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Inside the bitcoin-fuelled 'ICO' bubble

COMMENT John McDuling

SEPTEMBER 1 2017 - 12:15AM


This week was arguably the most significant yet for "crypto-currencies" in Australia. At least since a guy from the nondescript Sydney suburb of Gordon claimed to be the mastermind behind bitcoin.


If your eyes have already glazed over, I don't blame you. I don't particularly enjoy writing about crypto-currencies, but given the genuine technological breakthroughs involved and the potentially damaging financial bubble that's building, they've become impossible to ignore.


This week a Perth-based energy trading start-up called Power Ledger said it raised $17 million from speculators and crypto enthusiasts in Australia's first ICO (initial coin offering). An ICO is a bit like an IPO, except digital tokens created from thin air are up for grabs, rather than small pieces of ownership in a business. There are no regulators or stock exchanges involved.


To describe ICOs as the wild west of finance would be an understatement but, at the moment, lots of people are making a killing from them.


Bitcoin's value has exploded over the past year, rising as much as 700 per cent. A single bitcoin is now worth more than $US4600 ($5800), and the market value of all bitcoins stands at about $US75 billion. This rise has spurred all sorts of rivals, imitators and offshoots, including now in Australia.


Most experts agree the crypto-currency realm is exhibiting all the characteristics of a speculative bubble.


"We're seeing at least one ICO per day at the moment," says John Henderson, a partner at Sydney tech investment firm AirTree Ventures.


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Cryptocurrencies are new barbarians at the gate of central banks

When the cryptocurrency Exio Coin starts a round of fundraising on September 7, its founders say the unit will come with a unique distinction: the first to be endorsed by a sovereign nation. The identity of the government backer won't be revealed until October, and Bloomberg News has no way of verifying the claim of support. According to co-founder Sunny Johnson though, the supporter is one of "the world's richest countries" on a per capita basis....


Until recently, officials at central banks were happy to watch as pioneers in the field progressed by trial and error, safe in the knowledge that it was dwarfed by roughly $US5 trillion ($6.3 trillion) circulating daily in conventional currency markets.


But now as oficials turn an eye toward the increasingly pervasive technology, the risk is that they're reacting too late to the pitfalls and the opportunities presented by digital coinage.


"Central banks cannot afford to treat cyber currencies as toys to play with in a sand box," said Andrew Sheng, chief adviser to the China Banking Regulatory Commission and Distinguished Fellow of the Asia Global Institute, University of Hong Kong. "It is time to realise that they are the real barbarians at the gate."


Bitcoin ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ the largest and best-known digital currency ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ and its peers pose a threat to the established money system by effectively circumventing it. Money as we know it depends on the authority of the state for credibility, with central banks typically managing its price and/or quantity. Cryptocurrencies instead rely on their supposedly unhackable technology to guarantee value....



Cryptocurrencies go way beyond Bitcoin, and way out of reach

Cryptocurrencies encompass two contradictory principles: for them to work they require, transparency, history, ledgers and electronic fingerprints, but they appeal to people who seek anonymity and work below the horizon of regulators and investment analysts.
  • Could BAT's tiny strings of code be the next Bitcoin? Will their value increase by 1000 per cent? Or will the founder of BAT take the money and scarper?


Outlining big dreams for their blockchain technologies, hundreds of start-ups are crowdsourcing digital money from risk-hungry players, who are happy to pour Bitcoin and Ether (another electronic currency) into speculative, futuristic projects.


Tech developer Storj also released a swag of tokens via ICO in May; investors went ballistic and the company raked in $US30 million. The week before that, Gnosis tokens pulled in $US12.5 million.



  • "Whether or not the innovation around these proposed projects is actually any good remains to be seen," says one cryptocurrency trader, preferring to stay anonymous lest hackers target her Bitcoin stash. "But everybody seems to be making stupid money at the moment, pumping and dumping these coins. All of this froth and the crazy activity of the last few months is just fuelled by FOMO [fear of missing out] and greed."
Read more: http://www.afr.com/markets/currencies/cryp...9#ixzz4rTQ3KaGJ
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Winklevoss at the gates of the SEC

Dalia Blass of the Ropes & Gray law firm has been tapped to head the SECÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s Division of Investment Management which regulates, and approves or disapproves, exchange traded funds (ETFs). BlassÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ firm, Ropes & Gray, represents the Winklevoss twins in their efforts to create a Bitcoin ETF.


The SEC famously rejected two Bitcoin ETF proposals earlier this year, citing largely unregulated markets. They did leave themselves an out, however. The Commission indicated that in the event that a regulated futures market for Bitcoin were developed, they might reconsider. Not long ago, the Commodity Futures Trading Commission (CFTC) gave LedgerX permission to create such a futures market.


The SEC agreed to hear an appeal from the Winklevoss twins earlier this year, but few watchers expected the twins to receive a different answer. With Blass at the helm and regulated futures markets being developed, however, this could change.



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China hits booming cryptocurrency market with coin fundraising ban, Bitcoin value slides

Posted 21 minutes ago

China has banned the practice of raising funds through launches of token-based digital currencies.


The move was targeted at so-called initial coin offerings (ICO) in a market that has exploded since the start of the year.




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Bit of a bubble?

From everything I've been reading, absolutely, and with dire consequences according to some commentators - but then I don't understand "virtual" money - I like mine touchy feely and either in my wallet or in my bank account


Bitcoin is a gigantic bubble ready to explode, according to Euro Pacific Capital CEO Peter Schiff.

https://www.thestreet.com/story/14284698/1/...l-collapse.html - Schiff discusses around 7.11 minutes into video


Impact On The Economy At Large


Cryptocurrency has not become a huge form of money and has not yet registered in relation to global capital markets, Lynn noted. But it is becoming integrated into the world of finance. And once one part of the monetary system wobbles, the entire edifice becomes weakened, which is what occurred in 2008 and 2009.


Lynn said it is unknown what contracts and derivatives have been linked to cryptocurrencies or how deeply they have integrated into the financial system. This will become evident when a crash occurs. The losses connected to the crash could ripple in unexpected ways.



Last Stage of Bitcoin Bubble Yet to Occur, Says Economic Professor

According to Panos Mourdoukoutas, Professor and Chair of the Department of Economics at LIU Post in New York who is also contributing to several professional journals and magazines, such as Forbes and The New York Times, when the bitcoin bubble will burst, there will be a final stage, which he calls ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“maniaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ.


The professor explained that every bubble has the same attributes, which is often confused with healthy bull markets. The pattern starts with investor hype over a popular topic. This theme can be an exotic product or an emerging industry, which promises a major change to the world while making the investors rich during the process, Mourdoukoutas wrote



Bitcoin's nearly five-fold climb in 2017 looks very similar to tech bubble surge

David Ader, chief macro strategist at Informa Financial Intelligence, shows how bitcoin's gains resemble that of the Nasdaq Telecommunications Index before the tech bubble burst.

Bitcoin has gained nearly 400 percent this year, helped by increased interest from institutional investors.

However, digital currency expert Chris Burniske points out the market value of bitcoin is still a fraction of what stocks were during the dot-com boom.

Evelyn Cheng | @chengevelyn

Published 4:46 PM ET Thu, 31 Aug 2017 | Updated 11:34 AM ET Fri, 1 Sept 2017



Eventually and inevitably, what goes up must come down, and pain always follows euphoria. Just as AOL engendered the dawn of Dotcom, its January 2000 purchase of traditional media company Time Warner Inc. (TWX) is generally regarded as the peak of the bubble. Shortly after, the internet-heavy Nasdaq peaked at 5,132.52 then spectacularly fell 78% in the following 30 months. Bitcoin could be headed to a similar peak when it becomes mainstream and ubiquitous, and is no longer viewed as the currency of hackers and speculators

Read more: Here's What's Next for the Bitcoin Bubble | Investopedia http://www.investopedia.com/news/heres-wha.../#ixzz4rnkzWyfJ




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