For Mac Users The Security Bubble Has Bursting
This formula is simple, easy to use, and has the added benefit of being able to arguably identify market bubbles before they burst. As you probably know, when an asset is in the midst of a bubble, the probability of an unusually large downside move is greatly increased.
Sylverarts/iStock In July 2017, a young startup called caused a stir. It was a little-known project with an esoteric purpose: to build, in the words of its website, 'a new decentralised blockchain that governs itself by establishing a true digital commonwealth'. Yet it succeeded in raising finance to the tune of $232 million (£178m) - and not a cent of it was traditional venture capital. Instead, Tezos had scored the money from the crowd via an emerging funding model called a token sale.
Token sales are a hot topic in the booming world of digital currencies. Sometimes more colourfully referred to as an initial coin offering (because ICO sounds pleasingly similar to IPO), it's a novel way to fund a project by creating a token that will have a role within its ecosystem. For instance, say you were founding Twitter. You could design a token - a tweetcoin, perhaps - that users would have to spend when they wanted to tweet. You could sell tweetcoins to the public pre-emptively to finance building the service. These could immediately be traded for other currencies, so backers would enjoy greater liquidity than if they had made a traditional VC investment.
As well as being a way to fast-track capital, tweetcoins would later be used to remunerate people who offer their computing power to the service and keep it running. This would have an ideological benefit. 'It would be an open network,' says Jerry Brito, executive director of the digital currency think tank.
'So there would be no company that China could go to and say, 'Please censor this.' ' ICOs have generated more than, $1.38 billion of which was raised in 2017, according to the cryptocurrency news site CoinDesk.
Such is the hysteria, when the web-browser startup Brave held its ICO in May, the sale reached its $35 million cap in just 30 seconds. All expectations are for this sector to grow further in 2018. By Charlie Burton So far, so compelling. Yet, token sales are not without their detractors. It's an environment ripe for scams, and even when founder intentions are good, investors are often placing their trust in nothing more than an idea with a shiny website, clever marketing and a dollop of hype. Viewed pessimistically, it's akin to giving money to a man in a pub for tickets to a film that he says he will make. However, Johann Gevers, founder and president of the Tezos Foundation, argues that investing through a token sale isn't unique in its riskiness.
'It's exactly the same for traditional startups,' he says. 'Google did not have a revenue model when it started.
The first investor was one of their professors who said, 'Look, here's $100,000, who do I make the cheque out to?' They said, 'Sorry, we don't even have a company yet.' So he just made the cheque out to Google Inc, then they had to create an entity and open a bank account to deposit the cheque. This is just startups.' The need for token sales to comply with SEC rules, combined with investors' desire for greater confidence, may lead to a new trend, says Brito. 'In 2018, we'll see the emergence of platforms for the offering of new tokens that will better qualify the tokens before they're allowed to be sold, and will help investors make better judgments about them.'
Brito predicts that initially these platforms will only be open to accredited investors so, as the industry professionalises, we may perceive that the ICO bubble has burst. In fact, a slowdown would indicate that there are simply fewer scams. 'As a new funding model,' he adds, 'ICOs are here to stay.'
Back when the dotcom bubble burst, I wondered what the next one might be. I never imagined it would be something that’s totally made up, has no real-world use — and that gullible punters would pile into with gusto. Taking of gullible, I saw a scam this week of a faked page of a national newspaper carrying stories of celebrities using Bitcoin to rake in the cash. It even claimed it was done live on a popular daily TV programme, with the presenters making hundreds of pounds while the programme was running. Presumably people fall for these things.
But Bitcoin really does have no actual rational use, being totally unsuitable as either a currency or an investment with any lasting value, as. Well, it’s perhaps useful as a test for blockchain technology (which is genuinely something good, though we don’t really understand its full potential yet), but you’d have to be barking mad to put your investment cash into the thing. With Bitcoin at around the $3,400 level now, down from $19,783 at its peak, it might seem obvious that the. But if you listen to what they’re saying in cryptocurrency circles, it might not seem like it. Looking around, I see the Smartereum website quoting an analyst who apparently believes that “ a lot more money is going to come into Bitcoin, it will go up around $30,000-$35,000 this year – next couple of years? $100,000.” $100,000 per coin?
Elsewhere I’ve heard enthusiasts claiming that massive price swings are to be expected in “ cryptocurrency space” and that if your coins go up and down in value by 70% or 80%, or whatever, that’s fine. The Motley Fool is far too polite to let me publicly use the words that immediately spring to mind.
I’m a big believer in ignoring short-term volatility and looking at the long-term value of investments, but they need to be investments with an actual value in the first place. It gets worse And if such nonsense isn’t enough for you and you want something that’s even one step further away from a proper investment, did you know you can trade in Bitcoin futures too? To me that’s a bit like betting on the horses, and then also betting on whether you’re going to win on the horses. Sheer madness. I’ve read about bubbles inflating and bursting, and I’ve seen it happen in my lifetime too, but the one thing that genuinely puzzles me about the Bitcoin bubble is that it hasn’t fully deflated yet.
The economist Hyman Minsky’s theory of financial instability identifies the steps in a bubble as displacement, boom, euphoria, profit-taking and panic. Displacement is the beginning when some new fad or fashion takes over people’s minds, and the rest seem self-explanatory. We’ve certainly seen the first four stages, but I really don’t see the panic stage as having happened yet. And I don’t think we can declare a bubble as fully burst until that happens.
But we’ve seen a renewed fall in the Bitcoin price since mid-November, so the final panic stage might be starting. But whatever happens, there are more realistic ways to become a millionaire.