The Truth About The Latest Crypto Price Dip

Published in

The Cryptoverse

8 min readSep 12, 2018

On Today’s Episode of The Cryptoverse…

I have a theory as to why the crypto markets have taken yet another step down today, and I think it may have something to do with a decision by a federal judge about ICOs.

Now I don’t know about you but I’m getting really sick of my videos being consumed by topics relating to the government, regulation and the law.

Episode Transcript & Notes

I mean both videos so far this week have been primarily about regulation.

Monday’s Episode: ‘Why The SEC Suspending Bitcoin ETN Trading Does Not Matter’

On Monday it was about the SEC suspending trading of a European crypto product, on Tuesday it was about the Gemini Dollar being the first regulated stablecoin.

I just want you to know that I did not get into the crypto media business to constantly be talking about the old financial system. It just so happens that a whole slew of important stories came out recently that were related to regulations.

And today, it’s happened again because the crypto markets have taken yet another step down and it looks to me to have coincided with news about a United States Federal Judge ruling ICO frauds fall under securities law.

Tuesday’s Episode: ‘New Gemini Dollar, The Final Nail in Tether’s Coffin’

So let’s unpack this one together like we usually do and examine the pieces so we know exactly what’s going on, what the implications are for our investments and what action we need to take as a result.

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Let’s Continue Unpacking…

https://uk.tradingview.com/chart/9Ly0ynVv/

So let’s face reality, Ethereum’s price in US dollars in a steep decline…

And according to my technical analysis, the next support isn’t until $136, which was the low from the 16th of July 2017.

The crypto market went through a mania as a whole last year, but Ethereum in particular benefited from being the platform of choice for ICOs.

Ethereum’s smart contract functionality makes it so much easier to create a new token on the Ethereum network versus the huge complexity of establishing a dedicated blockchain.

Now, this statistic is from January 2018, but at that time Ethereum tokens made up 91% of the cryptocurrency market cap.

And let’s face it, the lowest price Ethereum itself saw in January 2018 was $770.

So while this wasn’t the exclusive reason for Ethereum’s rise in price, I’m suggesting that a lot it had to do with the fact that many people saw Ethereum as producing a genuinely useful service.

That directly contributes to Ethereum’s fundamental value which then sort of creates a feedback loop when people expect those fundamentals to continue to get stronger over time.

So that’s the setup.

Now, let’s look at today’s news that may have caused a significant dip not just in Ethereum’s price, but across the altcoin market.

According to my research it was Bloomberg who were the first to break this story yesterday afternoon around 5pm London time:

https://www.bloomberg.com/news/articles/2018-09-11/u-s-judge-says-initial-coin-offering-covered-by-securities-law

The headline is “U.S. Judge Says Initial Coin Offering Covered by Securities Law”… but wait…

In the very first line of the article body it says…

“A federal judge has ruled that U.S. securities laws may cover initial coin offerings.”

To which I say “well yes, we already knew that, so what?”

We already knew that regulators may consider ICOs securities, it was the discussion that ran for the whole of 2017, right alongside the boom in ICOs as the new revolutionary fund raising method.

I felt a little bit angry about this because I believe Bloomberg left the word “may” out of the headline on purpose, because it immediately softens it.

I believe they also know that the vast majority of their readers don’t actually read entire articles.

Fortunately for me and unfortunately for them, I was blessed with an eye for detail so I do read entire articles, and I do not miss such details.

So let’s go one level deeper..

US District Judge, Raymond Dearie, said that the government may proceed with a case against a man charged with promoting digital currencies back by investment in real estate and diamonds.

The prosecutors say that the man never had any real estate or diamonds and was acting fraudulently as a result. So this is a criminal fraud case.

I think I mentioned this in Monday’s episode. This really has very little to do with cryptos or ICOs at its core.

This is about a man promoting a fraudulent real estate investment scheme. You could report the story without mentioning the fact he did an ICO and it would still make perfect logical sense.

Now I’m not suggesting they leave a detail like that out, I’m just saying that by mixing the concept of an ICO into a news story about fraud is very likely to lead to readers linking the two in their mind.

Again remember, my eye for detail gives me the gift of discernment. That is not well developed skill among the masses so they tend to clump concepts together like different colors of play dough.

The question really is this. What would have happened if this man DID have the real estate and the diamonds? What if he owned them outright and acquired them legally?

Unfortunately, the only way we’d ever know that is if such a case actually was presided upon by a judge in the same position. Perhaps my example would never reach the courts BECAUSE it was legit.

That would actually prove my point that there’s nothing illegal about ICOs themselves, only how they are conducted. And that conduct is already covered under existing law.

In fact, the Bloomberg article says that the judge’s decision focuses on the particulars of this ICO and not on other ICOs transactions.

However, if this guy gets convicted it is going to have wider ramifications.

The judge actually said in his ruling “Simply labeling an investment opportunity as a virtual currency or cryptocurrency does not transform a security into a currency.”

Apparently this guy didn’t even issue any digital tokens to the people who invested money, yet he still denies any wrongdoing.

So circling back to the affect this may have had on the markets.

Given that Ethereum based tokens accounted for the vast majority of the market cap at the beginning of the year, and given that a large amount of that was the result of money flooding into ICOs…

Investors in those coins may now be in a panic.

If we follow the logic it probably goes something like this…

This guy gets convicted, the ICO I invested in gets targeted next, they go out of business, the token price goes to zero, I lose all my money.

Now this particular court case relates to an ICO that clearly appears to be a fraud. But sadly that’s not going to stop the fear from spreading to even legitimate ICOs.

The ICOs don’t have to get targeted by the justice system. The market just needs to perceive that has a high risk in order to generate the emotion of fear, and emotion is what moves human beings into action.

That action today has been to sell off a bunch of altcoins.

How this ultimately circles back to Ethereum is that, while Ethereum itself has already been cleared of being a security, that fundamental utility value we spoke about earlier is also now looking like it’ll be eroded, and that’s what I think is leading to the Ethereum price falling.

This is precisely why I put together my “Truth about ICOs in 2019 and Beyond” video. I know from the stats the vast majority of you haven’t watched that so please now go back and review it in the context of today’s news.

Truth about ICOs in 2019 and Beyond

So what’s a crypto investor to do?

That very much depends how close you are to your resilience threshold.

It’s the very fact that many investors have just crossed their threshold of mental discomfort that they are dumping their coins, that’s a natural reaction.

It just re-enforces the fact that this crypto market is so brutal that it’s really only the most resilient people, or those with faith in the long term potential of this industry that will be able to hold out.

I don’t mean to be glib, but these are the dynamics of a super high-risk, super high-reward market.

And you know what I’m going to say next because you’ve heard it before.

My recommended tool of choice for building mental resilience… is meditation.

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