Category Archives: ICOs

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Bitcoin Re-Asserts Dominance in 2019 Amid ICO Bust

  • Bitcoin dominance percentage up 17% in 2019 as the ICO boom goes bust, paving the way for a healthier crypto space

In early 2018, the initial coin offering (ICO) boom reached the peak of its speculative frenzy, pushing the Bitcoin dominance percentage as low as 32%. Unfortunately, numerous ICOs ended up being scams or poorly planned, causing untold numbers of investors to be ruined and scared away from the crypto space. As the ICO bubble collapsed, the Bitcoin dominance percentage rose to 51.7% by the end of 2018.

In 2019, the Securities and Exchange Commission (SEC) brought legal action against numerous ICOs, making it clear that they were illegal in the United States, and that any offering that conducts business in the United States will be prosecuted to the full extent of the law. This caused the ICO sector to collapse even further, and Bitcoin’s dominance percentage rose another 17% in 2019, reaching 68.7% currently.

Now Bitcoin reigns supreme, as well as several handfuls of reputable altcoins that are well-built and have solid potential. Compare this to the crypto space in 2017 and 2018, which was filled to the brim with fraudulent ICOs.

This has set the stage for a crypto space rebound, since now only the best cryptocurrencies remain as serious investment options, and the focus has shifted towards developing better infrastructure and increasing crypto adoption, rather than the focus being on scam ICOs.

 

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IEOs, ICOs, Whatever the Name, Regulation is the Issue

IEOs, ICOs, Whatever the Name, Regulation is the Issue (1)

With Initial Exchange Offerings (IEOs) gaining in popularity, industry experts have been suggesting that their uncertain regulatory status doesn’t necessarily mark an improvement as a way of generating new capital.

An IEO is conducted via a cryptocurrency exchange. Unlike Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens. ICOs raised nearly USD 30 billion over a period of three years until hitting a wall in 2018/2019 as the SEC cracked down on fraudulent activity and illegal offerings blighting the market.

Many analysts see IEOs as a way of sidestepping strict market regulation, but Peter Van Valkenburgh, director of research at advocacy group Coin Center in Washington, begs to disagree that there is any mileage in this argument. He suggests:

“I don’t expect IEOs to result in better outcomes… From a regulatory and legal standpoint, there’s not going to be much difference here… Calling it now an IEO is not going to change your obligation to the potential issuer of that token if the token fits the test for a security, which I think in many cases it will.”

Crypto advisory firm TokenMarket’s CEO Ransu Salovaara claims that whatever the method of raising capital, tokens still need to work as utility tokens in the long run. Cryptocurrency research firm InWara claimed that only 30% of IEOs launched this year had what it calls a “minimum viable product” at the sale with most offering simply a website and a white paper.

A recent InWara research report into IEOs found that many exchanges don’t screen new products launched on their platforms, often offering subjective evaluation:

“That’s the problem here: there is no standardized vetting process… And as long as exchanges have the freedom to decide where to draw the line, bad actors, and fraud crypto projects will always creep into the limelight.”

 

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Ethereum Co-Founder Says Time for South Korea to Deregulate Blockchain

Ethereum Co-Founder Says Time for South Korea to Deregulate Blockchain

Ethereum founder Vitalik Buterin has urged South Korean regulators to remove restrictive blockchain industry laws in a recent visit to the Asian tech powerhouse.

Buterin was speaking to South Korean parliament members in a hope to overturn the government’s current stance which currently favors blockchain over Bitcoin and other cryptocurrencies, by its banning of ICOs.

The Ethereum Canadian-Russian crypto entrepreneur was quick to point out that separating the two key aspects of the burgeoning tech and payments industry wasn’t feasible due to their interdependence. He also explained that ICOs have moved considerably since the early days of cryptocurrency and scams are now rare, adding “ICOs have certainly improved, and will continue to improve in the future”. He argued:

“Blockchain is a technology that can be run without cryptocurrencies, but there is no crypto without blockchain. Public blockchains rely heavily on cryptography. Therefore, cryptocurrencies are absolutely necessary.”

The initial banning of ICOs in South Korea was implemented by President Moon Jae-in. also removing generous tax breaks for crypto businesses after a number of high-profile crypto scams. The approach has impacted the industry in the country which has largely flourished despite prohibitive government intervention and legislation.

Last year, Chin Dae-je, chairman of the Korean Blockchain Association, made a strong case for legalizing ICOs, suggesting that they offered a way creating new jobs, boosting the economy and producing innovative world-leading blockchain startups in the country, commenting:

“The government should implement guidelines to nurture the domestic blockchain industry, which will help Korea emerge as a global industry leader… Startups who comply with guidelines should be allowed to launch ICOs.”

Both Buterin and Reddit founder Alexis Ohanian agree with these sentiments as cryptocurrency emerges from what it calls a “crypto winter”, suggesting that a purge of bad actors and scams over this period is creating a much healthier crypto environment. Ohanian said:

“The speculators have fled and that’s great. Because the people who are now building on crypto are true believers. They’re actually building the infrastructure that it’s going to take to really make this happen.”

 

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Is 2019 the Year of the Crypto Bull Market?

Is 2019 the Year of the Crypto Bull Market?

How Long Will the Crypto Market Bull Sleep?

Speculations about the cryptocurrency market continue to weigh heavily on the hearts of crypto enthusiasts as the market is yet to improve from the slump of 2018. The space is now left with dashed hopes, closed crypto exchanges, layoffs, hacks and a whole lot of constructive partnerships by the very few who truly understand what the blockchain is all about.

Reality has become grim for investors who hopped in at the all-time-high, especially shattering the expectations fueled by crypto influencers – the claims of Bitcoin reaching a high of USD 100,000 at the end of 2018. The ‘lambo’ songs that once reigned in many social communities have lost its savor as the lingo is being replaced with more realistic expectations such as measurable development goals and expected platform launch date.

Where are the 1000x’s promises?

Tough times greeted the new year, though still at the beginning of the year, many investors, as well as spectators, are wondering why the market still hasn’t had a bull run even though interest in blockchain has spiked. Some blame it on the delay in the entry of institutional investments.

Ripple CEO Brad Garlinghouse provided his personal opinion in a Blockchain Summit in Europe held at Brussels, saying that he estimates a 5 to 10 years waiting time for mainstream crypto payments.

This may be heartbreaking, as 5 years is indeed a long time to wait before hitting those 1000x’s again. More so, one would wonder if Ethereum’s co-founder Vitalik Buterin was right about his earlier predictions on the end of 1000x’s in crypto space. However, in just under a decade, cryptocurrency has evolved many times over.

The flagship cryptocurrency Bitcoin started its dramatic steep decline in the wake of 2018 and dragged the whole market with it after grazing an all-time-high of USD 20,000 the previous year. The cryptocurrency market with a cap of over USD 813 billion in November 2017 has now dropped to USD 114 billion according to data from CoinMarketCap as at press time. Surely, this drop in market value is enough to make investors wary.

The previous 3 years had seen a steady rise of activity in ICO markets, with 2016 recording an approximate fund collection of USD 93,922,741; USD 6,576,372,746 in 2017;  a reportedly recorded USD 21,576,147,596 in 2018 and now, in 2019 ICOs have raised over USD  126 million and still counting, according to data from CoinSchedule. With these humongous figures, it behooves one to wonder what happened to post-ICOs and why the current conditions appear rather stale.

What’s wrong with Crypto?

Brad has said that the biggest risk in the market is regulatory uncertainty. With the Securities Commission of different jurisdictions like the US SEC breathing down the necks of ICOs for securities compliance and making scapegoats out of defaulters, startups are exercising more caution. Binance CEO Changpeng Zhao had opined that 2018 was a year of correction and expressed his confidence for the future of crypto, however, he also pointed out that lack of clarity from regulators was a major drawback.

An analyst from JPMorgan expressed his skepticism about cryptocurrencies saying that real use for cryptocurrencies will only be in a dystopia – [one that has been duly noted in some hyper-inflated economies] – and that despite the correlation, the crypto market has with traditional assets, it’s of little value because of the prolonged bear market.

Legislation has indeed pegged the growth of the industry to a certain degree – at least from the cryptocurrency market perspective. However, some jurisdictions are opening up to the Idea of regulating the space in a way that innovation isn’t stifled. What’s left is for blockchain projects to live up to the hype that once ruled the space by developing more proof of concepts that are usable beyond the cryptomarket, as the market has so far proved to be a poor benchmark for the healthy state of blockchain enterprise.

For a while, the promise of institutional grade crypto services by elite financial systems such as Fidelity, and Intercontinental Exchange’s Bakkt has held many ‘hodlers’ ransom. Fortunately, as the space continues to mature, it becomes less reliant on external influences and survives on its initial narrative – decentralization.

Amid the market downturn, regulatory uncertainties, organizational restructuring, high expectations of institutional players; immense developments and innovation are driving adoption such as the rise in the numbers of Bitcoin ATM kiosks, use of crypto in charity, banks collaborating for cross-border payments, legacy systems shifting towards blockchain to tackle logistics problems. Perhaps, the market is just one trigger away to the next bull-run.

 

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They’re Coming: Stablecoins, Security Tokens, Institutional Crypto

They're Coming: Stablecoins, Security Tokens, Institutional Crypto

Circle research indicates that with the hype of the ICO market becoming a distant memory and Dapps development strong, a market trend reversal is possible in 2019 with stablecoins, security tokens, and institutional crypto leading the recovery.

These findings were released in a retrospective report examining and reflecting on the major achievements, events, performance, and activities of cryptocurrency in 2018.

The report reveals that Bitcoin profited from altcoin drops in value in 2018, gaining a 50% dominance as a result. Its fees, along with those of Ethereum, dropped by 90% over the course of the year. The report also showed how ICO activity reduced in the second half of 2018 due to increased regulation, putting further downward pressure on the cryptocurrency market.

Looking ahead to 2019, the report points out that stablecoins, security tokens, and institutional crypto by providing the solution of real-world problems and adding more certainty to the crypto space as a whole. Part of the problem in 2018, according to Circle, was that the kind of projects being invested in had no real-world impact but where being invested in for short-term financial gain.

It cites this factor as leading to the market crash of 2018 which actually lead to the demise of many worthwhile projects along with solid projections with strong foundations and good teams behind them. However, it is some of these more worthwhile projects which the report sees as re-emerging in 2019.

The company backed global exchange Poloniex and USDC stablecoin, and was the first virtual currency company to be approved by the British government and the first to receive a Bitlicence from New York State in 2015.

 

 

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Morgan Creek Digital Forecasts Fall and Rise of Crypto Hedge Funds

The Founder of Morgan Creek Digital, Anthony “Pomp” Pompliano, forecasts that cryptocurrency-oriented hedge funds will begin to close their doors. Further, Pompliano says regarding the bear market that “things will get much worse before they get better”.

There are two main factors that will cause cryptocurrency hedge funds to shut down according to Pompliano. First, there is something called a high water mark, which determines the salary of hedge fund managers. Basically, hedge fund managers only receive their performance fee, which is usually 20% of profits, if the fund’s net assets are higher than in any previous period. Due to this bear market, which has seen the price of Bitcoin decline from USD 20,000 to less than USD 5,000 in a year, practically no cryptocurrency hedge fund managers will get their performance fee, making their businesses much less lucrative.

Pompliano thinks cryptocurrency hedge funds will close down, be quiet for a few months or up to a year, and then restart under a new name. Since the market is at a very low point, closing an old fund and launching a new one will likely ensure consistent performance fees for fund managers.

The second factor that will cause cryptocurrency hedge funds to close down is the increasing Securities and Exchange Commission (SEC) enforcement in the initial coin offering (ICO) market. Recently, the SEC issued its first civil penalties against Paragon (PRG) and Airfox (AIR). Each firm was fined USD 250,000 and is being forced to return investments to investors who choose the option. Most ICOs have lost money and if the SEC proceeds to take this action against the rest of the ICO market, it could lead to widespread bankruptcy of ICO companies, according to Pompliano.

This will have a direct impact on cryptocurrency hedge funds, since many of the ICO investments they have on the books could quickly go to zero. Pompliano said, “As both ICOs and funds begin to shut down, it is easy to see a future feeling of panic and desperation spreading across parts of the market.”

On a positive note, Pompliano thinks once the bear market runs its course the market will be in a healthy position to rebuild. Specifically, he said, “Remember, bear markets get rid of the tourists so that the true entrepreneurs can focus on building sustainable value. Watch closely for the founders who are quietly toiling away with talented teams right now.”

 

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New Report Cites Multiple Causes for ICO Funding Slump in Q3

In a new report by ICORating, ICO funding succumbed to a significant nosedive in Q3, dropping to 48% of its Q2 levels in 2018.

ICORating specializes in evaluating companies with a planned ICO. Their analysis is described by the company as being thorough and objective, reviewing companies as potential investment objects. The report revealed that in Q3 of the 2018 fiscal year that only 4 percent of ICOs managed to get listed on cryptocurrency exchanges, and more than half of the ICO projects declared that they managed to raise just USD 100,000.

Compared to Q1 and Q2 this year which saw Telegram and EOS raise over a USD 1 billion, this last quarter trailed with only one really significant fundraiser raising big numbers, – which reached USD 70 million. However, The London Football Exchange (LFE) did manage to feature in this year’s top 10 fundraisers’ list within the first 3 quarters.

LFE launched a cryptocurrency to power an ecosystem of “inter-related components” made up of sports, media, entertainment, finance and a foundation earlier this year, allowing “fan-driven” football community the opportunity to take part in various club and fan experiences.

According to the ICORating analysis, there were many reasons for the poor performance in Q3; overall, was that traditional ICOs were showing little promise as the year was drawing to a close. One peculiar reason cited was an increasing lack of transparency from ICO teams which tended to make investors wary.

Regulation has long been an issue and is only beginning to receive the attention it needs this year from jurisdictions in order to boost investor confidence in the aftermath of various scams and ICO frauds. This was cited as a significant investment determiner as potential investors become more knowledgeable and careful before making financial decisions.

The ICORating report also cited “an overall market downtrend, lack of new ideas from project teams and the not-so-fast pace of actual blockchain implementation in the traditional market,” as responsible factors in the current funding slumps in ICO investments.

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Ohio Congressman Tells SEC Hands Off Crypto

Ohio Congressman and cryptocurrency advocate Warren Davidson is to go ahead with his plans to introduce a bill which will effectively eliminate the SEC’s jurisdiction over the industry.

The representative for Ohio is also pushing for sensible cryptocurrency and blockchain technology regulations. He recently invited 32 prominent representatives of the cryptocurrency industry to Washington in order to discuss future ICO legislation. Davidson sits on the United States House Committee on Financial Services, which is responsible for overseeing the entire financial services industry, including the securities, insurance, banking, and housing industries.

The Bill will need to penetrate President Trump’s home guard in the House of Representatives and as yet Davison hasn’t named his co-sponsors. If passed, the bill would effectively create a situation where securities law would not be relevant to ICO as cryptocurrencies would be classified as products rather than securities.

Davidson is hoping for a bipartisan approach to getting the bill through, although the new Democratic majority is thought to have little effect in limiting the SEC’s regulations as they apply to cryptocurrencies. The Examiner commented:

“…[unlikely that the] incoming Democratic majority will get joyfully on board with any form, of crypto deregulation strategy, though the Congressional Blockchain Caucus has historically featured a bipartisan membership.”

Craig Phillips, the senior adviser to Treasury Secretary Steven Mnuchin, stated publicly on Monday that the department would be releasing its latest position on cryptocurrencies in the near future.

It has been noted that despite Davidson’s push for change within the SEC to combat its punitive stance on cryptocurrencies, startups have taken their own approach to sidestep rules through VC funding or raising by raising funds privately. Over the next few months, the SEC has several pending cases against cryptocurrency exchanges and ICOs.

CNN claims that this regulatory uncertainty could result in a decline in investor confidence, a fact which  Congressman Davidson and his supporters in Washington are fully aware of.

 

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Etherdelta Founder Fined $388,000 by SEC

In a landmark ruling for decentralized cryptocurrency exchanges, the founder of Etherdelta, Zachary Coburn, has been ordered by the United States Securities and Exchange Commission (SEC) to pay a USD 388,000 fine.

Etherdelta was until now among the top so-called decentralized exchanges. Its trading volume has crashed to USD 250,000 per day due to this news and it seems users have gone over to IDEX which now has USD 3 million of daily trading volume.

Etherdelta offers trading of Ethereum ERC-20 tokens, most of which are from initial coin offerings (ICOs) and can be considered securities by some jurisdictions, certainly by the SEC. The exchange did not have a license to operate as a securities exchange and Colburn is found liable for this since he created the exchange and operated it from July 2016 until it was sold to foreign investors in November 2017.

Coburn is being ordered to pay a disgorgement of USD 300,000, USD 13,000 of pre-judgment interest, and USD 75,000 to the SEC. The fines could have been heavier but apparently, Coburn worked closely with regulators and prosecutors.

This case sets a precedent where someone who creates the code for a decentralized exchange could be heavily fined by the SEC. This ruling could mean decentralized exchanges are considered illegal in the United States and therefore illegal worldwide. Even if a decentralized exchange tried to ban United States users, little could prevent enforcement scrutiny, as was seen with 1Broker, which was investigated by an undercover agent from the Federal Bureau of Investigations, paving the way for a lawsuit.

It would seem the only way to successfully launch a decentralized exchange is to retain full anonymity, extending decentralization to the hosting and management of the exchange hosting and software itself.

Bisq is a better example of a decentralized exchange, but still not 100% decentralized or anonymous. Most decentralized exchanges available fall short of true decentralization and autonomy, although that would be arguably impossible to create with today’s technology.

 

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Ethereum ERC-20 Creator Proposes Reversible ICOs

The creator of the Ethereum ERC-20 token standard, Fabian Vogelsteller, is proposing new technology which will make initial coin offerings (ICOs) reversible, meaning investors can withdraw their funds from the ICO at any time. This will give investors full protection, which would eliminate fraud. This new form of crowdfunding might be called RICO, which stands for reversible ICO.

The ERC-20 token standard is an easy, efficient, and secure way of launching a cryptocurrency via an ICO. A smart contract can be created with ERC-20, where investors send Ether to the smart contract and receive their tokens. This technology has led to USD 20 billion of investments into ICOs in the past two years and has been a boon for the entire crypto space. Unfortunately, a significant fraction of ICOs end up not delivering on their promises of new blockchain technology or in the worst case scenario, end up being outright scams.

Vogelsteller said he feels “obligated to come up with something better” since, without ERC-20, scam ICOs would probably be much harder to pull off and occur less frequently.

The proposed RICO would allow investors to send back their tokens at any time to the smart contract address and get back the Ether they invested. This would give RICOs strong motivation to deliver on their promises, instead of misspending the invested money, since if the RICO fails then all the money will be taken back.

Vogelsteller said, “You are able to withdraw the funds you committed at any point of time and you do this by simply sending back your tokens… It brings the balance back between the community and the project and I think this is really important.”

If RICOs are implemented, then catastrophic ICO failures due to mismanagement or fraud will become a thing of the past. RICO projects will fail naturally and investors will be safe, rather than ICOs hurting all the investors if they don’t deliver. This is good for companies conducting RICOs too since lawsuits would be less likely if a failure happens as investments would be automatically returned.

One aspect of RICOs that remains unclear is how there will be a balance between the company getting the funds it needs and the investors being safe. For investors to be 100% safe, companies that conduct RICOs would never be able to touch any of the invested Ether, which is probably not the way they would prefer to work.

Vogelsteller will demonstrate an RICO in real-life when he launches his fashion and design blockchain Lusko. At that point, the concept behind RICOs should become more clear.

 

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