A cautionary tale …Hedge your crypto funds

Peter Kristensen is an old school marketer and financial man working in blockchain and ICOs. He cautions CFOs of ICOs to hedge and control liquidity – making sure you have the correct procedures in place

“Every time when evaluating a new White Paper (we old-school guys call it an Offering Memorandum because it is a legal document for a company or a project) I find it amazing how little or not at all information there is about liquidity management and hedging strategy for the post-ICO period or during the raise.

In principle this should be simple, and everyone should know its importance, but unfortunately little planning, preparation or action is being taken. An ICO capital raising provides financial means for a project to succeed in business. And since the capital raising is done for the benefit of the company and the token buyers, the capital should not be risked in the volatile crypto market for speculative purposes.

Hedging strategies are always created at the current market levels and never where the market has been or where it might be going. Nobody knows where the market is going. Taking an unnecessary risk by speculating with other people’s money can quickly lead into serious financial and legal problems for the project and its management.

So what should a good CFO do during and after an ICO? A CFO should have a clear strategy defined already before the company starts raising capital via ETH/BTC. This strategy should at minimum include clearly defined amounts to hedge when ETH/BTC enters the company’s wallet during and after the ICO, opening proper banking facilities (preferably with two signatories), opening exchange accounts for listings, having multi-signature ledgers with procedure for safekeeping of those ledgers, and deciding who has access to and is responsible for the ledgers.

This mean that wherever the market will be heading the company’s liquidity is managed so business can be conducted as promised in the White Paper.

I hope you young guys/girls won’t be offended by this stark reminder. This is just an old traditional money management principle that should always be applied. It should not be different if it is called an ICO instead of an IPO? The same principles matter. And remember being a CFO of a start-up company who is responsible for managing investors funds demands common sense, experience and balls to say no to crazy and unnecessary expenses.”

For more information, please visit https://www.c6advisors.com

If you would like to have your company featured in the Irish Tech News Business Showcase, get in contact with us at Simon@IrishTechNews.ie or on Twitter: @SimonCocking