Moving Beyond ICOs

Like many crypto-enthusiasts recently, we’ve gotten a bit caught up in the ICO craze. After publishing a few ICO analysis reports, we noticed the posts were driving a lot more organic traffic that we’d ever had, that people were actually leaving comments. Naturally, that lead us to publishing more ICO reports. In fact, we’ve published over 30 of them. However, it’s time to stop.

The purpose of the reports was to present information in a standardized way. Every token crowdsale is run and presented differently, making it quite difficult to compare. Even leaving the nature of the project out of the discussion, there are so many variations in the method tokens are sold, bonuses, token allocation, usage, etc. that it becomes prohibitively difficult to compare without doing a lot of work. Something as simple as how much money projects are looking to raise is obscured. And determining the value of your specific contribution is often even more difficult with closed private sales at enormous discounts on tokens that are likely to be dumped onto the market post-ICO.

With that in mind, our reports are not sufficient. Though we stopped trying to rate each ICO a while ago, even gathering the information has become too cumbersome and there others doing a much better job of it. As we often cite in our reports, some of our favorite sites for in-depth, single-project analysis include CrushCrypto, Hacked (subscription), Picolo Research (release delayed for all but Astronaut.capital clients), ICO Alert, and ICO Rating (look for the in-depth reports, not the ratings). There are others we’re overlooking at the moment.

None of these allow for comparing multiple ICOs using standardized info, but that’s not necessarily a problem. For one, the ICO landscape is changing so fast that comparing a project from 3 months ago to a new one coming us is virtually meaningless. Second, there are others much closer to what we envisioned originally. TokenData tracks over 140 ICOs currently and TokenReport has comprehensive data on over 700 projects (albeit at $225 per month).

Without a comprehensive solution, it would seem like a good niche too fill. However, the time investment is no longer worth the effort, given the extremely high valuations and waning returns of late. Our bandwith is limited, and it’s simply not worth trying to find the needle in the oversized haystack, especially when the risk/reward ratio is as terrible as it appears now. While we aren’t completely foregoing looking at particular projects in depths, we’ll rely on others to call our attention to it.

Our initial interest in crypto currencies had nothing to do with ICOs. Like most, we were first drawn to Bitcoin and the possibility of a decentralized currency and a finite number of tokens that could be exchanged with anyone in the world nearly instantly. Over the past year, we’ve gotten more interested in the bigger possibilities created by Ethereum and token sales. Beyond funding, there opportunities for new business models, new business structures, automation, anonymity, etc. that will bring more meaningful, macro changes. That’s where our interest lies and where we’ll be focusing here.

If you feel we’ve underestimated the value of our ICO reports, and you’d like us to continue, let us know in a comment. 

Stop Worrying About Warren Buffet Thinks about Bitcoin

Each time Warren Buffett makes a comment about Bitcoin, it makes headlines. To be fair, any time Buffett chimes in anything financial-related, it’s considered newsworthy. In 2014, he called Bitcoin a mirage, which as a much more popular opinion at the time. Recently, he commented “You can’t value bitcoin because it’s not a value-producing asset.”

Of course, this is written about mockingly by Bitcoin-proponents, as if Buffett should be expected to suddenly change everything he’s done throughout his career. Perhaps it’s merely others seeking validation, but nobody should be surprised. This is entirely consistent with how Buffett has always operated. Buffett invests heavily in what he knows, concentrates his bets, and looks at the underlying value of an asset with only some regard to price. It hasn’t exactly been a poor formula for success.

His comment may sound harsh, but he’s not even wrong. Though many have attempted to derive valuations methods for cryptoassets, most tend to agree that Bitcoin and Ethereum are more similar to a currency or gold, rather than a security. From that light, he’s entirely right to say it’s not a “value-producing asset.” Businesses produce value. Currencies are a means of exchange; no value is produced.

True believers in Bitcoin are actually quite similar to Buffett in many ways. Rather that getting caught up in the extreme volatility, they believe Bitcoin will be valuable in the long-run and act with that timeframe instead of trading. And while Buffett knows nothing about Bitcoin, those have followed the developments know it quite well and can’t imagine not being involved.

Buffett’s methodology can be extended well-beyond the stock market, but it needs to be adapted to individual situations. In the biography, “The Making of American Capitalist” Roger Lowenstein does an excellent job describing Buffett’s thinking and development.Some of the key takeaways are

  • think long term
  • don’t pay attention to what others have done

Baseball synonyms are big with Buffett, and he was a big fan of Ted Williams (the greatest hitter who ever lived according to this Red Sox fan). Williams would often let hittable pitches go by early in the count, while he waited for something better in his zone. Likewise, Buffett has no need to swing at every opportunity. He can wait to find things that are obvious opportunities to him. And unlike Williams, there’s no third strike possibility.

Buffet has avoided tech stocks mostly, rarely uses a computer. It would be shocking if he suddenly decided to get into BitCoin. Of course, it shouldn’t matter to anyone involved with Bitcoin.

Bitcoin Hard Forks as Dividends

At Bloomberg, Justina Lee compared the recent Bitcoin Gold hard fork to a stock dividend:

On top of stupendous capital gains, investors in bitcoin are also getting a dividend — if they’re lucky.

A split in the blockchain created a new offshoot in the form of bitcoin gold on Tuesday, with bitcoin holders receiving one unit for every bitcoin they own, according to the offshoot’s developers. The cryptocurrency fell from a record high after the so-called hard fork, just as stocks typically drop after going ex-dividend.

Of course, not all token holders received the dividend. For example. anyone holding BTC through Coinbase missed out. Then there’s the problem of whether a 5% of less dividend means anything when prices can fluctuate 30% in a week anyway.

The Bitcoin Boom: Asset, Currency, Commodity or Collectible?

From Aswath Damodaran’s post The Bitcoin Boom: Asset, Currency, Commodity or Collectible? at Musings on Markets:

I find myself disagreeing with both its most virulent critics and its strongest proponents.  Unlike Jamie Dimon, I don’t believe that bitcoin is a fraud and that people who are “stupid enough to buy it” will pay a price for that stupidity. Unlike its biggest cheerleaders, I don’t believe that crypto currencies are now or ever will be an asset class or that these currencies can change fundamental truths about risk, investing and management.

He goes on to describe his process for determining how to classify bitcoin, beginning by describing has his asset class classifications as:

  • Cash Generating Asset
  • Commodity
  • Currency
  • Collectible

After concluding that Bitcoin is a currency, though a weak one currently given how much it is used as a means of exchange currently (which would make it closer to a collectible), he layout out three possible long term scenarios:

  • The Global Digital Currency
  • Gold for Millennials
  • The 21st Century Tulip Bulb

A very practical look at Bitcoin from a more traditional financial perspective.