The Sad State of Crypto and How a Startup Struggles to Hand Out Free Money to Its Users
The Big Short
There is a scene from the movie The Big Short where the hedge fund manager Steve Eisman (played by Steve Carell) goes on a field trip to Miami to investigate the housing bubble. He speaks to a stripper that owns 5 houses and a condo and who has no clue about the teaser interest rate she is paying. That’s when he declares the housing bubble and shorts everything. If you haven’t seen the movie, go watch it. It’s a great commentary on the subprime housing crisis in the US. Here’s a short clip of the scene:
Michael Lewis, the famed author of The Big Short, has been praised because he uses the subject’s stories to reveal the social and economic problems of our time. If Michael Lewis, were to write a new book in 2018, he would write about crypto.
The Dilemma of a Crypto Startup
For the past six years, I’ve been running my own software as a service (SaaS) business. I am well aware of how hard it is to get some strangers online to pay for your software. What I didn’t realize is that it’s equally as hard to give away money to your users.
A few months ago, I decided to join a good friend on a startup in the crypto space. After giving out thousands of dollars of our own hard-earned money and receiving raving 4.5 stars reviews in the Google Playstore, we are still having trouble convincing our users that we are NOT a scam.
So, how did we get here? How is giving away money on the Internet as hard as making people pay?
Our Crypto Platform
The startup we are building is a virtual crypto simulation game. A user joins a weekly contest with $100k virtual cash. At the end of the week, the winners with the most net worth win actual crypto prizes. On a typical week, we give away $200–300 dollars USD in prizes.
In the game, you can buy and sell any coins as a way to learn about the crypto space. Why did we decide to create this? First we’ll cover how crypto has evolved in recent years and you’ll see why there’s a huge need for people to have a safe place to learn about crypto before jumping into the shark infested waters of crypto trading and investing.
Shitcoins! Shitcoins Everywhere!
There are currently 1559 coins out there. After playing Altcoin Fantasy ourselves, we came across some interesting crypto projects (or what we refer to as shitcoins):
- A coin with 500 million market cap that went up 2000% in one day: 2 year old github repo that was recently forked and one developer
- Project with 10x more business people than engineers (These company are obviously focused more on trying to sell you their coins than building something valuable)
- Massive pump and dump telegram groups
Just in case you are wondering what a pump and dump look like:
As a result, one of our users was able to capitalize on the massive pump and dump of prices and ended the week with $18,430,188.82, a whopping 18,430% weekly gain! To curb these ridiculous gains, we had to restrict our coins to the top ones with less volatility. This begins to speak to the mass amounts of scams out there that exist in the crypto space.
Crypto vs Stocks
The nature of crypto is such that it’s
- 24/7
- Global
- Highly volatile
- Highly technical
In stock market, companies report earnings, and the price of the stocks adjusts accordingly. In crypto, since most projects are at the concept stage (white paper and prototype), the ones with the most hype win.
No project has mastered the art of hype building than Tron. Just take a look at their road map as an example:
If you ask any serious developers what their project will look like in 10 years, you will of course get an answer that references Star Trek — no joke! You can see that they capitalize on the Star Trek hype and haven’t actually provided any information as to their road map. You probably wouldn’t invest in a stock that gave you this kind of roadmap for their business. So, why would you want to invest in a crypto like this? Yet, believe it or not, at one point, the market cap of Tron is
Moon and Lambos
To amplify the effect of hype building, each coin has its own social networks. There are Youtubers out there who bought the coins early, promoted it to their hundreds of thousands of subscribers, pumped up the prices of their coins. We find that there is a direct correlation of the price hikes with Youtube mentions. Did these Youtubers do so for the sake of their subscribers learning about new coins or for their own Lambo aspirations?
Irrational Exuberance then Fear, Uncertainty and Doubt (FUD)
If you entered the market before January 2018, you likely developed this dangerous illusion that nothing can go wrong in the crypto market, and everything will just keep moving up and to the right. Enter January 2018 and the crypto market has gone through some reckoning.
It has shrunk from the peak of $814 billion on January 7th, 2018 to $249 billion (as of April 6th, 2018). So, in a short four months of time, about half a trillion dollars got wiped out. That’s more than the market cap of Facebook (456.67billion as of April 6th 2018). Sadly, some people have lost their 401K and life-savings along the way.
“The market can stay irrational longer than you can stay solvent.” — John Maynard Keynes
Because the water is so muddy, big tech companies have stepped up to crack down on the scams.
With big names already stepping up to publicly remove support for crypto, it’s likely only a matter of time before more companies follow. With all this doom and gloom, many of the crypto investors we talk to are feeling deflated. There is a sense that the lambo they envisioned earlier has turned into a toys car at this point.
What’s a HODLer To Do?
With so much fluctuation in the crypto market, and cyrpto paupers becoming cyrpto millionaires in one week then back to paupers in the next, it can be terrifying to consider investing in crypo at all. That’s exactly why we built Altcoin Fantasy— to enable people to try their hand at investing in cryptocurrencies risk free. Not only that, but we’re giving away money for people to do so!
While crypto investors are losing money hand over fist, our top players are still doing great on our platform, with 200–500% returns week by week. Imagine if you made the same trades on the real crypto market as our top players — you’d practically have enough money to open your own lambo dealership and give away lambos for free!
Crypto Got You Feeling Excited?
If you are new or are curious about crypto investing, here are some good resources to get started:
Crushcrypto — in-depth ICO and crypto reviews by people who used to work at Morgan Stanley
Cryptomismo — rank crypto projects by their github activities
Boxmining — in a nutshell series introducing different crypto projects
Siraj — awesome channel about everything blockchain, AI and tech
And lastly, a little bit of shameless plug here. Our very own…
Altcoin Fantasy — crypto trading simulation game to hone your trading skills, have fun and win real crypto! Learn about crypto before you trade your house (or your wife or husband) for crypto.
What are some other good resources you use? We’d love to hear them in the comment section below.
