.2% of the move since Jan. ‘15 to 2,330/ 1,915.”

What does this mean for the uninitiated? In short, while bitcoin remains in Wave IV, it could go up… or down. She explains:

It’s worth keeping in mind that fourth waves tend to be messy/complex. This means that it could remain sideways/overlapping for a little while longer. At this point, it’s important to look for either an ABC pattern or a more triangular ABCDE. The former would target somewhere close to 1,856; providing a much cleaner setup from which to consider getting back into the uptrend. The latter would hold within a 2,076/3,000 range for an extended period of time.

However, at that point the next major breakout higher would take place, one which would take bitcoin as high as $3,915.

Either way, eventually expecting one more leg higher; a 5th wave. From current levels, [Bitcoin] has a minimum target that goes out to 3,212 (if equal to the length of wave I). There’s potential to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.

Goldman’s analyst concludes with the following summary: “[Bitcoin] could consolidate sideways for a while longer. Shouldn’t go much further than 1,857. Eventually targeting at least 3,212.

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And now, Goldman offers an FAQ for the institutional investor…

The debate has shifted from the legitimacy of the ‘fiat of the internet’ to how fast new entrants are raising funds. The hype cycle is in full effect with Bitcoin, the first, largest and most widely recognized cryptocurrency up almost 200% YTD (v 11% for the S&P 500) and a host of other emerging ‘alt coins’ growing in scope and presence (witness the growth of Ethereum).

Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are) real dollars are at work here and warrant watching especially in light of the growing world of initial coin offerings (ICOs) and fundraising that now exceeds Internet Angel and Seed investing.

FAQs:

1. Two Sides To The Coin: Is Cryptocurrency a “Currency” or “Commodity”?

Answer: It depends who you ask. The complexity exists because coins have attributes of a currency (e.g. presented and trusted by some medium of exchange) and commodity (e.g. limited resource). The classification of cryptocurrencies varies by country, government and even application. In the U.S., the IRS has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property. 

2. How Big Is The Cryptocurrency Market?

Answer: Nearly $120 billion. Bitcoin remains the largest and accounts for nearly 50% of the total market cap (Exhibit 5).

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There are currently over 800 cryptocurrencies out there, though just 9 have a market cap in excess of $1 billion.

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While its growth has been impressive, the aggregate market cap of cryptocurrencies equates to less than 2% of the value of all the mined gold in the world.

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3. What Is Ethereum? 

Answer: A Platform 1st, a Cryptocurrency 2nd. Ethereum differs primarily from Bitcoin in the latter is set up to be an alternative to ‘real money’ while the former is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency like Bitcoin – called Ether – but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. However, the rise of Ethereum has not come without setbacks, including the ~$60 million hack of “The DAO”, a venture capital like organization with the mission of “investing” in Ethereum-related start-ups and projects (and is no longer operational today).

4. How Does One Trade Cryptocurrencies in the United States?

Answer: Digital Exchanges, Block Trades and (soon to be) Options. Individual investors can trade virtual coins on various online exchanges. Institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility, but block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges. Futures and options may also be coming to the US soon. On August 2, 2017, the CBOE entered an agreement with Gemini Trust Co to allow cash-settled Bitcoin futures on CBOE Futures Exchange in 4Q-17 or early 2018.

5. What is an Initial Coin Offering (ICO)?

Answer: Fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which money is raised via a white paper and internet browser has sounded the alarm bells from parties including the SEC and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global Angel & Seed stage Internet VC funding in recent months.

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The Tezos blockchain raised a record breaking $232 million worth of Bitcoin and Ether through an ICO completed last month. The next closest? Bancor’s ICO which raised $150 million in mid-June. And the speed of ICOs is an added benefit: Gnosis raised more than $12 million in under 15 minutes.

Source: ZeroHedge