The New Definition for an ICO is: ILLEGAL COIN OFFERING
Updated: Jun 12, 2019
With 99%+ of the coins listed on CoinMarketCap non-compliant, illegal, not-really-a-company frauds, with unqualified teams, without software, without purpose and who went outside the U.S. but then solicited U.S. investors or allowed them to trade the Howey-failing unregistered securities on unregistered exchanges, and with illegal fundraising help from "ICO Advisors" who took illegal broker/dealer success fees, I think it's time to just call them what they are: Illegal Coin Offerings from Illegal Coin Offering Advisors, trading on Illegal Exchanges.
ETH rallied from December lows of around $80 all the way up to $160. Now ETH is back down to $120, having gone past the airdrop dates where someone would receive free new coins for owning the ETH coin (which btw makes ETH a dividend-earning security). I think the airdrops were what provided support and I believe that support is now gone. The days of ICOs and everyone needing ETH to participate are gone and with that demand. Companies holding ETH in their treasury from their own ICO have dumped nearly all and there is a glut in the market. Illegal ICOs lead to illegal exchanges who allowed US citizens to trade unregistered securities, and who acted as broker/dealers without proper licensing.
Thousands of ERC20 coins continue to fail, eroding confidence in the market and weighing on the perceived value of ETH. We haven't seen the bottom until all of that happens, as I said back on June 7, when ETH was around $607, down from $1,400 but about to get another 83% haircut, in my article, Will You Survive the Upcoming ERC20 Crash? I will say it again: We are going much lower from here and I'm looking for sub-$40.
The other thing people forgot along the way is that the big difference between Howey-failing altcoins, that were actually illegal securities, and compliant securities was investor ownership of any financial benefit of the underlying enterprise. There was no audit, governance nor accountability as there is with a typical investment in a new company. The "coins" that were created suddenly became a bet on an idea, and little else, with no ownership of anything except the "utility" token, which was really a representation of the public opinion at any given point in time, as shown in the last trade at a crypto exchange matched to USDT or BTC or whatever other altcoin pairing.
Crypto 1.0 was tulip-mania all over again, with massive fraudsters selling worthless bulbs to eager people whose rationale was weaker than their fear of missing out.
Besides the fact that nobody knows the real last price of BTC because there are too many exchanges, and nobody is keeping track but the high-frequency traders, there is a bigger problem with crypto as compared to securities. Fair value cannot be derived by traditional methodology.
WHAT IS FAIR VALUE?
From the mind of Benjamin Graham we understand that fair value is the price of a share of stock, divided by the earnings per share of that company, which should be equal to the growth rate in revenue and earnings, or perhaps market growth as factors. Therefore if you have a $10 share of stock with $1 in earnings per share the p/e is 10/1 = 10. If the company is growing its revenue and earnings by 10% in the coming year then it is fair value. If the company is growing revenue and earnings at 20% the fair price for the stock would be $20.
This fair value method of p/e = growth rate was followed successfully by people like Berkshire Hathaway's Warren Buffett, who studied under Benjamin Graham. Buffett said of crypto, "I can say almost with certainty that they will come to a bad ending."
The problem with crypto is that the emperor has no "e," only the speculative "p," with little to no accountability, with speculators depending on charts and trading history for false support levels.
THERE IS NO INTRINSIC VALUE IN A "COIN" UNLESS YOU CAN SPEND IT EASILY, RECEIVE A SPENDABLE DIVIDEND, OR YOU OWN THE UNDERLYING ASSET.
Crypto 1.0 is dead and there are now only people holding the proverbial bag of shitcoins. Long live Crypto 2.0.
If it is a replacement for a fiat currency, is a commodity or coupon it is likely NOT A SECURITY. You can read about this in a Memo I penned with the help of retired SEC Commissioner Roel Campos and his team of top attorneys at Hughes, Hubbard & Reed, titled “Zen & the Art of Compliant Coin Maintenance,” which explains in detail with citations the difference between securities and compliant cryptocurrency.
You can follow me here at JohnGotts.com as well at:
Thanks for reading, sharing and thinking about this post.
John Gotts - Genius, Husband & Farmer
Founder of AngelTrades.com and the foremost expert on compliant digital assets.
Warrior fighting for the honest, safe use of compliant digital assets, which protect investors.
John Gotts, AngelTrades