Showing posts with label investment. Show all posts
Showing posts with label investment. Show all posts

December 14, 2017

The Bitcoin bubble – how we know it will burst

December 07, 2017 (

Ready to pop? Adam Dachis/flickr, CC BY

In the last year, the price of Bitcoin has increased from less than US$800 to more than US$12,000. This huge spike in value has many asking if it is a bubble or if the high price today is here to stay.

Finance defines a bubble as a situation where the price of an asset diverges systematically from its fundamentals. Investment mogul Jack Bogle says there is nothing to support Bitcoin, and the head of JP MorganChase, Jamie Dimon has called it a fraud “worse than tulip bulbs”.

Like any asset, Bitcoin has some fundamental value, even if only a hope value, or a value arising from scarcity. So there are reasons to hold it. But our research does show that it is experiencing a bubble right now.

Together with Shaen Corbet at Dublin City University, we took as the fundamentals of Bitcoin elements of the technology that underpins it (and other cryptocurrencies). We looked at measures, which represent the key theoretical and computational components of how cyrptocurrencies are priced.

New Bitcoin is created by a process of mining units called blocks. Bitcoin is built on blockchain technology – a digital ledger of transactions – which enables the currency to be traded independently from any central banking system, without risk of fake or duplicate Bitcoins being used. Instead of having a bank verify pending transactions (a “block”), miners check them and, if approved, the block is cryptographically added to the ever-expanding ledger.

So the first measure we examined relates to mining difficulty. It calculates how difficult it is to find a new block relative to the past. As per the Bitcoin Protocol, the number of Bitcoin is capped at 21m (there are currently 16.7m in circulation). This means that as more people mine for Bitcoin and more blocks are created, each block is, all things being equal, worth less than the previous block.

Bitcoin mining affects the cryptocurrency’s values.

The second measure we looked at relates to the “hash rate”. This is the speed at which a computer operates when mining. To successfully mine Bitcoin, you must come up with a 64-digit hexadecimal number (called a “hash”), which is less than or equal to the target hash. The faster you can do this, the better chance you have of finding the next block and receiving payment.

The third measurement was “block size”. This relates to how large the chain is at any given time, with larger chains taking longer to mine than shorter ones.

And lastly we looked at the volume of transactions conducted. Any asset, in particular any currency, which is more widely used will be more valuable than one which is used less frequently.

In our study, we examined data from Bitcoin’s early days – from July 2010 to November 2017. The price of one Bitcoin did not rise above US$1 until April 16, 2011, then to US$10 on June 3, 2011 and US$100 on April 2, 2013. Since then the price rise has clearly been exceptional.

Price of Bitcoin

Source: Data:

We then applied an accepted method that is used to detect and date stamp bubbles after they burst. In essence, this involves identifying the existence of an explosive component in a series. As the series, here the price of bitcoin, “explodes”, it runs the risk, like any explosion, of flying apart.

A possibly counter-intuitive result of this approach is that if a fundamental driver and the price of an asset both show an explosive component, we might not conclude a bubble is present. A bubble is when something deviates from its fundamental value. If the fundamental value is itself growing explosively then the price would also.

Think of dividends on a stock. If, somehow, these were to grow at an explosive rate we might expect to see the price do the same. While unsustainable, this is not technically a bubble. To overcome this, we then date stamp a bubble as being present when the price shows an explosive component and the underlying fundamentals do not.

Here are the results of the analysis:

The Bitcoin Bubbles. Authors own calculations

The orange lines denote when the price is showing explosive behaviour. We also see a period where the hash rate was growing explosively – the blue columns in late 2013 and early 2014. This is also an indication of a price bubble, which went on to burst.

So there are clear points where bubbles are visible – including now. The price of Bitcoin at present shows explosive behaviour in the absence of anything similar in its fundamentals. We see the price moving upwards in a manner that is not related to the technical underpinnings. It is a clear bubble.

A weakness of these tests and indeed all bubble identification tests is that they take place after the bubble has burst. Even this test, which can be redone as swiftly as new data arrives, is such. Bubbles by their nature grow in a compound manner – so even a day or two delay in addressing the situation can make a bubble significantly worse.

What is not yet available is an accurate advanced warning bubble indicator. In its absence, this approach may be the best. Unfortunately, we cannot use this approach to determine the extent of the bubble. There is no well-accepted model that suggests a “fair” value for Bitcoin. But whatever that level is, it is almost certain that, at present, it is well below where we are now.

November 27, 2017

Bittrex issues a warning about cryptocurrency Pump and Dumps

By Kai Sedgwick - November 27, 2017 (

Pump and dumps, which have long been synonymous with cryptocurrency markets, are facing a clampdown. Bittrex has emphasized its determination to combat the practice, which persists on several exchanges. In an update to its terms of service, Bittrex reiterated that it takes a dim view of pump and dump schemes, and will suspend accounts found to have been participating in such activity.

What Goes Up…

Pump and dumps were around long before cryptocurrency – and indeed the internet – became a thing. They can be traced back to the stock markets, as immortalized in Jordan Belfort’s penny stocks scene from The Wolf of Wall Street.

 In the altcoin era, there are mainly two forms these controversial schemes take:

Fake News: Using message boards, social media, and blogs, a particular cryptocoin is hyped and shilled, sometimes with screenshots of fake news regarding new platform developments, exchange listings, and mainstream partnerships. The aim is to get buyers to snap up the coins, thereby inflating their price before buyers who got in early can dump their holdings and perform a sharp exit. This behavior can take place over a period of hours, days, or weeks.

Flash Pumps: The other principal pump and dump involves members of a closed group who are all in on the scam. When the name of the coin to be pumped is announced, it’s a race to buy in and then dump it on the stragglers before they in turn do the same with buyers who come after them. It’s essentially a game of chicken: a contest to see who’ll blink first and offload their holdings. A huge vertical green candle followed by a corresponding red one characterizes flash pumps, which can rally and crash in a matter of minutes.

…Must Come Down

Telegram groups with names such as Crypto4pumps and Bigcryptopumps conspire to pick micro-cap coins with low volume, often on the Bittrex exchange. Currently the world’s second largest bitcoin exchange, with a 24-hour volume of $1.2 billion, Bittrex is a prime target. The site lists almost 300 coins and tokens, many of which have minimal sell walls, making them vulnerable to manipulation.

In a recent update to its trading policy, Bittrex announced that “stale” orders of more than 28 days would be removed and the minimum trading order size would be increased. It concluded with a “general statement about market manipulation tactics”, writing:

"Bittrex actively discourages any type of market manipulation, including pump groups.  Consistent with our terms of service, we will suspend and close any accounts engaging in this type of activity and notify the appropriate authorities."

Pump Up the Volume

Prohibiting P&Ds and preventing them are two very different matters of course. Coins that have rapidly appreciated in value are prominently displayed on the frontpage of Bittrex, luring in more buyers. Be it due to greed or FOMO, some traders blindly follow the green candles, chasing pumps with scant consideration for the reason behind the coin’s sudden spike.

Less charitable souls will say that investors who don’t perform their own research deserve everything they get. Nevertheless, as cryptocurrency goes mainstream, rampant manipulation of coins does little to endear the already volatile markets to new entrants. An influx of institutional money has helped the cryptocurrency markets swell to nearly $300 billion. The wild west days of the earliest bitcoin exchanges are long gone; perhaps it’s time that pump and dumps were also laid to rest.

Just a handful of the altcoins to be found on Bittrex.

Traders who recall bitcoin’s earliest days may shed a wry smile at the mention of such words as ‘Fontas’ and ‘trollbox’. It was a time when every coin had a small market cap and currencies such as Peercoin and Feathercoin were sent to the moon on Btc-e before plummeting into the abyss. For so long as illiquid coins continue to be listed on major exchanges, P&Ds will continue to happen. Newcomers to the space, who are intrigued by the get-rich-quick promise of such schemes, would do well to learn that the most profitable move is often to buy bitcoin and hold. It’s one of the few trading strategies that’s been shown to consistently pay dividends.

Images courtesy of Shutterstock, Bittrex.

Kai Sedgwick

Kai's been assembling words for a living since 2009 and bought his first bitcoin at $19. It's long gone. He's previously written white papers for blockchain startups and is especially interested in P2P exchanges and DNMs.

November 26, 2017

Bitcoin will be safe haven during next stock market crash, Says expert

By Gareth Jenkinson - November 26, 2017 (

As Bitcoin powered ahead to a new high for a second week in a row, some have speculated that institutional investors could seek safe haven in the virtual currency in the future. The prevailing rhetoric over the past month has been more affirming than damning of cryptocurrencies, with the likes of Ronnie Moas and Max Keiser predicting new highs in 2018. Speaking to RT, eToro analyst Mikhail Mashchenko says financial institutions could look to Bitcoin if a major financial crash hits global markets.

“The demand for Bitcoin is growing as the crypto market has become less volatile, and an increasing number of professional investors see it as insurance.”

Second-oldest bull market

The current bull market in stocks is the second-longest in history, according to Fortune, having lasted 104 months so far. The longest bull market in history ended in 2000 after an impressive 113 month run. With the current rally getting a bit long in the tooth, many on Wall Street are making contingency plans for the stock market’s inevitable turn. If Mashchenko is right, Bitcoin will have a role in some of these plans.

Shifting opinions

Mashchenko’s statements come on the back of changing sentiment in the mainstream financial sector. Last week, JP Morgan Chase announced plans to offer Bitcoin futures on the Chicago Mercantile Exchange - an important move by one of the biggest banking and financial services providers in America. Even more satisfying, this moves comes only months after Chase CEO Jamie Dimon condemned Bitcoin as a scam.

Online banking service providers and exchange operators LedgerX and Revolut are also adopting Bitcoin support. The former was recently cleared to offer Bitcoin derivatives as people look to do more than just trade the cryptocurrency.

“LedgerX launched its first long-term options for Bitcoin, with an expiration date of December 28, 2018. In the coming months, we will continue to see the ‘domestication’ of Bitcoin: the Chicago Board Options Exchange and the Chicago Mercantile Exchange are planning to launch tools based on the cryptocurrency in the near future.”

Big money

If and when a stream of institutional investors start investing large amounts of capital into cryptocurrencies, some of the stunning predictions made by Bitcoin bulls could well be realised. However, Mashchenko’s prediction was quite conservative, suggesting that Bitcoin reaching a $10,000 high by the end of 2017 would be driven by emotion rather than fundamentals:

“We could see a Bitcoin at $10,000 in a month or so. However, such a surge will be based on emotions, not on fundamental factors. So, further growth of the cryptocurrency will require something more than euphoria.”

Having hit the $8,000 mark last week, Bitcoin surged another $1,000 dollars in just a few days, breaching the $9,000 level during the Thanksgiving weekend. At press time, the price of Bitcoin sits at $9,500, just $500 below Mashcenko’s predicted level.

November 24, 2017

The Power of compounding - You can achieve anything, If you stop trying to do everything

By Darius Foroux - September 28, 2017 (

Do you have a long list of goals, desires, and wants for your life? Do you want to learn more? Earn more? Improve your skills? Get the most out of your relationships? Live better?

All those things are good. Life is about moving forward and making consistent progress.

However, there’s one important thing about all this working, hustling, striving, and achieving more: You can’t do everything at the same time.

That’s common sense, right? You only have so much time and energy. So if you take on too many things, you end up spread too thin.

Instead, it’s much more effective to focus your effort on one thing.

Success Adds Up

Real success happens when we focus on one thing at a time. The first time I discovered that idea was in high school. When I was preparing for my final exams, I decided to study only one subject at a time. And I only moved on to the next when I fully grasped the material.

I noticed that I could learn something way faster if I immersed myself in it for a few days. Most of my peers studied multiple subjects a day. I never like that approach because it’s too scattered.

If I’m working on a project at work, I don’t pick up another big project. If I’m working on a new course for my blog, I don’t start writing a book at the same time. That strategy helps me to get things done quicker and better. Hence, I achieve much more when I give my attention to one thing.

Gary Keller and Jay Papasan, authors of The One Thing, which is a great book about this same concept, said it best:

“Where I’d had huge success, I had narrowed my concentration to one thing, and where my success varied, my focus had too.”

Are you working on a lot of things? Is your attention not on one thing? There’s a big chance that you will not achieve the best possible results. Or worse: You might fail if you try to achieve many things at the same time.

The reason is simple: Most of us believe that success happens all at once. Real life is different. Keller and Papasan put it well:

“Success is sequential, not simultaneous.”

Things add up. You learn one skill. Then another. You finish one project. Then another. Over time, your accomplishments add up to form an impressive feat.

This is especially true for money. Most people earned their money over time. Few people make a big financial splash. Forget about the Conor McGregors and Evan Spiegels of this world. These are people who hit the career jackpot.

But you don’t need special talent or skills to succeed in life. If you take the long road, achieve one goal after the other, and build up your wealth step by step, you are more likely to live a good life.

It’s simple. And it always works. People who say it doesn’t just haven’t had the patience to apply it to their own life.

One of my mentors owns a few dozen properties, worth millions. He acquired his wealth over time. He’s in his sixties now. You see, things take time. And when you combine patience with compounding, you achieve the biggest results.

And these are not extraordinary things. I’m not promising you a gold medal at the 2020 Olympics or that you’ll become the next Zuckerberg.

Everyone can save money, improve their skills, and create wealth.

The Impact Of Long-Term Compounding

It’s incredibly corny example, but take Warren Buffett. This is how he built his wealth over time.


Don’t look at the numbers (or random x-axis). Look at the relative growth.

Between age 32 and age 44, Buffett improved his net worth by 1257%. That’s pretty exceptional growth over 12 years, right? Especially if you take into account that he lost a lot of money in his 40s. But that’s not the point here.

Look at this. From age 44 to 56, Warren Buffett’s wealth increased by a ridiculous 7268% over a similar time period. And of course, this is his net worth and there’s always luck involved with these type of numbers.

Plus, his net worth is based on stock prices — which means a big portion of it could be all gone tomorrow. But still, it’s about the growth he achieved over time.

Another thing: Buffett acquired 99% of his net worth after he became 50. Think about all those spoiled idiots in their teens, twenties, and even thirties (me included), who complain about the slow progress of their career. This helps you to put things in perspective.

Anyway, there’s a lot of Warren Buffett porn on the internet. And a lot of people pretend you can become rich by investing in the stock market. All you need to do is to buy their course that contains all the secrets to wealth.

Yeah right. It doesn’t work that way. Personally, I hate stocks, and I think normal folks should stay away from Wall Street. I prefer real estate.

However, Buffett is the perfect example of sequential success. You can achieve big things with small actions, that build up over time.

This is not only true for money. The same concept applies to skills, health, and relationships.
You don’t build a strong body in a day, month, or even a year. It takes years of consistent effort. Shortcuts don’t exist, no matter how ‘smart’ you work.

For example, cyclists under the age of 28 rarely win big races like The Tour The France because it takes them years to build the strength, stamina, and mindset you need to win.

If you want to see the impact of compounding in your own life, it requires you to focus on one thing at a time (for every aspect of your life) and always look at the bigger picture.

It comes down to this: You’ll get there if you put in the work. Who cares if it’s tomorrow or 20 years? It will happen. That’s all that matters.

This article was originally published on

Darius Foroux

My new book, THINK STRAIGHT, will be out Nov 27. I’m giving it away for free to my newsletter subscribers:

Russian billionaires invest in cryptocurrencies

By Joshua Althauser - November 24, 2017 (

Russian billionaires Roman Abramovich, Aleksandr Frolov and Aleksandr Abramov are reportedly investing large amounts of money into digital currencies like Bitcoin through the European fund called Blackmoon Crypto.

The fund, which is a subsidiary of Blackmoon Financial, is intended to establish and maintain the best framework for tokenized funds around the world.

Meanwhile, another Russian billionaire Roman Trotsenko is planning to launch a platform for exchanging digital currencies and organizing initial coin offerings (ICO). Based on a report by local newspaper The Bell, Trotsenko claimed that he wants to meet the demand by investors who want to invest in the virtual currencies.

“We had an interest in investing only in Bitcoin and we’re developing the infrastructure; we’re not going to move passengers, but rather service them on the ground.”

Position of the Russian government on cryptocurrencies

Trotsenko’s proposed digital currency platform, however, is facing uncertain future before it has even started its operation. This is because the Russian government has a confusing position on how it will handle the virtual currencies. The government is scheduled to issue official regulations on cryptocurrency mining and initial coin offerings (ICO) in July 2018.

However, in late November 2017, Communications Minister Nikolay Nikiforov has claimed that the government will “never” legalize the virtual currencies.

Because of this pronouncement, Trotsenko said that he is awaiting further developments before launching his already fully functional platform. He further claimed that he already raised the issue of regulating and legalizing the cryptocurrency market with Russian President Vladimir Putin in September.

In early November, the Russian central bank has launched its digital currency CryptoRuble, which is designed to be the only virtual instrument to be recognized in the Russian market.

The CryptoRuble is also intended to enjoy some degree of regulatory freedom. In 2016, revenues from Russian ICOs have totaled more than $300 mln.

November 16, 2017

Bitcoin price surpasses $7,500; Market confident on entry of institutional investors

By Joseph Young - November 16, 2017 (

The bitcoin price has surpassed $7,500 today, on November 16, achieving $7,558 at its peak, as the market continues to demonstrate optimism around the rapid rate of adoption by leading financial platforms.

$15 Billion App Square’s Integration of Bitcoin

Earlier this week, Square, the $15 billion payments app development firm operated by CEO Jack Dorsey, the founder and CEO at Twitter, surprised its users with the integration of a bitcoin brokerage feature on its mobile app used by more than 3 million active users.

The development team of Square followed up the integration of its first bitcoin pilot with the following statement:

“We’re always listening to our customers and we’ve found that they are interested in using the Cash App to buy Bitcoin. We’re exploring how Square can make this experience faster and easier, and have rolled out this feature to a small number of Cash App customers. We believe cryptocurrency can greatly impact the ability of individuals to participate in the global financial system and we’re excited to learn more here.”

Square’s integration of a bitcoin brokerage service will soon allow the app and the company to compete with existing service providers in the bitcoin market, most notably Coinbase. Over the past few years, bitcoin wallets, trading platforms, and brokerages have grown exponentially in value and user base. Hence, in the mid-term, major financial platforms such as Square will likely begin testing the bitcoin market, given the rapid increase in demand for bitcoin and the cryptocurrency market in general.

$95 Billion Hedge Fund’s Entrance into Bitcoin

Almost immediately after CME Group’s confirmation in regards to its launch of a bitcoin futures exchange by the second week of December, $95 billion hedge fund Man Group revealed its plans to invest in bitcoin by the end of 2017. Man Group CEO Luke Ellis stated at the 2017 Reuters Summit that bitcoin will soon be added to Man Group’s “Investment Universe,” or a diversified portfolio of assets.

Managers and partners of large-scale hedge funds like Man Group are only permitted to issuing checks in the minimum value of around $300 million. Given such policy, in the mid-term, hedge funds and investment firms will invest at least billions of dollars in bitcoin, further increasing its liquidity and improving infrastructure surrounding the cryptocurrency.

Throughout this week, the market has remained highly enthusiastic and optimistic in regards to the short-term growth trend of bitcoin, considering that some of the world’s largest hedge funds will pour in billions of dollars in the market in the upcoming months.

George Kikvadze, the vice chairman at Bitfury, also stated that out of the 30 institutional investors he had met in the previous week, 12 are in the process of investing in bitcoin, 10 plan to invest in bitcoin in the short-term, and eight remain undecided.

While the bitcoin price has been relatively volatile over the past four days, by the end of this month, the $8,000 price target of highly regarded financial analyst Max Keiser seems realistic, given the adoption of bitcoin by major financial service providers and retail investors.

Featured image from Shutterstock.

10 keys for evaluating Initial Coin Offering (ICO) investments

By Michiel Mulders - July 22, 2017 (

An initial coin offering (ICO) is a fundraising method that trades future crypto coins for cryptocurrencies which have an immediate, liquid value. Usually, a percentage of the tokens is sold to ICO participants and a percentage kept for the company’s needs (private investors, etc. Terms differ from one ICO to another). An ICO allows both big and small investors to fund the projects they like. The recent year carried thousands of successful ICO stories. The motivation for the project is obvious. The motivation for the investors of the ICO is that the price of the token would be higher (or much higher) than the token’s price during the ICO.

The highest value raised by an ICO is Tezos, which raised a record breaking $232 million in less than a month! Many factors influence the chances for a successful ICO and they can predict whether it will be valuable for its investors.

At this point it is right to mention less successful stories like the Mycelium ICO. Its team members just disappeared after raising the money, and later it was reported they used the funds to pay for their own vacation. The lack of regulation might be one of the reasons it happened. Just days ago, $7 millions were stolen as CoinDash’s ICO started. Right before the start of the token sale, their website was hacked and the ICO wallet address was changed to the hacker’s address.

This article will discuss the main keys to pay focus on when evaluating an ICO investment.

* Important warning before we start: ICOs are a high-risk way of fundraising. Never invest anything you can’t completely afford to lose. Keep in mind that due to a lack of regulation, you will have difficulty getting back your lost money in case of any failures.

1 – Team Composition

Find out everything you can about the team, especially the development team and the advisory board. Look up each team member for relevant experience. Google their names. Visit their LinkedIn profiles. Look for famous  names among the advisory board of the project. Find out if the team has any crypto experience and more importantly – in which projects, or ICOs, they were involved with and the impact they had. 

2 – Thread

A good starting point is the project’s announcement (ANN) thread on, as Bitcointalk is the biggest forum for Bitcoin and crypto related issues. It is strongly recommended that you read the messages carefully. Investor’s concerns will be answered (or may be unanswered) in this thread. It is a bad sign when the developers avoid answering certain questions or aren’t collaborating. Sending devs a personal message to see how responsive they are is also a good idea.

Each message on Bitcointalk contains the rank and activity degree (number of past messages) of the sender. Be aware of newbies and low-ranking writers. Reputation has become very important and significant.

Be aware of experienced writers comments, and also look for negative messages, sometimes it could be a warning sign. Use Select [All] to see all comments in the thread and use CTRL + F (Windows) to search for red flag words like ‘scam’, ‘con’, ‘MLM’. See the relation between the search results and the total number of replies as can be seen in the following live example:

Source: Kibo announcement thread with 287 replies and 75 hits on the word ‘scam’ (;all)

3 – Stage of the project and VC investments

Evaluate the stage of the project. Does it only have  a whitepaper? A beta version? Is there a launched product with limited functionality? Prefer projects which have “some lines” of working code, however, many ICOs have proven they can become success stories without any code written.

VCs (venture capital) tend to invest and support projects from early stages. Look for this information usually on the main page of the project’s website. It’s likely to be considerable if a well-known crypto VC is involved, like Blockchain Capital or Fenbushi (belongs to Vitalik Buterin – founder of Ethereum).

4 – Community and Media

It is crucial to have a wide open supporting community like a public Slack for all investors. Openness is as crucial in gaining our trust as the Github code. Try to grasp the atmosphere within the community. Look at the size of the community and its activity.

Source: Slack community QRL – #trading channel

Other sources like Reddit, Twitter or Facebook can be relevant when evaluating the project. Be aware of bounty posts. It is a common practice to launch a bounty thread to reward users for spreading positive information about the project to increase media coverage, or to help out with translations. These bounty threads can stimulate the hype around the project but they are not very objective. On the other hand some investors participate only for some tokens.

Source: ABAB Twitter Bounty Rules (

5 – What do they need the token for? Is the blockchain necessary?

ICOs mean the creation of a new dedicated token for the project. One of the most important questions each project needs to answer is what is the token for? Why isn’t Bitcoin or Ethereum enough to serve as the project’s token? Yes, many projects just make up a scammy story. Hey, an ICO can’t be an ICO without a dedicated token. The same question needs to be asked regarding the use of the blockchain technology behind the project.

6 – Unlimited / Hard cap

In the early days of crypto ICOs, the difference between open and hard cap didn’t have the same impact as today’s ICOs. An open cap allows investors to send unlimited funding to the project’s ICO wallet. The more coins are circulating, the less unique your tokens become for the trading afterwards – through less demand.

As ICOs become mainstream within crypto land, enormous amounts are collected. Take a look at Bancor, this project raised an astonishing $150 million in just three hours. This resulted in no percentage gain for the investors. Keep that in mind when participating in ICOs with no cap.

On the other hand, you don’t want to be the only one investing in the project. Exchange’s have much less interest in projects that raise very little, which makes it harder to sell these tokens after release.

7 – Token distribution – when and how

Greed can be defined by a high token distribution to the team members, let’s say, more than 50% of the tokens is suspicious. A good project will link its token distribution to the roadmap. Because each phase or milestone of the project requires a certain amount of funding.

Watch for the token distribution stage. Some projects just release their tokens hours after the ICO has ended. Some projects need to develop a beta version before sending out the tokens. If you look at the percentage gain of Etherium (one year between ICO and token distribution, around 500% gain), Augur (1+ years, 1500%) and Decent (8 month, 350%), sometimes this break creates a very positive hype around the project.

Source: Augur token distribution – Only info available about the usage of fundings. Roadmap is poorly described without link to this chart.

8 – Evaluating the Whitepaper

Most typical investors actually don’t read through the whitepaper, even though it contains all the necessary information about the upcoming project and the ICO.

Don’t hesitate to read it, or at least the majority of it. Note the strong and negative aspects and add in some of your own research. In the end, the whitepaper is the silver platter to potential investors. After reading it you should be able to answer a simple question – what kind of value does this project bring to our world? You’ll also learn what you’re investing in.

9 – Quality of the code – Meet Githhub

If you have a little bit of programming experience, you should be using it here. The quality of a developer can be understood by analyzing some of their code. As a non-techie, it is still possible to evaluate their quality by looking at the consistency of the code. Another good indicator, is the usage of proper commenting. Avoid messy developers. A piece of code reflects the attitude of a developer.

Next, the length of a function is another indicator. A function containing more than 50 lines of code should raise a red flag. Modularity is important and makes the code more readable and maintainable.

Source: Piece of readable code by editor with proper commenting

Crypto projects tend to have open-source code. This creates trust among the project’s community, encouraging devs from the community to make suggestions or improvements. An open-source project provides the opportunity to look at the commit logs. A commit is essentially developer slang for pushing a piece of code to the Github code repository.

Source: Github Code repository of QRL project (

 You can see each commit by clicking on the text saying “366 commits”. This allows you to investigate each change. The “Insights” tab gives you a more general summary of the developers activity. This tab shows a graph with the amount of commits daily. Beneath the graph, you can see the activity of each developer individually. This information is key for investigating the development team.

Source: QRL Insights (Graph) Github (

It is even possible to see how popular the project is by looking at the amount of stars it receives.

Source: Github (stars)

Bonus: Ask yourself why the project chose to run on the specific blockchain. Whether it’s on the Bitcoin’s blockchain, Ethereum’s (smart contract), Waves, and more. Recent months have shown the rising popularity among the ERC-20 Ethereum based smart-contract’s ICOs. These tokens can be stored easily on Ether’s based wallets (like MEW – Myetherwallet), sometimes they don’t require exchanges to be traded, and they usually have high liquidity.

10 – The Bottom Line

ICOs will become more and more ‘mainstream’ as a method for raising funds. There will be plenty of projects to choose from, hence it will become even harder to assess these projects.

It is key to investigate and read as much information as possible and write down all the important aspects, positive and negative, before making an investment decision.

November 14, 2017

After rollercoaster crypto price weekend, European Union issues two ICO warnings

By C. Edward Kelso - November 14, 2017 (

European Securities and Markets Authority (ESMA) issued two same-day warnings concerning initial coin offerings (ICO) on 13 November after the preceding weekend was witness to dramatic swings in prices and volatility. One release is geared toward investors and the other is aimed at participating firms. 

ESMA Warns ICO Investors

In what might be taken as a response to a rollercoaster weekend for cryptocurrency markets, where bitcoin cash traded places with ethereum, and bitcoin shed billions, ESMA has issued two same-day statements regarding ICOs.

Dated 13 November 2017, ESMA50-157-829 focuses its attention on investors. “If you are considering investing in ICOs or have already done so, be aware of the many risks this may entail,” ESMA begins, “including the total loss of your investment. In particular, be aware that you will have no protection,” they note.

ICOs are indeed largely unregulated in the traditional sense, having gained great traction this year as at least a tail in the price-comet that is bitcoin.

“ESMA has observed a rapid growth,” they write, “and is concerned that investors may not realise the high risks that they are taking.” “ICOs are highly speculative investments,” and “depending on how they are structured, may fall outside of the regulated space, in which case investors do not benefit from the protection,” they reiterate.

The regulatory arm is one of the three European Supervisory Authorities within the European System of Financial Supervisors bureaucracy.

They continue, “ICOs are also vulnerable to fraud or illicit activities, owing to their anonymity and their capacity to raise large amounts of money in a short timeframe.” Risks include the above along with money laundering, losing one’s entire capital, lack of exit options and price volatility, inadequate access to information, and fundamental flaws in early, untested technologies, the body urges.

“Virtually anyone who has access to the Internet can participate in an ICO,” they point out.

ESMA Warns Participating ICO Firms

ESMA50-157-828 is decidedly more stern in its tone. Issued the same day, it urges firms “to meet relevant regulatory requirements.” In a cat-and-mouse, near Orwellian turn of phrase, they argue, “If their activities constitute a regulated activity, firms have to comply with the relevant legislation and any failure to comply with the applicable rules would constitute a breach.”

This might be very difficult for firms to ascertain, especially when the very same body refers to them as “unregulated.” Keen readers might ask, are such offerings regulated or not?

Some clarification might be had in the following: “where the coins or tokens qualify as financial instruments it is likely that the firms involved in ICOs conduct regulated investment activities, such as placing, dealing in or advising on financial instruments or managing or marketing collective investment schemes,” the body details. These too seem rather broad and vague.

The memorandum then sets out some basic guidelines for firms. A prospectus is urged among start-ups in the field, containing “necessary information which is material to an investor for making an informed assessment of the facts and that the information shall be presented in an easily analysable and comprehensible form,” ESMA advises.

It continues in this manner, imploring firms to also be transparent in their organizational dealings and structure along with complying with anti-money laundering regulations. “Firms have an obligation to report any suspicious activity and to co-operate with any investigations by relevant public authorities,” they say.

Images courtesy of: Pixabay, Balint Porneczi, ESMA.

C. Edward Kelso

C. Edward Kelso is a long-time fintech journalist, passionately covering the cryptocurrency space since 2014.

November 13, 2017

Rollercoaster Weekend - Bitcoin price Falls From $7,300 to $5,600 and Rebounds to $6,200

By Joseph Young - November 13, 2017 (

Within a single weekend, from November 11 to 12, the bitcoin price plunged from $7,300 to $5,600, and recovered to $6,200, in less than 48 hours.

Beginning late Saturday evening, the bitcoin price began to fall from $7,300 to $6,900, as Bitcoin Cash started to record major gains. By Sunday morning, the price of Bitcoin Cash has surpassed $2,900, a new all-time high, while the price of bitcoin plummeted to $5,600.

As such, the rapid surge in the market valuation of Bitcoin Cash and abrupt plunge in the price of bitcoin led to serious market turbulence and uncertainty, as a relatively large portion of investors initiated a sell-off of bitcoin.

Daily Trading Volume Hits $22 Billion

The daily trading volume of the cryptocurrency market achieved $22 billion on Sunday, as the trading volumes of both bitcoin and Bitcoin Cash surpassed $10 billion. Since then, trading volumes have decreased.

According to reports, several major bitcoin investors including bitcoin angel investor Roger Ver sold billions of dollars in bitcoin and allocated the majority of those funds to Bitcoin Cash. As a previous CCN report explained, the sole beneficiary of the cancellation of the SegWit2x hard fork has been Bitcoin Cash, as supporters of SegWit2x migrated to Bitcoin Cash and unified their vision of scaling bitcoin’s on-chain capacity for short-term scaling.

Consequently, the demand for Bitcoin Cash increased in one major region that is South Korea, mostly through Bithumb, the world’s second largest cryptocurrency exchange by trading volume behind Bitfinex. Several cryptocurrency communities in South Korea heavily invested in Bitcoin Cash primarily due to the movement of miners from bitcoin to Bitcoin Cash.

However, traders were made aware that the migration of miners from bitcoin to Bitcoin Cash cannot be permanent, as miners moved when the Bitcoin Cash blockchain was more profitable to mine. Miners are extremely sensitive to profitability, primarily because mining requires a significant amount of resources, capital, and infrastructure.

Hence, in the near future, after a difficulty adjustment on both blockchains, it is likely that miners will move back to bitcoin if it becomes the more profitable blockchain to mine. Because of the tendency of miners to switch between more profitable blockchains, hash power is often not an accurate indicator to utilize to determinate the mid-term growth of a cryptocurrency.

In fact, as Ivie Business School professor JP Vergne wrote, developer activity is usually the most accurate indicator of a cryptocurrency’s price trend.

“We found that the best predictor of a cryptocurrency’s exchange rate is the amount of developer activity around it,” explained Vergne.

What Lies Ahead?

Given that the bitcoin price has stabilized in the $6,200 region and the tendency of bitcoin to rebound to its previous all-time highs, it is likely that the price of bitcoin will soon recover back to the $7,000 region, especially if institutional and retail investors attracted by CME Group and CBOE’s bitcoin futures exchange launch begin to engage in bitcoin trading.

Featured image from Shutterstock.

November 02, 2017

Go-nowhere ICOs testing investor confidence

By Alex Lielacher - November 02, 2017 (

On January 1, 2017, the price of bitcoin exceeded the $1,000 mark for the first time in three years and continued to rally thereafter. This brought media attention back to bitcoin and also raised awareness about altcoins (Ether, Litecoin, and Ripple for example) as well as new coins that were being issued via token sales.

Driven by the belief that these newly issued tokens might replicate bitcoin’s price evolution, the ICO market quickly captured investor attention, resulting in several blockchain ICO projects raising tens of millions. As the market boomed, however, there also came a wave of sub-par ICOs that still managed to raise substantial funds — as well as outright scams. Some leading bitcoin community figures even claimed that ICOs are only a way for developers to get rich while many others have voiced their concerns about the valuation of projects that do not even have a working minimum viable product during their fundraising stage.

As new record numbers of funds were raised in Q2/2017 and startup valuations were mimicking those of the DotCom bubble, regulators started to take notice. While most have simply issued guidance statements and alerted stakeholders to the potential application of securities laws to ICOs, China and South Korea took it a step further and banned ICOs outright. These bans dampened the Asian ICO market in early September as two major investor countries were now prohibited from participating.

Problems arise in major ICOs

Action by regulators hasn’t been the only thing cooling enthusiasm for ICOs, though, as problems have also surfaced with several multi-million dollar ICO projects after their token sales had completed.

The Bancor Network — one of the largest ICOs of 2017 — received negative press when Cornell professor and outspoken blockchain thought leader Emin Gun Sirer stated in a blog post that investors who took part in the ICO invested in untested code and highlighted several other issues with the Bancor project. Prominent bitcoin evangelist Andreas Antonopoulos and Augur co-founder Joey Krug also voiced their concerns over the project’s viability. The price of Bancor tokens (BNT) is currently trading around 50 percent below its issue price.

IOTA was forced to announce in September that there was a vulnerability in its cryptography after it was discovered by MIT researchers. While the vulnerability has since been patched and no exploit of the vulnerability took place, this revelation did not bode well for the reputation of a promising blockchain project with a market capitalization of over $1 billion.

Most recently, it has come to light that the leadership of Tezos, a blockchain project that raised over $232 million, has entered into a legal dispute with the head of its Swiss foundation that holds all of the funds that were raised during its crowdsale.

According to Reuters, Tezos founders, Arthur and Kathleen Breitman, “sent a 46-page letter on Sunday to the two other members of the foundation’s three-person board, calling for Johann Gevers’ prompt removal and seeking to give the couple a “substantial role” in a new structure that would limit the foundation’s responsibilities. The document accuses Gevers of “self-dealing, self-promotion and conflicts of interest.”

Gevers, however, told Reuters that he does not plan on stepping down and said that the Breitmans are trying to gain control of the foundation through character assassination. Gevers went on to tell Reuters that the foundation has begun selling the cryptocurrency the Tezos project raised during its ICO and plans to invest the proceeds into a diversified portfolio. These funds will then be used to operate the foundation and to ensure the future development of Tezos and its technology.

Until this dispute is resolved the Tezos platform will not be able to launch as the Breitmans are not able to access funds from the ICO to continue the development of the project. Needless to say, the price of Tezzies (XTZ) has dropped precipitously in pre-launch trading — down around 50 percent since the Reuters story broke. 

The cases of Bancor, IOTA, and Tezos act as reminders of how risky investing in initial coin offerings can be as there is little insight into most project’s work and stage of development.

Only 10 percent of ICO projects have built a product

More worryingly for the current state of the ICO market is a recent analysis by Token Report, which found that only ten percent of projects that have held an 

initial coin offering to fund themselves have actually developed a functional product.

 According to Bloomberg, only 20 of the 226 ICO tokens analyzed by Token Report are actually being used in the projects’ networks while others can only be traded on 

exchanges for speculative reasons. Token Report CEO Galen Moore stated TenX, Storj, and Augur as examples of the few startups that have actually delivered a product where its tokens are being used.  

The reality of the ICO market is that in most cases investors are simply betting on the startup team’s ability to turn their proposed ideas into reality. As it turns out, only a few have actually been able to do that.

Many high-profile ICO tokens are underperforming

While startups tend to measure ICO success by how much money they have raised, investors, on the other hand, care more about how well the newly issued token they 

bought performs in the secondary market — and for many the results so far have been disappointing.

In June, Bancor raised a staggering $153 million and went down in history as one of the biggest ICOs to date. Great for its founders, certainly, but from an 

investor perspective the value of its cryptocurrency has dropped by around 50 percent since its token sale, making it one of the worst performing ICO tokens in the market.

EOS was another record-breaking ICO that has issued a token that has since underperformed the market and is trading below its issue price. EOS managed to raise $185 million for its decentralized blockchain network and, in an unconventional move, is actually still running its token sale until 2018. However, its token has already launched on exchanges where it is currently trading lower than its original issue price. Other ICO tokens that are trading below their issue prices include Wagerr (WGR), Tierion (TNT), and (CFI).  

Over 400 ICOs have been conducted since this new form of funding was first introduced in 2013. Today, anyone can launch an initial coin offering to fund their project and they don’t even require any technical knowledge to do so as there are now several ICO-as-a-Service platforms, and blockchain platforms such as Waves allow easy token creation for anyone.

Hence, we are now seeing dozens of ICOs hitting the market every week and for many, including the blockchain and a digital token into their project makes little to no sense. Too many startups and developers are simply jumping on the ICO bandwagon because they smell the money, a scenario that regrettably is taking funding away from many truly innovative value-adding blockchain projects.

However, with increased regulatory restrictions and scrutiny on token sales, and growing investor aversion to the bubble-like state of the ICO market, it seems that the heyday of easy money through token sales is over. New projects are finding it increasingly difficult to hit their funding targets while investors are seeing many of their tokens underperform comparative to bitcoin. 

In the future, the ICO market will probably be more tightly restrained by a regulatory framework. Although this could prevent many smaller startups from opting for this type of funding, it will at the same time make the ICO market a more investor-friendly place as regulators keep a closer eye on issuers.

Before that happens, though, for investors there will likely be a move back to quality as they deal with the reality that many of the bright ideas they invested in have never come to fruition — and the bulk of future investor funds will be channeled into primarily high-quality projects that actually make sense.   

Alex Lielacher

Alex Lielacher is a former bond trader who now works in blockchain media. He is the founder of Africa-focused bitcoin news publication and is a regular contributor to several global blockchain news outlets where he shares his insights on cryptocurrency investing and blockchain innovation. He has been following bitcoin since 2011.