Cryptocorn: How Whales And YouTube Influencers Drove Kin From $50 Million to $1 Billion Market Cap In Two Weeks
Kik is one of the most pioneering startups out there and is almost never reported by mainstream Canadian press. It was ahead of the curve of Snapchat (messaging for teens) and Facebook Messenger (bots) but didn’t develop a leadership position. It’s third major play is centered around its cryptocurrency: Kin. On Jan 6th 2018, Kin’s “market cap” soared above US $1.1 billion. In this post I lay out some series of observable events, including a very active whale and a YouTube influencer who played a key role in this run. My conclusion is that Kin’s actual present value is $0 — it is just a variable name, and real value will only be created by extensive usage and being linked to the dollar directly. DISCLAIMER: I hold about 15,000 Kin, worth about $10 now.
Kik became worth over a US$1 billion on Jan 6th 2018
Per this chart from Etherscan, 92.4% of Kin is owned by Kik/related entities. Overall, the top 100 holders own 97.29% of Kin. So when Kin’s market cap climbed to over $1.1 billion for a brief moment last week, the Kin owned by Kik and related entities was worth over a $1 billion (all figures USD). There is no other such private Canadian startup which has crossed that threshold.
Kik became one of the first startups globally to become a unicorn due to the craziness of crypto markets, moving beyond the frothiness of the VC industry which created unicorns in earlier years!
However there is more to this story than fundamental product/business activity. According to my analysis and cursory research (after I became curious..), this run in Kin’s case was driven by a very active investor and a YouTube crypto influencer. We had the perfect storm of an active trader and eager beaver buyers who started hearing about Kin, mixed with the general excitement in the crypto markets which led to a rise in Kin’s market cap from about $50 million on Dec 16th 2017 to just over $1.1 billion on Jan 6th, 2018! Now its around the $400 million mark (just after a week) — but that run is done.
Whales Make The Market
Some very minor Saturday-morning-in-bed-half-asleep digging here helps in narrowing down a very active whale — thanks to the wonders of an open, distributed blockchain — all of this is available to see publically (all links in this section are to relevant transaction/contract holder pages on Etherscan.io.
- The screenshot in the featured image above showed a series of transactions from ..214.. account to ..c55.. account, which then transfers the exact same amount to ..9e186..
- That is the 6th largest Kin holder, holding a 0.26% share (about 26 billion Kins, worth about $18 million).
- All the other top 10 Kin holders have done less than about 10 transactions each except what look like system accounts (since the ICO). This one, however, has done about 10,000 transactions, playing a leading role in making the market. Every minute of every day — there is a buy/sell happening in Kins from this account.
This whale bought 0.5 billion Kins on Dec 22nd 2017 — which was still a great time to buy given the 10x run ahead in the next two weeks. Another related link.
Another whale sold 0.5 billion Kins at the peak of the market price on Jan 6th 2018
Another whale sold 10 billion Kins (over 25% of the holdings in that account) on Jan 8th 2018:
Buy stickers for 8 Kin, while whales trade in *billions* of Kins ?
According to Kik’s product-related blog posts here — a pack of stickers costs around 8 Kin. There are people/entities trading in billions of kins and driving the price up and down.
What meaning does 8 Kin even hold in such a world ?
Did Kik make a mistake opening up the currency to purely speculative buyers/sellers ? And this in a world where 92.4% is still with KiK in various forms, the fact that there were 10 trillion tokens created — means almost 800 billion Kins are still floating around.
Timeline — ups/downs in market cap and key events
1. The Sept 2017 ICO value: $100 million
Kik, a Waterloo-based startup, raised $100 million as part of its high-profile ICO in Sept 2017 where it sold artificially created digital tokens based on ERC-20 (on the Ethereum blockchain) called Kins to investors. Kin wasn’t however available to Canadians for purchase as Kik’s CEO Ted Livingston noted at the time due to local regulatory concerns.
2. Post Sept 2017 ICO until Dec 16th 2017 market cap: $50 million
For several months after that, the total market cap for Kin was being listed as around $50 million, as shown by websites such as CoinMarketCap.
Then on Dec 13th 2017, Kik announced they were moving away from Ethereum to another blockchain called Stellar. The market didn’t move much in direct response to that and its price/market cap stayed about the same until Dec 16th. There were also a series of product blog posts by Kik — but market did not move right away.
Then, from Dec 17th onwards, trading activity picked up. Look at this chart.
3. Dec 17th to Dec 28th 2017 market cap peak: ~$100 million
Things start looking up for Kin during this period.
In hindsight, this random Internet guy’s post on Kin’s subreddit was bang on (posted on Dec 24th 2017)
4. Dec 28th, 2017: YouTube video by an influencer; value ~$100 million
An influential crypto personality blogs about Kin and posts this video.
A comment on that video..
5. Dec 28th 2017 to Jan 6th 2018: $1.1 billion peak
Kin’s market cap goes up from ~$100 million to a peak of $1.1 billion on Jan 6th, 2018
I woke up on Jan 6th — came across this stunning Kin rally — and proceeded to buy some Kin through an exchange. Paying multiple hoops of transaction fees — I “successfully” converted $30 worth of Ether to about $15 worth of Kin.
Kik’s founder tweeted that Canadians lost about ~$100 million in gains by not being able to participate in Kin’s ICO back in Sept 2017.
6. Jan 6th 2018 to Jan 13th 2018: ~$500–600 million
Kin’s market cap, barely few days later, is now about half of its peak on Jan 6th.
Cryptomania is in full bloom
Kin wasn’t the only crypto currency going through such wild swings. Dentacoin rose in value similarly during similar time period as well.
But..what does a crypto’s USD market cap really mean ?
The below linked article does a good job of explaining that. It argues that crypto market cap, unless that crypto is traded against a fiat currency directly (like ether ETH is traded directly against the dollar) is basically a meaningless number. If a crypto like Kin is traded against ETH, and ETH is traded against the dollar; then the market cap of ETH in USD doesn’t provide an accurate co-relation with the price of that crypto in USD as well.
So if someone were to try and cash out even a minor % of Kin for USD, by going from trading Kin to ETH, and then trading ETH to USD, that would drive the price of Kin towards $0 for others. I would love to see this expressed mathematically, for a true/accurate depiction of the market cap — but that seems elusive. How much % of such an altcoin do you need to sell to crash the price to close to 0 ? How much % do you need to buy to spike the market into believing a narrative and then capturing compounding returns ? It seems people are doing it, and missed-the-wave-investors like me are paying for their gains.
Kin has a 10 trillion token supply. It seems to me the market cap of over a $1 billion was influenced by trading in < 0.1% of that token supply.
Suppose you generate 1 billion tokens or coins and once they are listed on a exchange, the first trade ever performed will become the unit price. Market cap trackers will then multiply this initial price for one trade by 1 billion — and that becomes the total market cap, even though a single coin was traded.
Keeping fundamental value separate from cryptomania
I have come to believe that the market cap in USD, daily traded volume in USD and price in USD are all highly misleading metrics for crypto currencies not directly traded against dollar and other fiat currencies. Even minor buy/sells, influenced by crypto celebrities and whales trigger massive variations. These metrics don’t really say anything about the underlying value proposition — but more about can we run with this coin and make money off it. Dogecoin rose to over $2 billion in “market cap” even though it was meant as a parody, without its software being updated in 2 years. Dentacoin rose similarly to Kin, above $2 billion. It is a coin for dentists — to do what… is a headscratcher.
What will determine the value of Kin is not the whitepapers, product design roadmaps, and this highly speculative buy/sell which can be gamed — but actual usage by people in innovative products, and then being pegged to a fiat currency directly. Its fundamental value, right now, is thus $0. It is the name of a variable, someone copy-pasted /enhanced some ERC-20 functions to create this “token”, and is being used in marketing materials and what looks like test usage. The vision looks good — but we are far from it.
The task here is to build a “country” and then the currency has value if it is used in that “country”. If outside speculators can easily massively create/destroy that currency’s value, then the users holding Kin after doing tasks won’t be too happy. In my opinion, there is design flaw inherent in all such cryptocurrencies which have opted for being open to mass speculation without having the user base/or an interest/ability to stabilize that currency.
On the bright side, these models will be improved in subsequent cryptocurrency experiments by good faith actors and legitimate startups like Kik. Nothing ventured, nothing gained right…. Kik, led by Ted, is one to worth watch out for, and I wish them luck. They are trying and pioneering something which the world is watching in awe, is baffled by it, and trying to copy and improve upon.
Wall Street: Greed is Good; In Crypto: Greed is God
In crypto world right now, greed is not just good, it is god.
Such ERC-20 tokens (most such coins are based on ERC-20..) have value if they play a fundamental role in increasing the value of the underlying product. Say, what if Medium introduces a CLAPCOIN as a method of payment to authors; or Facebook introduces a LIKECOIN for good posts only and punishes you for spreading bad content, and so on. Crypto economics is the #1 thing today in my mind.
How you design the economy of your product is what will define the next generation of startups — other aspects of implementation (AI, distribution, etc) are just other components of the entire puzzle here
If you don’t have a product, then it is all just bullshit. In nicer words, without a real product, coins are purely speculative plays and its like betting on variable names (dentacoin, dogecoin, etc) and getting into a ponzi scheme ahead of others to cash out. Few will make money, and most will lose money — thats exactly how ponzi schemes work: newer investors pay for the older ones until it can’t sustain itself and one day the system crashes.
In the market we are in, a coin called PONZI would do really well and be worth over a $1 billion in no time. People are willing participants due to their greed and even recognize that these are ponzi schemes and still get excited about them. Charles Ponzi would have been proud of all these crypto coin launchers with no underlying value and who need a year to build a basic software product based on their “white paper”.
Here is to a fun ride in 2018. Hang on tight..
