The Token Report Newsletter, Version 2.1
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Despite months of increasing regulatory pressure, brave ICO issuers continue to domicile in the US — and, increasingly, Estonia and Gibraltar. We looked at ICOs closed in Q4 and open or set to open in Q1 and found the US and the UK were the only top-5 ICO domiciles to grow, quarter over quarter.
Zug’s “Crypto Valley” branding aside, ICOs seem attracted to more substantive efforts: Switzerland ICOs fell, while Estonia went from 6 ICOs in Q4 to 13 in Q1, and Gibraltar went from 7 to 13, after their governments got directly involved in the crypto economy. Among smaller ICO countries, France, Germany, Japan and Spain all grew in activity, but remain in the single digits.
Crypto Climate Reading:
Digital currency markets gained back some of last week’s losses, but regulators are still on the march in the US and elsewhere. We rate the crypto climate: RAW.
Weekly Read: How To Regulate ICOs
What to do when regulators seem to lack a basic understanding of the thing they’re about to regulate? Bring in the academics. In a new paper, ”Initial Coin Offerings and the Value of Crypto Tokens,” Christian Catalini of the MIT Cryptoeconomics Lab and Joshua Gans of U. Toronto establish one advantage and one limitation in raising startup capital through initial coin offering (ICO).
The advantage is: An ICO is a test for product-market fit; the disadvantage is the inflexibility inherent in token fundraising, compared with equity capital. These factors make tokens a complement, not a competitor, to venture capital, the authors argue. Here’s our brief summary of the paper and the questions it leaves unanswered:
How to Regulate ICOs: First Figure out What They’re Good for
FOMO & FUD: You don’t have to believe any of it, but here’s what the Internet was saying about people and companies in crypto last week.
- FUD: Brock Pierce. News magazine show host John Oliver gave digital currency and blockchain a fair and thorough treatment, on a show known for its early influence on the net neutrality debate. Michael Casey and Don Tapscott got airtime, as did Wax, Electroneum, Deep Onion, pump-and-dump groups, and “Bitconnect Carlos.” Oliver was less kind to EOS, dedicating a full three minutes to the project, in which he called investor Brock Pierce a “sleepy creepy cowboy from the future” and said he wouldn’t trust him to mow his lawn. Full episode here.
- FOMO: Blockstack. The project’s decentralized internet could “bring back the freedom and good will of the internet’s early days” — Wired.
- FUD: Mt. Gox creditors. Blockchain analysis has shown that between December 2017 and February 2018, one of the trustees of the Mt. Gox recovery fund sold ~$400 million in Bitcoin and other crypto assets, leading analysts to speculate that these large sales initiated or exacerbated the market downtrend during that time. — CoinTelegraph.
- FOMO: Ripple. A consortium of Japanese banks is teaming up to develop a mobile payments app utilizing Ripple’s blockchain technology, according to Ripple.
- FUD: Binance. suspended withdrawals from their exchange on Wednesday after users’ accounts were compromised and used to buy Viacoin, temporarily sending the price up over 200%. Binance reports that the trades have been reversed, and the vulnerability was related to a third party app with API access — Reddit thread.
- FOMO: Ol’ Dirty Bastard. The son of the former Wu Tang Clan rapper is launching an “Initial Artist Offering,” a cryptocurrency called Dirty Coin which will fund an upcoming album — CoinDesk.
Who to follow:
“I think the single most important indicator of a crypto project’s long-term success is if it generates excitement from strong developers and domain experts who have no association with it.” — Noah Ruderman, @devilscompiler on Twitter
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Token Report is an independent financial information service founded by Galen Moore and Peter Vessenes. Galen is a financial journalist with a background in startups, venture capital and launching news sites. Peter is a co-founder of the Bitcoin Foundation, and launched the first VC-backed Bitcoin company in 2011. He is managing director at New Alchemy, a boutique consulting and investment group based in Seattle, Wash., that is making a pre-seed investment in Token Report.
Nothing contained in Token Report materials or posted at tokenreport.com constitutes an offer or a solicitation of an offer to buy or sell a security, financial instrument, or other category of asset, or investment advice or recommendation of a security, financial instrument or other category of asset. Tokens involve risk and are not suitable assets for everyone. Token Report believes its information was obtained from reliable sources but does not guarantee its accuracy or completeness and accepts no liability for losses arising from the publishing of this information. The information provided by Token Report is not a substitute for financial, legal and other professional advice. Each individual should always consult his or her own financial, legal or other professional advisors and discuss the facts and circumstances that apply to the individual.
