State of the Cryptocurrency Market
Summary of the Current Bitcoin Market
This is what is happening on inside track and what we discussed recently….
We will see some ups and down, with marketing going up and down, but the volume of money and attention flooding into crypto-assets only keeps increasing.
However, there are VERY FEW real or legitimate coins. There are lot of coins with very nice looking websites and many coins with very nice looking “advisor boards”. There are coins raising hundreds of millions of dollars in ICOs left and right.
However, almost none of these coins have any software developers or have the ability to hire or manage software developers or the ability to architect or design software.
However, their marketing is very good. Since they do not have to do software development, they can focus 100% of their energy on their marketing (instead of having to develop things). While the projects who are actually doing real things are handicapped in this market and ignored.
Some of the projects with no developers who have raised insane amounts of money, have even announced that they will not open source (no one gets to see if they are developing software), until “their AIs are done”. So they are going to build some type of artificial intelligence machine learning (LOL, what!?) before anyone can see if they are actually writing code or know how the system they are building is supposed to work.
Since there are so few real projects, we will see MASSIVE floods of money, that are quite rapid, into the small number of real projects.
The time to invest in these projects, between when no one cares when everyone is rushing in and the coin has appreciated is very brief.
Previously, coins had a period where public could buy them at a low price, before they appreciated. It tooks years (like Litecoin and Bitcoin).
Then for more recent coins like ByteBalls, there were only a few months to buy because it exploded in price from pennies to $800 in merely a few months. Now the appreciation is happening even more rapidly and in an even more compressed time frame.
Now, with projects like Cardano, all of the coins are pre-sold to insiders. Then the coin just magically APPEARS in the top 15 out of nowhere. There is no period when the coin is being bought/sold by a user community. They just sell the coins to insiders, VCs and the already wealthy. Then the coin POPS on the exchange at its full price and then they pay marketers to promote it and people to buy it. While the insiders dump as many coins as they can.
So before, there was a period when the public could find a good coin, cheaply, and buy it before it appreciated. Today, it is just a cartel of insiders who are already rich, giving each other coins (pre-ICO, lol what?) and institutional sales, before throwing the coin on an exchange and trying to dump as much of it as they can on the public.
So the new model is:
- The founders and insiders buy in at 1/10th the ICO price
- They sell to public at ICO price (10x what the insiders paid in the “pre-ICO” no one told you about)
- Then they dump the coins on the exchange at the ICO price and support price with the pre-ICO/ICO sales and then market the hell out of the project. Dumping as many coins on the dumb public as they can.
- Then everyone on the advisor board is doing this for +20 coins. Some of the people are just doing the ICOs, going to next coin and washing/repeating every week.
Most of the “Raised 150 million dollars in ICO!” are fake. Its like five guys taking their money, putting it into the coin and then getting their money back on backend.
The “investors” are demanding extremely steep and large discounts (huge percentages of the coins at extremely large discounts). “All the other coins are giving me 30% of the market rate”. The “coin investment funds” are literally popping up, to shop around and try to buy up 5 or 20 million dollar chunks of crypto-coins. 5% or 20% of crypto-currencies at a fraction of the market price, so they can dump them over time on the market for profit.
The old model was:
- You release coin
- It gradually appreciates over years as user community and adaption grow
- The earlier people do well and hopefully the project does something useful
The current models is to just scam the public for anything you can get.
I think, from experience with some of the coins I have advised on, from some of the conference calls I have been on, that I can predict that we could see some exchange owners raided at gun point and thrown face down with a gun to their head while their servers are looted and confiscated by the government. Not because their are scamming people, but just because they are clueless and snubbing the wrong person or the friend of the regulators.
Basically, none of the governments wanted to “regulate” Bitcoin or the exchanges until the “regulator” and their friends started getting into the market and wanted to push out the other people. In the United States especially, you will have an oligarchy like CoinBase and a few companies and only they are allowed to operate. They will start white listing coins, so only their coins get listed and exchanges will be delisting the other projects.
The exchanges that are not owned by the right people are going to be shutdown (or hacked).
They are literally doing “Do what we say and we will protect you”, then on backend they are trying to get them shutdown at gunpoint so they can put their “licensed” competitor in place. Sort of like Circle trying to integrate Bitcoin into iMessage, then creating a white-list of which coins could go into the Apple App store. Everyone is trying to figure out how they can grab this thing and get control over it.
Just imagine if Apple integrated circle as the “official Bitcoin wallet” and put it in iMessenger, then purged all the Bitcoin wallets from the App store.
The coin market is forming into an oligarchy. People are demanding “regulation” because they are scamming everyone left and right and do not want to compete with other people’s scams so they want to own and control the regulation and shut everyone else down. That is what is happening.
I think we may see another round of large hacks, like we did on Gox.
There may not be a regulatory or legal pretense for shutting down particular exchanges (like what happened to BTC-E) and they could be “hacked” and cleared out like MtGox.
There was also a conference call where it was pointed out that the SEC was funded by regulatory actions, fines and asset seizures. That is where their budget comes from.
- The exchanges are ranked by volume.
- Exchanges with no fees can create infinite fake volume, so only the exchanges with trading fees are included in ranking, otherwise it’s inaccurate
- To pump up their volumes and stay in the top of the rankings, the exchanges are doing secret rebates of trading fees and other scams to inflate their volume, while the actual volume is much lower
- The exchanges that are most aggressive about puffing their volume and who are least moral are highest ranked
- There is a huge incentive for exchanges to lie and puff their volume (which is why they are only listing scam coins, who can guarantee high volumes and fees)
Exchanges will not list a coin unless they are guanteed to make a minimum of $5,000 or $40,000 a day in trading fees. So the coin has to be heavily marketed to scalp that much money off the user community after the ICO. The exchanges are taking 0.1% on each side (0.2% per trade because they are trading against themselves). So every million dollars a day of volume is draining a coin $2,000 /day in exchange fees. Some of the coins are doing $6 or $10 million/day in “paid volume” or “guaranteed volume” ($12,000 or $20,000 a day in volume for medium sized coin). The exchange owners only care about volume.
The scam coins and mega-ICOs are paying the fees and working with the “market makers” to create the fake volume so the exchange owners know how much money they will make.
Kraken is probably the only exchange that no one complains about and is not screwing with the volume.
Most people with large orders are actually trading OTC on Bitfinex or other OTC platforms.
Most of the exchanges are making their money on volume and do not have maker/taker fees so there is no real order book depth. Making it very easy to rig and manipulate coin prices with a relatively small amount of money (hence OTC must be used to fill large orders because they cannot be done on the order book). The market structure is just broken and optimized for manipulation.
- No maker/taker fees, so a thin order book depth
- Exchanges making all of their fees on volume
- Exchanges ranked by fake volume (and exchanges are faking volume)
- Hidden trading rebates
- Paid market makers (people paid massive fees to create fake volume)
- Inaccurate exchange rankings (by fake volume)
- Inability to buy/sell on market (thus a need for OTC)
- Most coins are off markets because of the hacking risk (getting Goxed)
- Ability to easily rig billions in coin market cap with little money because there is no real order book depth
- Emphasis of exchanges on only the largest, most well marketed coins who have done huge ICOs (all of which are scams). No emphasis on technology or real companies
So for concrete example and instance there are three micro-grid tokens and companies:
- One is launching token and is a 100 million/year existing business who has been building and operating combined heating/electricity generation for thirty years. Has whole legal department to deal with regulation and customer pricing laws and compliance. Has existing customers and revenue.
- The other two coins are are massive ICOs that raised tens or hundreds of millions of dollars, but have no software, no employees, no experience building power grids and do not even understand the regulations required to operate in the markets they are raising funds in an ICO for. Has no customers, no revenue, cannot even operate in the markets they are raising funds for.
- The two scam ICOs, already have multiple exchanges lined up to list them, with confirmed listing dates
- The actual company with 100 million/year in revenue with actual power grid projects, cannot even get a phone call or get the exchanges to talk to them
That is what the altcoin market looks like right now. The non-scams are actually being filtered out for economic reasons.
What is happening now is:
- The latest generation of users is buying/selling 15 or 60 coins in their portfolio. Someone who owns 60 coins does not have 60 wallets installed on their computer. Even the altcoin investment fund people are having trouble keeping 15 wallets installed to an offline computer and figuring out how to do offline transaction signing for them.
- They do not even have wallets installed for ANY of the coins. Meaning all of the coins are just sitting on exchanges waiting to be looted
- I did a survey of Ethereum users and ask them questions like “What Ethereum Thin Wallet is Best? Is there something like Electrum for Ethereum? What are the best Ethereum wallets?” and most of the “Ethereum Users” have never actually used an Ethereum wallet or cannot answer, do not know. This means all that money is on exchanges somewhere, its not in their wallets.
For the smaller coins (even coins valued in hundreds of millions or billions of dollars), many actually have almost zero real transactions, zero people actually with the wallet. I know this from node IP stats and harvested data I have seen.
Also, for the majority of the coins the volume is fake. There are coins with very impressive volume (which the exchanges are making a lot of money on) and very impressive market caps, but its all fake. Just completely fake. To get enough volume to get on exchanges, you have to agree to pay a market maker to create volume.
So some coins are giving 3 or 5 million dollars in coins to day trade on the exchange, to make the exchange owner money and lure in suckers and if you are an honest coin or not doing that, they won’t list you and will complain “Your volume is not high enough” and to go give their friends free coins to day trade and make the exchanges a lot of money.
They know the people that will do this and who wont.
The exchanges are making so much money on the scam and scam ICOs, that they will only list scam coins (which they make more money on). Their whole business is about volume. They can have 10 million/day in “volume” and the real order book depth is ten Bitcoin.
Also, most (the most popular) “Bitcoin News” websites are publishing fake news, “China Bans Bitcoin for the fifth time”, “Russia Bans Bitcoin”. Then when exchanges shut down something actualy happens (an event) there are ZERO articles about it on those website, because the REAL NEWS is not timed to their market pump and dumps. The media sites are literally just doing timed market pump and dumps with completely fake news. They are even recirculating fake, leaked “regulatory letters” from four years ago as “Just released China banned Bitcoin” news. And every single day is either a “pump day” or a “dump day”.
So for 90% of these projects, unless you are an insider and the one rigging the markets and in the cartel, you are not going to benefit from buying any of these coins. They have already appreciated 100x before you will even see them on the market. They are just popping into the top 20 out of no where now, with no one in public able to buy anything before the peak and then immediately crash afterward.
There are almost 0 (ZERO) news websites tracking:
- Actual technology
- Real world usage of blockchain
- Real world development (projects with developers)
- Smaller projects that are trying to do something more than run a pump and dump for the suckers
The whole market has been taken over completely. The libertarian aspiration of Bitcoin have been killed by simple greed and lust after easy money.
There are people who have real data (primary data) and they know which coins have actual users and real user communities. I track this data constantly and the data is pretty bad. The existing coin market is a train wreck.
Since no one ever withdraws coins from the exchange, the data suggests that many coins are selling more coins than actually exist. The trading volume and activity is completely uncorrelated to any real verifiable primary metrics.
People have told me that some exchanges have a history of sudden delisting of some coins without allowing the users to withdrawal. Which would explain what is happening. My attitude now is “If the coins are not in my wallet and on my computer, they do not exist”.
Once the regulators lock out the smaller coins from the markets completely with white-listing, the only thing that is getting listed will be two or three multi-billion dollar mega-scams a month. I have no idea what this will look like. Only the biggest, most toxic, best dressed scams who paid off the most people will be able to get listed.
The big changes to the market will be:
- Multi-coin support (cross platform coin/wallet support standards, people pulling coins off the exchanges)
- DEX (distributed exchanges), the real and long term money has already moved off the exchanges because of the hacking risk.
- Real uses of blockchain instead of speculation (actual companies, using tokens for real business functions)
However, the sophisticated people are doing very very well. The people who know what is going on.
Many of the large investors are moving off of the exchanges to OTC.
They are boycotting all the coins with one or two “pre-ICOs” where the insiders get to buy at 1/100th the price of the public. They are ignoring the massive ICOs and looking at fundamentals and primary metrics.
It is sort of obvious, to anyone that is not an idiot, that if a coin raised 1 billion dollars in an ICO, that the price is not going to go up 100x (that 100 billion dollars in shucks are going to come along and dump one hundred billion dollars into the coin so that all the people in the ICO can exit 100x when the bought it at before the ICO). Especially if the coin is a “Smart Contract Platform” with no users or applications and not Enron selling a billion barrels a year of oil for E-coin.
- A coin raises 1 billion dollars in an ICO
- The coin WILL NOT increase to 100x the ICO price
- To go up 100x, the existing coin holders have to be bough out for 100 billion
- That money has to come from somewhere (where as the vast majority of coins only lose money and all of their inflows come from people buying the coin for speculation)
So it is obvious that all the best relative returns are in the smaller projects and not the mega-ICOs.
So all the money is being made by avoiding the mega-ICOs and focusing on fundamentals.
Where as idiots see “They raised twelve billion dollars in FIVE MINUTES. I NEED TO MORTGAGE MY HOUSE AND BUY THIS IN CASE IT GOES UP 3x AFTER THE ICO”. Then all the people who bought the coin at 1% of the ICO in the “pre-ICO” (that you were not invited to), will dump everything at the ICO price as soon as it hits the market.
This trend of everyone creating twelve bitcoin forks, so they can get free coins and dump them is also ridiculous.