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Weekly Newsletter- 30/05/18

 

With Bitcoin’s market cap stumbling, rolling, dropping and rising, it’s hard to really point the finger and give a succinct reason as to why Bitcoin’s price keeps on gradually dropping as well as the rest of the altcoins. I feel there are several mitigating circumstances that I will attempt to dive into.

Firstly in the long term, the U.S’s financial regulating authority- the SEC have still yet to come up with a statement other than all ICO’s are securities as opposed to utilities. Several crypto’s regard themselves as utility tokens, for example Ethereum is considered by many to be a utility. Should the SEC state otherwise Ethereum could run into many problems, which would seriously affect many other ERC20 and ERC721 tokens that are based off its platform. This has created uncertainty and doubt in the market as well as the fact that SEC has subpoenaed many crypto funds based in the U.S.

One thing that does seem apparent currently is that the Bitcoin market is being heavily manipulated. With prices rising during the day and dropping at night, (that being UK time) it points to the Asian market  as the one facilitating it, as soon as the East wakes up prices remarkably drop. When the West wakes up, prices rise in the wake of the price difference thus allowing a tug of war scenario to take place.  It’s also worth bearing in mind that the selling volume of BTC has been substantially higher than people buying into the market, and with more supply than demand at the moment we could see BTC’s price continue to drop, with it being anywhere as low as $6,800-$6,900 within the next week.

In other news, the much anticipated launch of EOS Mainnet is scheduled to happen this Saturday on June 2nd. EOS announced that it would give $10K for every major bug found which lead to Qihoo, China’s largest security company discovering several major flaws in its system. It remains to be seen whether this will affect its launch date and if it does expect price drops!  Many major exchanges are supporting the shift from EOS’s ERC20 tokens to its new EOS token supported by EOS Mainnet.  (Should you have EOS ERC20 tokens, be sure to transfer them to an Exodus wallet and register them before the launch date, otherwise you could be stuck with worthless tokens.)

A question that was asked of me this week and I’m sure others are wondering too, is what effect fiat currency gains and losses have on the crypto market. Specifically whether interest rates rising in the U.S would somehow have an adverse effect on BTC. In the long term they’ll have more spending power although is this investment of 1% gains really going to stop institutions wanting to enter the Bitcoin market, especially as the price of Bitcoin today in a bear market compared to last year is up 23.3%?

But really where the question should lie is whether the Eurozone’s failings and specifically Italy’s, will have an effect on the price of BTC. On a day that saw Italian bonds soaring sky high, a potential Italexit and political unrest with snap elections as Italy remains without a formed government (since March) which in turn sent worldwide stocks into the red. Bitcoin, Ethereum, XRP, Bitcoin Cash, Litecoin, EOS and Cardano all saw gains.

Which begs the question do traditional asset classes have an effect on the “crypto index”. For the time being, at least for yesterday, they do. Italy’s pressure on the € further strengthens the argument having a decentralised currency like BTC can be a more valuable and potentially “safe” investment for institutions as you are not relying on the politics of nations but rather on the underlying technology that would serve it.

To finish on, I thought I’d talk briefly about ICO’s and scams in the crypto space. Whether retail or institutional investors are interested, thorough due diligence is key. The SEC recently released a fraudulent ICO of its own specifically launched and aimed at showing investors what a scam would look like. It’s called HoweyCoins and is worth taking a look at even for amusement sake https://www.howeycoins.com/.

The co founder of Ethereum, Vitalik Buterin stated not too long ago that 90% of ICO’s will fail regardless of whether they are genuine or legitimate projects, meaning you have a 10% chance of investing in a successful project. Looking at a study undertaken by The Wall Street Journal, it found that out of the 1,450 ICO’s researched, 271 were outright scams. Giving you 20% chance of investing in a deceptive coin offering. It’s not all bad news, a report from Boston College titled “Digital Tulips” studied 4,003 ICO’, which raised a total of $12B. The average investor earned a net profit of 82% in USD after a 60 day time frame.

Have a great week

Michael