Highlights from ~95 theses on crypto

95 Theses for 2018On Crypto Prices and “Investing”

1) 2017–2019 will be THE big crypto bubble. Things could get nuttier from here…far nuttier than in the dotcom era. The retail investor base is 10x larger, with 24/7 access to the FOMO and get rich quickism. And we’ve got CNBC to help with the pump!1a) Unbelievably, the institutions will be the last money in this time, with the futures market and custody solutions just coming online, and the mythical ETFs perhaps not too far behind. This has been properly hyped, I think. I could see a Q1-Q2 stampede.

Lots of great ideas in this post from TwoBitIdiot on Medium. Here’s a few more:

3) BTC, ETH, ZEC, and XMR are the main cryptocurrencies. These could still have a LOT of room to run. Money is a reflexive asset where the more people buy it and use it and believe in it, the more valuable it gets. Cryptocurrencies are the ultimate momentum play.

5) Most utility tokens, then, will go to zero, regardless of team quality and execution. You simply don’t need to hold them but for momentum & greater fool investing. When the market lacks “higher order” investors for speculators to flip to, assets will unwind. Viciously.

17) Forks with airdrops will become the preferred alternative to ICOs. You give away free money in order to get people excited about the new and improved project. The only thing they pay is attention. The people who truly buy in become your collaborators

54) Sooner rather than later, the institutions will wise up to the reality that they shouldn’t be paying carry on funds mostly denominated in BTC and ETH. When that happens, you’ll see a massive influx of capital to passive index funds like Bitwise’s HOLD 10.

via 95 Crypto Theses for 2018 – TBI’s Weekly Bits – Medium at Medium

Another bearish outlookon non-major cryptocurrencies

aside from BTC and ETH, all of the other TOP 10 coins will disappear into oblivion.

as always, lots of links to excellent pieces throughout their weekly post

via Token Economy #30: Gazing into the crypstal ball at Token Economy – Medium

Decentralized crypto exchanges are the only way forward

Centralized and custodial exchanges are the exact antithesis of why Bitcoin was born and why (we like to think) people spend their time in the crypto world.We are building trustless technology to remove middlemen, monopolies and risk

via ☠ Token Economy #31: Kraken & the death of centralized exchanges at Token Economy – Medium

Bullish on bitcoin

I think that this market is headed well above 20000$ in the upcoming weeks/months, for completeness a possible bearish scenario would imply first a drop down to 7500$

I think that this market is headed well above 20000$ in the upcoming weeks/months, for completeness a possible bearish scenario would imply first a drop down to 7500$

From last week, a bullish longterm view of bitcoin from one long-term trader’s perspective

via Long Term Update: Bottom Done. at Bitcoin Trading Ideas, Analysis

Bitcoin as compared to beanie babies & gambling

Why am I spilling digital ink on Bitcoin and other coins? I know how this movie will end, and this knowledge brings a weight of responsibility. People will be hurt by this mania, and many of them will not be able to afford their losses.

Why am I spilling digital ink on Bitcoin and other coins? I know how this movie will end, and this knowledge brings a weight of responsibility. People will be hurt by this mania, and many of them will not be able to afford their losses.

One value investor’s take on cryptocurrency. After this analogy, he goes on to liken it to gambling. More true for bitcoin than utility tokens and coins from quality projects.

via Bitcoin and cryptocurrencies are just the Beanie Babies of the moment at Vitaliy Katsenelson Contrarian Edge

Ray Dillinger on the Sad State of Blockchain

From Ray Dillinger, who reviewed the blockchain code for the orginal bitcoin source code and began experimenting with virtual currency back in 1995, comes a regretfully toned message on the current state of affairs:

Sadly, many of the people who launched these alternates don’t know what they’re doing. Even more sadly, most of them do know what they’re doing, and at least three quarters know that what they’re doing is ripping people off. They strive to do it as well as they possibly can, usually by means that I can’t really distinguish from blatant stock price manipulation and insider trading.

His lament comes after praise of bitcoin and Satoshi:

Every Trusted role is, by definition, a weakness in security. You can see why security professionals are aghast when people talk about “Trusted Computing Modules” becoming a standard part of computers.

Satoshi had developed, as far as I’m aware, the first digital cash system with no Trusted role at all and thus, no way to abuse a Trusted position.

You know the old saw about being able to get a lot done if you don’t care who gets the credit? Satoshi doesn’t want the credit. Two years later he walked away and left the pseudonym behind. And hard as this may be to believe, it looks like he doesn’t even want to be paid for it. As far as we can tell he mined approximately a million Bitcoins and has never sold a single one of them.

The original selflessness of bitcoin feels a long way from the ICO-craze.

I hate to even imagine how many billions of dollars of scams and failures and thefts have been perpetrated by abusing people’s faith in and enthusiasm for that technology by now. And I have no idea how we could possibly have prevented it.

Don’t Ignore Bitcoin

From Zachary Karabell at Wired, on the potential huge changes ahead for the finance world:

The gaining momentum of digital currencies and the Chinese reinvention of a financial system led not by traditional banks but by technology companies are potent signs that Western financial architecture of the 20th century may not long survive the 21st.

Karabell points out the numerous “captains of finance” that have dismissed bitcoin, and points out the danger in doing so:

In fact, the way that the guardians of the financial world are dismissing these phenomena says more about them than it does about Bitcoin, and what it says isn’t pretty. Rather than grappling with the ways in which the software and information-technology revolutions have yet to deeply disrupt finance, the defenders of the status quo are seizing upon the price action of Bitcoin as proof that it is all a fever and a mirage.

And points out that China may be at an advantage by virtue of lacking strong financial traditions:

In truth, the financial industry has been among the least nimble in adopting to the promise and peril of information technologies. If you want to see what might be coming, look at China, which lacks a strong and deep banking system.

He ends with a warning:

Dismissing digital currencies because of how they’ve traded in the past months is an easy way to avoid grappling with how technology might soon undermine traditional modes of finance. Change always comes, sometimes slowly, but often unexpectedly, dramatically, sweeping away what seemed to stable and certain with breathtaking speed. That doesn’t mean you should invest in Bitcoin today. But it does make it stupid to ignore what is very likely around the corner.

Bitcoin is 1000x less energy-efficient than credit cards

It’s hard to conceive how inefficient bitcoin is in terms of energy consumption:

An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to “mine” more Bitcoins. That’s about as much as Nigeria, a country of 186 million people, uses in a year.

And to put in terms more relatable to Americans:

Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries’ index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes.

Included is a quote from De Vries:

“Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node,” he said via direct message.

And lastly, award the eco-friendly category to credit cards:

But since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will need to get thousands of times better.

Will bitcoin futures pave the way for ETFs?

More on the new CME bitcoin futures, from RCM Alternatives, and how this will likely lead to Bitcoin ETFs and more: Welcome to Future(s), Bitcoin:

[Last] week came quite a shock to some as the CME announced plans to launch Bitcoin futures after dismissing claims to create the contract just a month earlier. Maybe this chart of it 78,900% growth since 2011 had something to do with it…

On the mutual fund/ETF/ETP side of Bitcoin, there have been many failed attempts to get a Bitcoin “product” going. But the futures markets could change all that. The SEC even went on record back in September saying they would hold off reviewing Bitcoin products until a futures contract started trading!

A Bubble Bursting Scenario

From traditional fund manager Denny K comes a fairly reasonable article about how things could playout in a similar manner to the tech crash. 

Denny begins with a few comparisons:

In the .com bubble existing technology firms listed on the Nasdaq sometimes decided to add “.com” to their company name and saw their shares surge, sometimes 30–50%.

Well, guess what is happening now…

During the .com bubble, the major problem for analysts and investors was that most of the companies had losses and not profits, so there was hardly anything to value them on.

Fast forward to today — the same is happening again. While I want to be clear that there are important differences in that Bitcoin does have some sort of a value as a “store of value”, people making up new ideas like network value for token (not so much for Bitcoin) just makes no sense.

Then he mentions the differences that makes this even more risky, including the ridiculousness of ignoring non-released tokens, which we’ve posted about previously:

if you look at coinmarketcap.com, the “go-to” site for crypto market caps, you will notice that they only count the “Circulating Supply”

In equity markets, of course there are occasional scams and there were IPOs that turned out to be founded on not much more than a pyramid scheme. However, looking at crypto ICOs, the sheer amount of obvious scams is breathtaking.

While the .com bubble had its fair share of retail investors, the main driver were the institutions. In the crypto bubble, the field is made up almost exclusively of newcomer retail investors that probably have never held a stock in their life.

And he ends with his projections of how this may play out:

all ICOs will lose 90%+ of their value (just like during the .com bubble…) regardless of the strength of their projects. I keep bringing this up, but Amazon fell to 5.5 USD / share in 2001. It now trades at 1000 USD+. So also the good projects will fall 80–90%…

At the same time the utility token related to the ICO boom will probably crash in tandem

Cryptocurrencies such as Bitcoin will also be impacted, but I would expect an almost V-shaped recovery there as the listing of futures on the major exchanges, the formation of ETFs and more regulatory certainty will undoubtedly introduce institutional money to the space and more than 90% of that will flow into Bitcoin. Make no mistake though, Bitcoin will also suffer.

In the aftermath of this ICO carnage, I would expect the same story as with the internet firms from 2001. Really good projects will give their token holders equity-like rights and fulfill securities regulations. New ICOs will be strong companies that will have a good value proposition and again, will actually be selling something valuable and not just hot air. When this ICO 2.0 phase starts, platforms such as Ethereum will also strongly recover.

I would therefore personally not invest into any random ICOs at all nor their respective token at this late stage in the game. The likelihood you can buy all of these cheaper at some point over the next 12 months is extremely high.

Even if you completely disagree, it’s well worth a read as he brings up some great points.