ICOs vs IPOs and the "womp womp"
Boston Trading Co. Monthly Update: March 2018
Crypto Market Update:
Watching Bitcoin drop from heights of $25 000 to $10 000 may have been heart-breaking for some people. Ditto for watching Ethereum fall from $1200 to $500. If you were an investor who was late to the cryptocurrency party, you could be sitting on a loss of 70%. Ouch!
Facebook officially banned advertising for new ICO's earlier this year, and in March, popular short-form social media Twitter followed suit; citing that “up to 40% of cryptocurrencies are scams”.
We felt that the Facebook ban was not so much to save users from scam ads (let's face it, it could be argued that 40%+ of weight-loss ads are scams also, yet they remain on Facebook); it was possible that Facebook was banning “competitor” ads...
Just as Facebook did not allow its users to promote alternative social media site Steemit.com, we felt that the Facebook ICO ban was a pre-emptive strike to quash alternate ICO's before Facebook announced... guess what, it was going to create a Facebook coin for its “Marketplace” feature.
With recent revelations that Facebook may have failed to properly oversight data-mining and may possibly have been complicit in US election-rigging, public trust in the social media behemoth has taken a giant hit. The lack of trust this engenders may mean that a Facebook currency could have to take a back seat and launch in 6-12 months, once trust is restored. Facebook stock is down 20% over the data-mining and election-rigging issues.
Following falls of 50% to 70% in crypto-giants Bitcoin and Ethereum, the majority of alternative cryptos (“alt-coins”) were similarly sold down over the past few weeks. However, there is some good news.
Crypto → There's good news & bad news
The good: more goodies coming to market
Despite what you read in the media, the facts are clear: Crypto new business sales are going through the roof. More money has been raised since the start of 2018 through crypto ICOs and token sales than traditional finance venture capital funding — many think it’s a trend that’s going to continue.
“Investments in Crypto Startups in 2018 will exceed 2017”, claims Eren Sengezer, on March 6th in FXStreet.
In another article published on February 27th, Crunchbase author Jason D. Rowley analyzed the investment trend in crypto startups in 2018 and compared it to the previous year to conclude that this year's ventures could surpass 2017 despite the ICO hype. Below are some key takeaways from the article:
At the end of February, 2018’s venture fundraising totals are over 40% of 2017’s highs, according to Crunchbase data.
This could mean that companies are “front-loading” or trying to get capital in earlier, before the crypto hype dies out, potentially putting money into ideas which may be under-developed; or, it could mean that projects for 2018 could be more than twice as large as 2017's records.
Considering the cost of taking a new idea to list on the stock market, and the low barriers to issuing coins or tokens, many more businesses could use cryptocurrencies to raise capital in the next few months and years. Initial Coin Offerings (ICO's) are a viable alternative to a stock market Initial Public Offering (IPO) as a means of raising funds from investors.
A coin offering or ICO, can cost, quite literally, 98% less than an IPO or stock launch. This leaves more money in the hands of investors and more funds with the issuer, meaning the business can grow better and faster from an ICO than an IPO.
The downside of the ICO vs IPO debate is that, from an ICO, stock brokers, large banks and regulators such as government agencies could make less money. Rememeber that the companies and investors could make more. If you're an investor, you could be OK with that.
2017’s record fund raisers included: Coinbase’s $108.1 million, $43.45 million for Chinese ASIC chip maker Canaan Creative, and a $42.5 million raised by bitcoin wallet provider BitGo.
2018 is already off to a strong start with a $75 million by wallet-maker Ledger, $18 million in Russian blockchain-for-cargo-tracking platform QUASA, and $10 million invested in SF-based Harbor Platform.
Bankera Purchases Major Banking Asset
The #BostonCoin project invested into Bankera (BNK) late last year, when they stated their intention to become a crossover network between cryptocurrency and traditional banking. We believed that they could make waves in the marketplace, and potentially bring the new crypto interface to the sectors of the market who still had faith in traditional banks. Considering how some of the early Bitcoin investors spooked the general public by talking over their heads, BNK could represent a gentler introduction to crypto-banking.
Bankera recently announced that they have acquired Pacific Private Bank (PPB). PPB was founded in Vanuatu in 1997 and specializes in "wealth and asset management services for individual clients." This means that they have financial advisers and lawyers as well as stock trading and internet banking facilities.
Bankera insists that PPB will be its own entity and they will both focus on their own goals. PPB will deal with fiat-based solutions while Bankera will provide both crypto and fiat solutions.
Bankera's aim is to build a fully digital crypto-bank, complete with a debit card for crypto. Investors also plan to benefit from being paid returns, just as you would expect when owning stock in a bank. News of the PPB acquisition will surely provide a major boost to BNK prices. You can get into the BNK ICO here.
Aside from being paid “dividends” or interest for holding the coin, one of the more interesting things about BNK is their plan to make coin transfers free on the BNK exchange. As many investors may lose money in brokerage or “gas” when selling or trading on exchanges, eg. selling Bitcoin to buy Ethereum, it is intended that BNK will make it cheaper with a 2-step process. Therefore, trading BTC to BNK and then trading BNK to ETH will be more cost-effective than trading direct BTC to ETH. That's welcome news.
It's not just Russia, China & Iceland, now England dives into Bitcoin Mining
Bladetec, a supplier of high-powered IT equipment in the UK, is planning to build a bitcoin mining farm, named The Third Bladetec Bitcoin Mining Company Ltd’ (TBBMC), across three locations in England reportedly worth £10 million ($13.9 million). Bladetec is looking to raise the money from investors and the 3500 square foot mining farm will be built in London, Suffolk, and Surrey.
Declan Kennedy, CFO and one of three admins who will manage TBBMC added, "We are entirely focused on maximizing shareholder returns and so, understanding the relatively volatile nature of Bitcoins, we have allowed for four different growth scenarios with up to 45% capital growth per annum."
Note that “up to” also includes the number 0%, and could also be a negative number, so be sure to Do Your Own Research (DYOR) before investing into a mining operation. In any case, it's reassuring to see a British company getting heavily involved in crypto.
Wyoming, USA: Has Passed a Bill Exempting Crypto from Property Tax
Wyoming is one of nine US states that does not have any income tax. State Representative Tyler Lindholm announced that Bitcoin miners will not incur any property tax, income tax or corporate tax.
"The senate of Wyoming has passed a decision (Bill 111) exempting cryptocurrencies from property taxation in the state. The straight forward law defines “virtual currencies” as any type of digital representation of value that is used as a medium of exchange, unit of account or store of value, and is not recognized as legal tender by the United States government."
The bill was one of the 5 bills that were passed in the Senate, related to cryptocurrency regulations. Since Wyoming is one of the least populated states and acccounts for more than 40% of coal mined and excess production capacities of electricity, it is no wonder that the State wants Bitcoin miners to come and use the State's production power to mine Bitcoin and encourage the Blockchain industry.
The Bad News:
Bitcoin and other coins were hammered recently in the markets. This has been from a variety of reasons, including the Twitter ban, loss of faith in some cryptos, and losses in the broader stock market. Stock losses were linked to Trump's call for trade sanctions with China, and news that Facebook may have been guilty of conspiring to mine or sell user data and interfere with US elections.
Bitcoin was sold heavily, testing limits under US$8k, where buyers have so far re-emerged to support this price as fair value. The altcoins fell in tandem with BTC, with double-digit drops in the top 30 cryptos by market cap; the only exception was Verge.
The total crypto market cap stands at $311b, down from $350b a few days ago, and a long way from its $800b highs of 2017.
Twitter has banned all ICO advertising; following the lead of Facebook
A Twitter spokesperson said in an emailed statement: “Advertisement of Initial Coin Offerings (ICOs) and token sales will be prohibited globally. We know that this type of content is often associated with deception and fraud, both organic and paid, and are proactively implementing a number of signals to prevent these types of accounts from engaging with others in a deceptive manner.”
The crypto market can be jumpy, and reacts badly to bad news
Recent price action continues to demonstrate the 'reactive' nature of the market, with news of Twitter banning crypto adding fuel to the fire. While the G20 decision to stay away from further crypto regulations for the time being prompted fresh capital into the space last week, in a 'reactive' environment, traders tend to be driven by short-term sentiment, which leads to being in and out of the market for quick profits versus holding their positions.
WOMP WOMP WOMP -- did you get womped?
In the stock market, a "price correction" is defined as a decline of at least 10% ; a "bear market" is a decline of over 30%. Between 17 December 2017 and 6 February 2018, the Bitcoin price declined by 70%.
BostonCoin sold all its bitcoin holdings in December 2017, avoiding the massive drop. We later bought in during February and March at less than half the old price, and although still fluctuating, the BTC price is stabilising within distinct "fair value" bands.
As reported in Feb 2018 update, when Bitcoin dropped by 60-70%, BostonCoin only dropped around 15%; a significant difference for investors.
If you had $10 000 in Bitcoin in December, you could have been worth around $3 000 in Feb. This means that your BTC investment would need to more than *triple* (that is, go up by 334%) to get back to where you started. That's a hard task!
In contrast, $10 000 in BOS would have been worth $8 500 in Feb, and would only need to increase by 17.6% to get you back on track; a far more realistic target.
Top holdings for March 2018:
(We sold BTC at its high in December and bought back in February after the 60% drop, so, yes, now we own BTC again)
Top performers for March:
*some data from CoinMarketCap.com
Boston Financial Specifics
March 28 2018
Unit NAV $56.48
Boston coin price $62.13
Although the Boston Coin price shows a drop in "real" terms of around 30%, when benchmarked against a 70% drop in the price of Bitcoin from its peak, and a 60% drop in Ethereum, we have done very well during a turbulent time in the crypto markets.
This better-than-average outcome was through a combination of good diversification across a mutitude of coins, plus some good coin picks.
Whereas many individuals in the more well-known cryptos saw their capital fall by 60% to 70%, investors in the diverified Boston Coin portfolio saw 6 out of 36 coins with a positive result over the period.
If we lower the bar to any coins which have maintained their value at 80% or higher, then almost 50% of the portfolio maintained good value over the month.
We continue to hold and monitor the portfolio for any required changes, and watch the broader market for opportunities.
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The above information is of a general nature and for educational purposes. It is not to be taken as financial advice. All information is believed to be correct at time of publication. DYOR. We take no responsibility for any action taken on reliance on this information. Before making any investment decisions, including buying, holding or selling any assets or investment products, you should consult with a financial professional to discuss your unique circumstances. © 2018