The fastest growing market in the world

Wednesday, 11 October 2017
Melbourne, Australia
By Bernd Struben

  • The razor’s edge of the crypto market
  • Why greater regulation could push cryptos even higher

If you’d asked me five years ago if bitcoin would still be around today, I would have said…maybe. But don’t count on it.

Bitcoin had only been around for a few years back then. And there wasn’t really anything you could do with it. Except swap it back for fiat money when you thought it had reached a peak.

On 16 October 2012, bitcoin was trading for US$11.79. That might sound like chump change compared to the current price of US$4,746.60. But it had just more than doubled in price in under five months, since April 30 2012, when it fetched a mere US$5.05.

Even with that kind of growth, if you’d suggested in 2012 that the total value of the entire cryptocurrency market would exceed US$160 billion by August 2017…I would have wished you a pleasant day. And done my best not to roll my eyes until your back was turned.

Yet that value was indeed hit this August, in what is the fastest growing market in the world.

Of course, it’s not just bitcoin powering the market. Ethereum is a major player as well.

And there are now over 1,000 other cryptocurrencies competing for your attention…and money.

That’s something else few would have believed in 2012. One crypto was hard enough to wrap our brains around. But 1,000?

Yet the burgeoning initial coin offering (ICO) craze shows no signs of easing up. Quite the contrary. We now have a new digital coin launching almost twice each week.

ICOs, if you’re not familiar, are similar to an initial public offering (IPO). In an IPO a company looks to raise funds by listing on a stock exchange. ICOs also see companies — mostly start-ups — looking to raise capital from potential investors.

And, according to Autonomous Research, start-ups have already raised more than US$2 billion with ICOs this year.

But unlike IPOs, ICOs offer few legal protections for investors.

As Bloomberg reported this morning:

Nasdaq Inc. Chief Executive Officer Adena Friedman said the exchange operator is keeping its distance from initial coin offerings.

“There is no standard for disclosure,” Friedman said at the annual Financial Markets Quality Conference at Georgetown University in Washington Tuesday. “There are no protections for investors. There’s no ownership.” …

“I would call that a bleeding edge type of construct. Nasdaq doesn’t tend to get engaged in the bleeding edge,” she said, adding that the exchange instead prefers to stay in the realm of better vetted constructs in finance….

“It would shock me if you don’t see pump-and-dump schemes in the initial coin offering space,” SEC Chairman Jay Clayton said last month.

While New York-based Nasdaq chooses not to experiment with the emergent form of fundraising, it is exploring uses for blockchain, the distributed ledger system underlying cryptocurrencies like bitcoin.

It’s no surprise NASDAQ is steering clear of ICOs…for the moment. You’ll never see major exchanges leading the way in unproven territory. They need more security and fuller disclosures before dipping a toe in the water.

But it looks like they may be getting it.

More after the markets.

Markets

Overnight, the Dow Jones Industrial Average closed up 69.61 points, or 0.31%.

The S&P 500 gained 5.91 points, or 0.23%.

In Europe, the Euro Stoxx 50 index finished down 11.71 points, or 0.32%. Meanwhile, the FTSE 100 gained 0.40%, and Germany’s DAX index lost 27.16 points, or 0.21%.

In Asian markets, Japan’s Nikkei 225 index is up 46.73 points, or 0.22%. And China’s CSI 300 is up 0.40%.

In Australia, the S&P/ASX 200 is up 29.69 points, or 0.52%.

On the commodities markets, West Texas Intermediate crude oil is US$50.89 per barrel. Brent crude is US$56.61 per barrel.

Gold is trading for US$1,289.80 (AU$1,656.56) per troy ounce. Silver is US$17.17 (AU$22.05) per troy ounce.

One bitcoin is worth US$4,746.60.

The Aussie dollar is worth 77.86 US cents.

The razor’s edge of the crypto market

As mentioned above, ICOs remain largely unregulated. And that leaves the door open to potential fraudsters launching an ICO just to scoop up a few million dollars and quietly disappear.

Even when an ICO is fully legitimate, there are no guarantees the new crypto on offer will go up in value. Many ICOs run by legitimate companies, and with genuine backers, tank as well.

Make no mistake. Investing in any ICO comes with a hefty dose of risk.

As crypto expert Sam Volkering cautions:

You’re dealing with the razor’s edge of the crypto market. The tiniest digital currencies on the market. Gains could unfold super-fast. But price action can head downward just as fast. Its important folks new to the crypto world understand that.

Yes, you can make extraordinary gains — at speed. But your stake can head south too.’

Having duly noted the risks, what kind of extraordinary gains are we talking about?

Well Radium, for example, shot up 4,636% in only two months. And another crypto called Expanse gained 1,614% in six weeks. No other market in the world is delivering these types of potential gains today. Gains that can see $1,000 turn into $47,360 in two months.

But with roughly two new ICO launching every week, deciphering which ones are likely to skyrocket and which ones will lead to remorse is no easy task. To say the least.

And this is precisely why Sam has decided to run a free Crypto Masterclass.

If you’re even thinking about investing in an ICO, you don’t want to miss this. Sam’s Crypto Masterclass commences at 2pm this Saturday, 14 October.

Book your free seat here.

Why greater regulation could push cryptos even higher

Up top, I noted that the NASDAQ is steering clear of ICOs…for now. The major exchanges need a more transparent regulatory framework in place before they’ll even consider getting a piece of the action.

And that’s just what we’re beginning to see.

Now at Port Phillip Publishing we’re not normally cheerleaders for greater regulation. And one of the appeals of cryptocurrencies is their complete independence from global governments.

But for ICOs to take the next big step, investors need greater confidence in the system.

At the moment 99% of investors are on the sidelines. Only one in every 28,000 people hold bitcoin. And far less will participate in ICOs. It’s why Sam says, ‘Most folks are going to watch the few people who act immediately collect all the huge crypto rewards.’

Now the participation rate — and the reward for early investors — could well skyrocket over the next year as nations begin to introduce ICO regulations.

First this news out of Abu Dhabi. As CoinDesk reports:

The government of Abu Dhabi has released new guidelines for those looking to organize or participate in an initial coin offering (ICO).

Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) said that it would apply existing anti-money laundering and know-your-customer (KYC) rules to token sales, classifying some as securities (depending on their makeup and underlying structure) and others as commodities. Like a growing number of regulators worldwide, the agency said that it would weigh the sale and release of blockchain-based tokens on a case-by-case basis…

Tokens which are not treated as securities will be treated as commodities, along with cryptocurrencies more generally.’

According to CoinDesk, France is also in the process of formulating rules governing ICOs.

Speaking with the business magazine Challenges last week, Robert Ophele, president of the Autorite des marches financiers (AMF), said that his agency aims to formalize regulations around the blockchain use case, citing its increasing profile in France.

“We want to get a quick position on the issue,” he told the publication.

Though it’s not clear when the rules would be released, the clarification would make France the latest country to outline how it plans to regulate projects and startups seeking to raise capital via the token sale model.’

These kinds of moves by national governments could easily draw more investors into the booming ICO market. And as the participation rate rises, so will the potential gains for early investors.

And if the big institutional money comes knocking…the sky’s the limit.

For all the ins-and-outs of the ICO market, join Sam for free this Saturday at 2pm. You can sign up for his Crypto Masterclass here.

Cheers,
Bernd