by Nick Ayton
There have been a few key shifts in crypto worth mentioning…
I get asked all the time what is going on with Bitcoin? Will it go back up? Is it finished?
In recent weeks we have seen the crypto economy, it seems, move only sideways with little sign of pumping close to the levels we saw at the very beginning of 2018. And of course, the haters love this, claiming all sorts of things like “Bitcoin is finished”, “Bitcoin has no value”, words that normally come from fat old bloated bankers and fund managers that have destroyed the value of Fiat currency that would love to see the crypto economy go the same way.
For me, the reasons for this movement is clear maybe because we are working at the coal face and dealing with BTC every day. There are other forces are at work here, each placing very different external pressures on Bitcoin and the broader crypto economy.
Before going into this just a few comments on ICOs. Look, the heady days of the second half of 2017 when ICOs exploded are unlikely to ever return. The simple reason, the crowd is not sitting on profits to burn investing in a range of ICOs at a whim. Much of this initial crowd got burned bad as the price correction came through at the end of January ’18. Many newbies also came into the market, lost their cash and left.
Thus far in 2018, we have seen capital flowing into ICOs shift from the crowd to institutional monies where many ICOs now get full or partial funding privately, before the crowd is invited. And of course, the regulatory landscape where some jurisdictions are clarifying their position (SEC for example) is also not helping here.
In real terms this means an increasing number of ICOs are competing for a smaller piece of the pie, and where competition to get investment is very intense and to a degree desperate. ICO activity is increasing and the search for capital much harder to find, against a background where all tokens are now being considered securities anyway, anyone buying a token will have to pass some form of KYC and AML which is also pushing the crowd away.
So now is not a great time to launch your ICO unless you are really special and you are prepared to go on the road and find investors yourself or with the help of firms like ours. With value moving sideways we need Fiat currency to come into the crypto economy, and to attract this capital you will need to package your proposition differently when pitching your idea to investors. An Information Memorandum and pitch deck supported by some real numbers and projections. And if you want to sell a security token to the crowd you can! A Prospectus will get you started and adds credibility to your goal. And please no utility tokens, as investors will not buy these as don’t forget you are competing with non-blockchain projects where most offer real returns.
So why are Bitcoin, Ether and the larger coins moving sideways?
The simple explanation is that Bitcoin has never been better, more sought after and in demand. The change is the explosion of OTC (Over The Counter) where, rather than just a dozen OTC traders and brokers, we now seeing thousands globally emerge all chasing the big Buy Sell in search of the big pay-out. This in itself is not so bad, but here is the thing: very few deals actually complete and strangely the US banks that hate crypto so much, apart from buying through the back door as the ones providing escrow and custody services?
The reality is a large volume, maybe more than 50%, of BTC is changing hands outside the primary crypto exchanges and therefore not being reflected in BTC price. The recent patterns are BTC rises at the start of the month and then falls at the end as market makers who have shorted BTC clear their positions creating unnecessary and additional short-term volatility. Because they can. These bankers only see BTC as just another financial product to short to make money on without adding any value to the ecosystem whatsoever, because they know there are still BTC holders that are easily spooked and will sell and take their losses which is their gains.
In our business, we have been involved in OTC trades for several months and have on our books a range of Buyers and Sellers, from Mining Pools who Sell clean coins at a premium, to High Net Worth individuals and Institutions who are keen to Buy. And then Hodl which doesn’t help. We have also had our own deals presented back to us by the layers of traders, brokers and intermediaries that are strangling deals to get a piece of the commissions. All believing they are going to get rich quick on the back of a 100,000 BTC deal. Sorry boys it doesn’t work like this.
Whilst the underlying BTC volumes show strong activity, it is nothing compared to what it could be right now as demand for BTC remains very high and supply is slowing, which normally means prices go up right. And they will, as BTC, as of writing this, will start to test the next resistance level deemed to be $7800.00. But $20,000? Quarter 4 always surprises us, so never say never.
It is worth remembering that it is still early days although BTC is nearing a decade of existence it is only the past two years that have seen the crypto economy explode. This pre-pubescent crypto economy is experiencing the teenage years before maturity. The new Crypto Capital Markets will emerge from this far stronger but it will take a few more years to understand, as regulators try to hold it in check, banks try to destroy it one moment, then make money from it the next (they are, after all, bankers) and let us remember the majority of the crowd remain unaware of Bitcoin.
BTC is doing well although has largely transitioned from a payment network to a new asset class and will eventually manifest itself as a more stable source of value than any other financial instrument or currency. The future is good.
“Ignorance is further Strengthened”…