Bitcoin’s recent brutal tumble below $10,000 sharpened many minds on crypto valuations. Lending platform Bitconnect slammed the shutters down hard on 17 January citing “continuous bad press”.
Ethereum founder Vitalik Buterin openly accused Bitconnect of running a Ponzi scheme. “BitConnect,” he said on Twitter, “really seems like a scam…an old school ponzi...bad actors hurt the community. period.”
Elsewhere fake news is hitting some valuations. Fraudsters are targeting apps, Twitter accounts and other social media to attack or feed valuation hysteria.
“Every day there’s a terrifying amount of scams and out-and-out fraudulent schemes,” one source told Capital. “I could raise money as a window cleaner and have a window cleaning token. Forget about them.”
Call to God
One newbie is BiblePay (BBP). It claims it’s the crypto currency for Christians and that it sponsors orphans (location uncertain). It has a website: “Clear your concience (sic) and help a community dedicated to supporting essential causes while maintaining the highest efficiency…extend the Jesus kingdom”.
Capital emailed BiblePay for more info. BiblePay replied. “The CEO/Founder,” the email read, "is Rob Andrija. Employees: 0. Developers: 1 full time, a few part time, seeking blockchain devs now. Based Out Of: Anonymous Location. God Bless You, Rob.”
No staff biographical information. A badly written website. A suggestion to pray for each other in ‘wallet prayers’. No address details.
Lock-down on privacy
To be fair, the value of many privacy coins is their anonymity. Well-known privacy coins like Monero and Verge make a point of it. It’s part of the bigger collaborative picture of crypto assets, sticking two fingers to big banks and the established monetary control system. Other privacy coins, such as PinkstarCoin, appear to bend that way too.
Camden Dore, token economics advisor at Crowd Machine, a decentralised peer-to-peer network player, thinks there will be growing demand for privacy coins as global authorities become more adept at tracking crypto assets.
“I’m bullish long term on these types of coins. As security features of cryptos are essentially their original value proposition this becomes central to their desirability as medium of exchange and stores of value.”
Another entrant is Bitcoin Zero with the mission “to evaluate the implications of extreme supply deflation in the crypto currency market”. Capital emailed Bitcoin Zero for more clarity here too but it did not respond.
Dore says he’s sceptical about any benefit from something whose sole USP claims to be deflationary. “Essentially, I think society adapts to a medium of exchange and its anticipated future value, whether inflationary or deflationary”.
Meanwhile regulators are talking seriously about regulating Bitcoin – making it taxable and traceable – while North Korean hackers simultaneously attempt to blast their way through South Korean crypto exchanges (South Korea hosts up to 15% of daily Bitcoin trades).
Mind the froth, focus on the practical
Short term, most valuations are almost or nearly pure speculation and irrational exuberance. Long term fundamentals should, one crypto source said, lean toward blockchains that have a practical use. Such as breaking up legacy processes and slashing counter party risk.
“In the former situation I would focus on the quality of their marketing campaign to drive purchase of their token.”
Be aware that anonymous coins won’t necessarily avoid government clampdowns. Much of the hype around crypto currencies is around blockchain technology itself –which big business has yet to utilise effectively (and if big business doesn’t get behind it fast it may not happen at all).
Establishment acceptance still some time off
Some mainstream financial brokers are edging cautiously towards crypto. For example, you can invest in crypto currency ETNs (exchange traded notes) through Hargreaves Lansdown, though Hargreaves will not offer investors direct access to Bitcoin or any other crypto currency.
“Understanding crypto currencies takes a very high level of technological expertise,” Hargreaves Lansdown warned Capital, “so even the most experienced and sophisticated investors should proceed with extreme caution. Investing in crypto currencies is a new phenomenon and this means there could be unknown risks.”