Cryptocurrency Weekly Market Cap Analysis and Forecast: Issue #1

Author: Duane M. Tilden, P.Eng.

Report Period: April 19th to 23rd, 2018

Disclaimer: The author is an active trader in cryptocurrencies and may have variable holdings in some or all digital assets reviewed. Trading and investing in cryptocurrency markets is considered a high risk venture and requires analysis, due diligence and patience. No guarantees on outcomes are offered or implied, market performance may change due to unforeseen events which may alter market participation. The analysis and subsequent forecast are “best guesses” or opinions based on information reviewed and methodology of examination and therefore may be subject to change.

Foreword

At this time I am planning to issue a weekly report and analysis. The reader is encouraged to read the analysis and familiarize themselves with terminology, cryptocurrencies and markets. Links, where deemed necessary will be included for reference and clarity. 

Purpose

The purpose of this ongoing blog is to develop and examine data in a scientific and methodical manner using a variety of tools to understand the movement of capital and price fluctuations in the cryptocurrency market. The cryptocurrency market is well known to be subject to volatility and can move quickly. To maximize profits a trader needs to have information into market movements which can be verified by various means of inquiry.

We will discuss these changes and explore the underlying causes. Forecasts made are our hypothesis or “best guess” and will be the basis of a Trading Plan.  Changes in holdings or planned capital investments may be made to adjust holdings to the forecast.  After the week we can review the results to determine how accurate our model and forecasts have been, and any required refinements.

Empowered with these tools it is hoped that those desiring to trade in these markets will be able to better evaluate portfolios and individual holdings to make buy, sell and/or hold decisions.

Weekly Analysis of Market

A. Total Market Cap

Using the tools we have developed to date let us continue with analyzing the cryptocurrency trading market using data from the past week. We seek to establish trends and using this information to forecast probable outcomes in the week ahead. To start lets take a look at the Total Market Cap (TMC) for the past week to spot the trends and chart data for further analysis. Total Crypto Market Cap April 16 to 23 2018

Total Crypto Market Cap April 16 to 23 2018 #2

Figure 1: Cryptocurrency TMC Weekly Graph of April 16 to 23rd, 2018

We can see that the overall trend for the week has been steadily increasing with a short dip on April 21st. TMC increased by $78 Billion from $322 to $400 bn for a weekly increase of 24.2%. Daily volume has increased by $7bn from $15.5 to $22.5 bn for a 45% gain over the week.Total Crypto Market Cap Mar 23 to Apr 23 2018 #1.png

Figure 2: Cryptocurrency TMC 30 Day Graph – March 23 to April 23rd, 2018

This is continuing the reported upward trend from last that started on Monday April 9th where TMC was above $250 bn moving to April 12th where TMC started at $275 bn and rose by $25 bn in under one hour to $300 Billion. Daily volume peaked on April 13th to over $27 Billion traded in 24 hours. The two week change in TMC is $150 bn from $250 to $400 bn, for a 60% gain with an average rate of increase $10.7 bn/day or 7.13%.

B. Analysis of the Top 25 Cryptocurrencies by Market Cap and Price

TMC Top 25 Cryptocurrencies April 19 to 23 2018

Figure 3: TMC and Dominance of Top 25 Cryptocurrencies; April 19 to 23rd, 2018

A spreadsheet has been created to examine a variety of components of market capitalization, pricing and dominance and their variance over time. Where there are significant changes from the norm we can look for reasons to understand individual price changes and capital movement.

C. Variation in Dominance as a Predictive Indicator

The use of a dominance factor gives us an indication of the overall contribution to the TMC of an individual cryptocurrency coin or token. When this factor changes significantly over a measured period of time we may observe movements in price or MC which stand out from the overall market average.

From the period examined we have the following predictions for the upcoming week based on variance on dominance. Dominance indicates a current established trend in buying or selling. Where dominance is high and positive then for a fixed supply MC and Price will rise, and when high and negative the converse is true, that the cryptocurrency MC and Price are in a decline in value.

Caution is the word; not all declines in dominance are bad nor increases necessarily good. Sometimes when a market has moved too far in one direction a market correction may be in order and short term changes in dominance may indicate a correction. Increases in dominance should be examined for underlying cause for the cryptocurrency to gain popularity in the market.

Be aware, there are pump and dump schemes which can run up values in MC and Price for a short term while the architects of these manipulation activities profit. Generally speaking the organizers target obscure coins and tokens held on certain exchanges. Due to size and wide distribution the top 25 cryptocurrencies are considered safer from influence and price manipulation, although not immune.

In future articles I plan on performing more detailed examination of results and expand predictions or forecasts to include possible future outcomes as well as explore underlying causes to individual price movements.

Recommendations:

Top pick for the week is Bitcoin Cash.

Top 5: Buy or Hold

  1. Bitcoin Cash variance in dominance increased by 28.30 %
  2. IOTA variance in dominance increased by 7.94 %
  3. Monero variance in dominance increased by 5.51 %
  4. Ripple variance in dominance increased by 5.08 %
  5. Bitcoin Gold variance in dominance increased by 4.83 %

Bottom 5: Sell or Hold

  1.  Qtum variance in dominance decreased by -13.24 %
  2.  Tether variance in dominance decreased by -11.27 %
  3.  OmiseGo variance in dominance decreased by -10.96 %
  4.  Stellar variance in dominance decreased by -8.90 %
  5.  NEO variance in dominance decreased by -8.14 %

 

 

 

 

 

 

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Oilsands and Fossil Fuels Receive Major Blow Due to Paris Agreement

LONDON — Europe’s largest bank HSBC said on Friday it would mostly stop funding new coal power plants, oilsands and arctic drilling, becoming the latest in a long line of investors to shun the fossil fuels.

Other large banks such as ING and BNP Paribas have made similar pledges in recent months as investors have mounted pressure to make sure bank’s actions align with the Paris Agreement, a global pact to limit greenhouse gas emissions and curb rising temperatures.

“We recognize the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement… and our responsibility to support the communities in which we operate,” Daniel Klier, group head of strategy and global head of sustainable finance, said in a statement.

via Europe’s biggest bank HSBC says it will no longer finance oilsands projects — Financial Post

Weekly Market Cap Surges $50 Billion; Cryptocurrency Prices Continue to Rise

Previously, I reported on Cryptocurrency Market Capitalization and its relevance to understanding movements in the prices of cryptocurrencies. Let’s take a look at the markets one week after the reported $25bn of capital was put into the crypto markets. Refer to Figures 1 and 2 below, where in Fig. 2 we see that the TMC moved from $275 bn to $300 bn in under one hour.

Total Crypto Market Cap April 12 to 19 2018

Figure 1. Total Market Capitalization April 12 to 19th, 2018

 

Total Crypto Market Cap April 5 to 12 2018

Figure 2. TMC April 5 to 12th, 2018 (1)

Inspection of Figure 1. indicates that the TMC demonstrates a weekly upward trend. After the initial spike of $25 bn reported last Thursday, another $25 bn was added to the TMC Friday. For most of the week it hovered at the $325 bn level until Wednesday April 18th. Since then another $25 bn has been added over 24 hours to a new level of $350 billion. This is a total increase in the TMC of the Cryptocurrency market in one week of $75 billiion, or 27.2 %, from $275 to $350 billion.

TMC Top 25 Cryptocurrencies April 19 2018Figure 3. TMC of Top 25 Cryptocurrencies, April 12th to 19th 

Top 25 Cryptocurrencies

Of the listed 1574 cryptocurrencies traded on over 10,000 markets as reported by the website CoinMarketCap we see that Bitcoin represents over 39% of the TMC, and the top 25 altogether account for over 87% of capital in the market.

Of the 25 listed coins/tokens inspected we see that 22 advanced and only 3 retracted on the week, for 88% of the listed cryptocurrencies in the green. Most of these advanced by 25 to 35% over the week, with Stellar advancing the most at 59%. This is an example of a competitive marketplace where various suppliers are in competition for market share.

Note that the TMC increased from $275 to $350 Billion USD or 27%, and by inspection we can see that the average price of the cryptocurrencies listed in the top 25 increased by a rate between 25 to 35%. At present the TMC of $350 bn is 42% of the peak TMC of $829 bn  which occurred earlier this year on January 7, 2018. Since the peak the TMC has been generally trending down to current levels.

We can see from the forgoing that there is a strong correlation between TMC and the price movements of the various cryptocurrencies. This is the market dynamic of supply and demand in action; as the money supply increases in a market of fixed supply such as cryptocurrency, the prices of said commodities in that market must rise.

Is it possible that we have seen the bottom range of current TMC and moving forward we may experience more uptrends.

Happy Trading!

References:

  1. understanding-cryptocurrency-trading-markets-and-total-market-capitalization/

 

 

Understanding Cryptocurrency Trading Markets and Total Market Capitalization

Note: Soon to come is a separate blog for Digital Assets where I will continue to write, curate and publish these types of articles, reports and reviews relating to the Digital Asset Class, FinTech, Blockchain, Smart Contracts, CryptoCurrency and Markets. Duane M. Tilden, P.Eng; April 12, 2018.

Foreword:

Working on technical analysis of cryptocurrency, such as Bitcoin, we search for causes and effects to understand what makes markets move or prices to change. This is quite similar to how we may view the stock or commodity markets and a lot can be gained from techniques used by stock analysts and traders. Knowing how much of a commodity one can purchase for a given price is often vital to budgeting, whether it’s for a construction project, a dinner, or some other financial endeavour. If I cannot purchase enough of one product for a particular price then I must either raise more capital, or purchase an inferior product that may meet the specification or recipe, if one is available that can achieve the desired outcome.

Observing trends on charts and graphs is part of the toolbox where changes in pricing, volume or other parameters are graphed over time. We search for short, medium and long term trends. When something happens in a marketplace we assume there is a reason and look for relationships so that we can further understand market influences on pricing. Down to a basic level we seek “if this, then that”. This is the basis of supply demand economics.

Thursday, April 12th 2018 we saw that the price of Bitcoin went from trading at about $6800 to $7800 USD overnight, an increase of about 15%. An excellent opportunity to investigate what is the cause of this change in price and subsequent effects in the cryptocurrency market. How does this event distinguish itself from other price changes we often read or hear about regarding Bitcoin? If you wish to know more, read on.

Market Cap and Total Market Capitalization

Prior to the advent of cryptocurrency markets Market Capitalization is used in the financial world to define the size of a company by multiplying the current stock price by the number of outstanding shares to determine the size of a company. Currently the usage of Market Capitalization and Total Market Capitalization are applied also to the issues of Cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, Tron, Lisk, Minex, Dash, EOS and a multitude more. Every month new coins and tokens are emerging with whitepapers, websites, and ICO offerings.

Simply put, the Total Market Capitalization (TMC) is the sum of all the cryptocurrencies Market Caps (MC) listed and traded on the polled markets. It is important to remember this basic concept regarding markets in that there are events in the world which may cause change in attitudes or availability of capital, and movements of capital in or out of the market are reflected in the Total Market Cap. As this value moves so does money in and out of the markets.

Total Crypto Market Cap 2013 to April 12 2018

Figure 1. Total Market Capitalization of Listed Cryptocurrencies, April 28 2013 to April 12 2018

Total Crypto Market Cap April 5 to 12 2018

Figure 2. Total Market Capitalization of Listed Cryptocurrencies, April 5 2018 to April 12 2018

Bitcoin Price on Coinbase 4122018

Figure 3. Bitcoin $1000 (15%) One Hour Price Increase on Coinbase on April 12th, 2018.

Examining the forgoing graph on Figure 1 we can see how most of the TMC has been raised in the last 12 months. The TMC peaked on Sunday, January 7th 2018 with a value of $813.87 billion, and has a current value (April 13th, 2018) of $301.79 billion. Note that when we examine Figure 2 and the weekly chart of TMC we see a decided jump in value from around $275 billion to the current $300 billion, indicating $25 billion was introduced into the cryptocurrency market in less than a day.

Dominance - Percentage of Total Crypto Market Cap April 2013 to 2018

Figure 4. Historical Dominance Chart – Percentage of TMC by Cryptocurrency 

In Figure 3, this influx of capital into the market was reflected in the rapid increase in the price of Bitcoin, which has the highest trade volume on all markets and is dominant in the cryptocurrency market as seen in Figure 4. Coinbase price for Bitcoin shot up from $6856 to $8011 in about one hour, marking a jump in value of $1155 or 16.8%.

Almost all other cryptocurrencies followed suit and prices increased across the board as the previously tight bear market flooded with new capital. Sell orders were triggered as the prices rose rapidly and traders had new capital to reinvest into the market, resulting in further increases in alt coin prices.

Markets and Events

So we have clear evidence that a surge or influx of capital has entered the market. Now the questions that remain in our analysis of this significant event or change in the market are threefold; 1. What happened?  2. Who is making the trades?  3. On what markets?

1. What Happened?

One potential cause for this change in TMC is the entrance of new money or players in the market. A study released on April 10th regarding the compliance of Bitcoin and cryptocurrencies meeting Islamic law relating to money and usury concluded by one Islamic scholar to be halal, or meeting strict Islamic requirements. For cryptocurrency holders this is important news as it opens markets to a significant sized population of potential users and investors.

JAKARTA, Indonesia. – April 10, 2018 – As fluctuations and volatility continue to rock the cryptocurrency world, Blossom Finance has commissioned and released a working paper exploring the Islamic permissibility of bitcoin, cryptocurrency, and blockchain. The paper concludes that Bitcoin fully meets the definition of Islamic money under certain conditions and is generally permissible under Shariah. Blossom’s research also includes analysis of various legal opinions (fatawah) issued by prominent Islamic scholars on the topic. The research and development of the working paper was led by Mufti Muhammad Abu Bakar – Blossom’s internal Shariah advisor and Shariah compliance officer.

2. Who is Trading and Why?

Let’s examine another report on this recent price spike to see if there is a correlation on what occurred on April 12th.

Bitcoin, the most dominant cryptocurrency in the global market, recorded a 15.94 percent increase in value, from $6,900 to $8,000. The price of the cryptocurrency rose by $1,100 within a 30-minute window, as massive buy volumes emerged. […]

To influence the price of bitcoin, which has a daily trading volume of above $9 billion, billions of dollars would have to be traded. More importantly, billions of dollars worth of new capital have to flow into the cryptocurrency market in order for the price of bitcoin to spike up, and bring the entire market with it.

The April 12 surge in the price of bitcoin was not caused by investors cashing out from alternative cryptocurrencies (altcoins) to bitcoin or reallocating their funds from other major cryptocurrencies to bitcoin, because the valuation of the cryptocurrency market increased by more than $20 billion.

A wave of new investors or potentially a few institutional investors likely allocated billions of dollars into the market in a short period of time, causing a short-term pump and leading the price of the cryptocurrency to surge.

It is virtually impossible to pinpoint a single factor to justify the price trend of any cryptocurrency, because a variety of factors can contribute to the momentum of a cryptocurrency.

https://www.ccn.com/bitcoin-price

As we see from this article on CCN they report on the price surge however dismiss the ability to determine the cause of this price movement as “virtually impossible”. While this may be the case when examining the price movement of individual coins, it is different when the whole market moves in unison. When this occurs we seek further explanation to determine whether this movement is a short term spike, or if the market has moved up to another level. For hodlers an increase in TMC to a higher level is good news, although it depends if investment is of a centralized holder or a widely dispersed or decentralized population.

There is a potential of overlooking causes in the market or performing a superficial analysis if we do not include the TMC in our study. One market analyst attributes to the surge in Bitcoin price to other factors such as short positions as follows;

Brian Kelly, CNBC contributor and head of BKCM, which runs a digital assets strategy for clients said: ”Once bitcoin broke higher, shorts were squeezed and forced to cover.”

“The ratio of short margin trades versus longs has been increasing recently,” said Nick Kirk, quantitative developer and data scientist at Cypher Capital, a cryptocurrency trading firm. “Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally.”

https://www.express.co.uk//-news-update-cryptocurrency-latest-surge

Others relate the price surge to relief of upcoming tax filing deadlines compounded by short positions;

Some market participants believe that Thursday’s sudden upward price move “could be an unwinding of that (tax-related) pressure,” and the spike had a compounding effect as it “forced traders who had bet against the cryptocurrency to buy back into the market,” reports CNBC.

why-did-bitcoin-jump-1k-april-12

These analysis overlooks the overall increase of $25 billion to the TMC or the rally in the rest of the market. If the connection between the price rises and increase in TMC is being caused by a new population of investors representing 1.6 billion people, then this is a likely indication of more to come in the future and we are seeing the first wave of new capital enter markets.

3. On What Markets are They Trading?

Where these trades are being made is a more difficult task requiring some deeper digging into available data. If we find that all of the capital is coming into the market on only a few or one exchange then that would be indicative of a centralized actor in the market, while if we see more evenly traded entry across a number of markets this may indicate a wider dispersed population. At this time we have no information if any abnormal trading occurred on any market on April 12th except for an overall increase in volume. Deeper analysis is beyond the scope of this report, and I will leave it as an exercise for the interested reader.

Exploring the historical data records on CoinMarketCap it is revealed that the 24 hour trading volume went from $4,641,890,000 on April 11th to $8,906,250,000 on April 12th. Clearly the increase in trading volume of $4.3 billion is not the TMC of $25 billion, and we look also at the price increase to get an indication of the increase in MC. From the same data chart we read that MC increased from $118,048,000,000 to $134,114,000,000 for a total of $16.1 billion which would be a dominance factor of 0.64 on the increase of $25 billion TMC. Currently the Bitcoin dominance factor is at about 0.40 and has been rising.

Final Remarks

The forgoing analysis is not an exact science and as we can see relationships are not always inelastic. For example the increase in the TMC of $25 billion cannot be accounted for by the increase in Bitcoin trading volume of $4.3 billion divided by the Dominance Factor of 0.4 which would predict an increase in Total Trading Volume of $10.75 billion. This would indicate that there is a multiplier effect on invested capital to TMC. Also, capital is constantly flowing in and out of the markets and may change hands many times in one day. All of these and others unexamined factors may affect the TMC.

Events in this world form links in a causal chain, and often to manage best our resources information on relationships between various factors are important to understand when forming investing strategies or making budget decisions. Analysts provide qualified opinions on trends, and predictive market analysis is an important and valuable tool in decision making. Understanding fundamental market economics is essential to understanding cryptocurrency markets.

 

 

 

Chinese Blockbuster “Alibaba” Launches Cryptocurrency Mining Platform

[…When asked his feelings on digital currency, Ma claimed to be “totally confused,” explaining that “even if it works, the whole international rules on trade and financing are going to be completely changed.”

At the same time, Ma – whose net worth tops $46 billion – was quick to praise the advent of blockchain technology, suggesting his company had already looked into ways to harness this tool. …] (1)

Alibaba Group Holding Limited

(Chinese: 阿里巴巴集团控股有限公司; pinyin: Ālǐbābā Jítuán Kònggǔ Yǒuxiàn Gōngsī) is a Chinese multinational  e-commerce , retail, Internet and technology conglomerate founded in 1999 that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals, as well as electronic payment services, shopping search engines and data-centric cloud computing services. It also owns and operates a diverse array of businesses around the world in numerous sectors.[2]

In 2012, two of Alibaba’s portals handled 1.1 trillion yuan ($170 billion) in sales.[3] At closing time on the date of its initial public offering (IPO), 19 September 2014, Alibaba’s market value was US$231 billion.[4]

As of January 2018, Alibaba’s market cap stood at US$490 billion.[5] It is one of the top 10 most valuable and biggest companies in the world.[6]

References:

  1. alibaba-launching-crypto-platform
  2. Alibaba_Group – Wikipedia

How to Invest in CryptoCurrency – A Guide for Everyone

Of the many and diverse interests of mine, I include the emerging technology and upcoming revolution in finance, the CryptoCurrency [CC], Smart Contracts [SC] and the BlockChain [BC]. This makes sense as it fits in well with my technological background and interest in all things internet and information technology.

My first experiences with CC’s go back to 2012 when I was first looking at Bitcoin. I was interested in mining and how the various video cards of the day would perform to mine the BTC. Unfortunately, beyond doing some initial research and some trials with faucets in 2014, I did not invest early in Crypto. Some of the early amounts were still in present in my wallet and the small amount had grown considerably even left alone, from about $1 to $20 in a couple of years. This is shown in my current balance below.

Yesterday, January 13th 2018 marks a first. The day I spent my money on cryptocurrencies online and put myself at risk, and this is after much careful deliberation. I am starting with $200 (Canadian Dollars) with a plan of  investing $100 weekly in strategic ways to build my nest-egg. This will require some amount of discipline to maintain this schedule however I believe is doable and easy to duplicate.

Blueprints for Success – A New Blog

When someone finds a way to produce a product or service better than other’s they create an opportunity to profit from their advantage. My past experience working as a professional engineer in a number of consulting and design firms, including my own company, have proven that these methods work. It takes time, research, trial and error, and finally reporting.

Accumulating knowledge in a book is an evolving task and takes time. As I move forward, I plan to divest to you, the reader, my methods. What I did, how it is working, and other related concerns, opportunities or just prognostications. For this I will be creating a separate yet to be named and soon to be launched blog.

The First Steps – Make a Budget

Making the decision to start investing took some time on my part. Of course budgeting was crucial and ensuring that I had a stable source of income to commence a savings and investing program. I will be able to establish more detailed plans as my investment grows.

Wallets and Exchanges

This alone is a seemingly large and complicated topic. At present I will leave out most details and explanations for later posts, focus being on getting started.

At this time I am using Coinbase as both my on-line wallet and exchange.  Eventually I will have more wallets, some online, others on my digital devices. The wallet is where individual CC’s are digitally stored. These include online wallets, wallets stored on devices such as computers and phones, and hardware wallets. More later.

I created an account and linked my bank account via a Visa/debit Card which I already obtained from my bank for online purchases. I had done this a couple of weeks prior to making my first transaction.

Transaction Details

The first transactions were two purchases where I bought $100 of Bitcoin and $100 of Ethereum. The amounts include transaction fees and worked out to purchase 0.00538 BTC and 0.05557 ETH and have been detailed as seen in the screenshot.

ScreenShot - Coinbase - 01#1141018

Figure 1. Screenshot of Coinbase Cryptocurrency Transactions 

Also shown in the activity which is a third transaction I made to acquire some mining power, where some of the recently acquired BTC were forwarded to the provider from the Coinbase wallet.

Transaction Fees

To Be Discussed (TBD).

Mining

I decided to experiment with hiring some computing power online from the cloud using the provider FFLAK. Upon registration you receive a 14 day trial and 100 Gh/s mining power to mine Bitcoin. I upgraded to add mining of Ethereum at a rate of 2 Mh/s in one transaction using $40USD of BTC, and upgraded another 2 Mh/s with $40USD of LTC. See Transaction Fees.

On the calculator provided the projected return from my initial $80 investment annually is $348 after service fees deducted which is 435%. A pretty good rate of return, worth making an initial trial investment.

ScreenShot - FFLAK ETH Calculator- 03#1141018

 

Figure 2. FFLAK Mining CC Calculator

Prior to investing, I have been experimenting with mining and faucets. Since October of last year I have been mining a pre-ICO CC using my browser. This currency uses a novel approach to mining and I have accrued over 60 tokens over the past 4 months. Visit JSECoin to learn more.

ScreenShot - JSECoin - 02#1141018

Figure 3. JSE Coin Browser Mining Program

Faucets and Games

TBD.

ICO’s – Initial Coin Offerings and Airdrops

TBD.

Cryptocurrency and Value Propositions

TBD.

Disclaimer

No guarantees or warranties are implied or expressed by the author. Risks are inherent when investing in speculative ventures, and not all information may be included when opinion based statements and projections are made. The reader is advised to perform independent due diligence.

All readers and investors are assumed to be self-governing and able to formulate their own opinions and make independent decisions. No liability will be assumed by the author, his assigns, or the corporate entities mentioned in these published articles, for any losses.

Any payments made to the author are generated by referral links. These generate a small return and is the only financial reward provided to the author. This is in return for his time and expertise spent in sharing this valuable information to you the reader. Please follow the provided links as a small, no obligation courtesy.

Referral Links:

  1. Wallet and Exchange:  Coinbase 
  2. Mining Contract:  FFLAK
  3. Browser Mining: JSECoin

 

Are Cryptocurrencies a Fad or a Revolution in Finance?

Duane M. Tilden, P.Eng
November 5, 2017

As I was walking to my weekly bridge game at the local club, I was pondering my newfound interest in cryptocurrencies, Bitcoin, Ethereum, the block chain, and related topics such as mining, smart contracts, ICO’s; the list goes on. I also thought about the value of things from my childhood, like marbles, hockey and baseball trading cards, comic books, coins, stamps, post cards, and other things that I have collected. All which created markets and gained extrinsic value over time, and could be held speculatively. I then asked myself, “Are cryptocurrencies a passing  fad or here to stay?”

What Makes a Currency Valuable?

Some things, such as coins may be made of a valuable base metal alloy, like gold, silver, nickel and copper. Coins are currency, and as such a perfect example to assessing intrinsic value and extrinsic value. In the past coins were minted with higher contents of the base metal alloys.  The metal content gave them an intrinsic value due to the metals rarity and utility. In time, these metals gained value, to the point where it cost more to mint a coin than it was worth.  People would then begin to horde or “mine” the coin for its intrinsic value which was greater than it’s face value as a currency.

metcalfe_curve

Figure 1. The Metcalfe Curve (1)

Extrinsic value, however, could be likened to what we would consider the “fiat” aspect of a currency. As currencies have moved away from a gold or silver standard, the value of money is largely based on consensus. Markets are also consensus driven, without a universal agreement or set of rules, there could not be trade. This is the reason for the development for money or currency. I work and get paid in the common unit of currency, which I can then use to buy and rent goods and services.

Currency and Security

Until recent developments, Governments and their agencies in partnership with banking institutions have generally controlled currency and financial markets. The operation of the economy is the basis upon which society functions. Money exchanges hands for goods and services, including wages. One currency usually denominates value in a physical market. However, these markets can be subject to various forms of attack or manipulation. Physical money could be counterfeited, transfer of money and assets could be lost or stolen, other forms of fraud could occur where one loses their assets.

Another form of attack is personal, or on the individual. Local regulations and taxation laws require valuation of assets and income which are held by the individual to be known to the public agency and could be subject to economic deprivation and restrictions. This is an instance where individual privacy is violated in built-in, systemic and semi-transparent.

Examples of this are everywhere, such as income tax, sales tax, medical tax, alimony and child-support, retirement and pension plans, insurance. If you owe the government money in a disputed case, they often will violate an individuals rights to deprive them of assets, such as money in bank accounts, garnishee of wages directly from the employer, denial of services, loss of principal residence and other such actions.

Most of the money that we earn, own, or spend is being tracked by the government. There are lots of taxes and lots of “rules” made by the big boys. Unfortunately, the present financial system is often disadvantaging us. Why? Because it often collects more than it provides. (2)

Consensus and Fiat Money

Since a currency in today’s world generally consists of a consensus agreeing in a trading market place, then the truth is anything can have value. As the internet has opened up trading across international borders, and companies have sprung up in the financial market place to provide services beyond their physical location, often catering to the world. I can purchase electronics from China and have them delivered to Canada on eBay, using PayPal or a credit card to exchange in their accepted currency. Buy and sell ads have sprung up, such as Craigslist and Kijiji , allowing wider ranging access to markets at a greatly reduced costs as compared to paper advertising in magazines.

Computer users over time had an edge over non-users, as information became available in a vast manner over greater areas. Shopping for the best price of a desired item, good or service can be searched for on my laptop and obtained at a fair cost. No longer does one have to go out and purchase a paper magazine or ad book, in their search. We now can now open a browser on our computer, or digital device, ask a question on a search engine and sort through a selection of answers. Phone numbers, addresses, reviews, prices, hours of operation, names of staff, job openings and more information is all available quickly and efficiently.

Enter the Bitcoin, blockchains and crypto-currencies. In one report recently obtained, sourced from the international Engineering Firm ARUP (2) it has been stated about Bitcoin, a technology introduced by Satoshi Nakomoto.

At the start of 2009,when the world was in the middle of a major financial crisis, a paradigm shift in technology quietly made its debut. That technology is called Bitcoin, and it’s the biggest innovation in finance in 500 years, and certainly the greatest invention of the 21st century so far. (3)

Cryptocurrencies Create Markets

Beyond creating an anonymous system of financial transactions and storage, crypto-currencies are creating new markets of value and trade. There has been a recent wave of new crypto-currencies coming on the market, most of which have issued whitepapers, and have sales landing pages which outline the details about structure, their markets or business plan, how to participate, and their projected timeline.

In my opinion, issuing tokens for sale is very similar to crowd-funding, which may also be likened to buying or selling shares on the stock market, without the restrictions or regulations necessarily placed on participants. Whether or not these activities are legal may depend on local jurisdictions. However, as long as no laws are broken for the purposes of making transactions in a business manner, or the proposed ecosystem,  then personal privacy of participants and security should be secured to all qualified participants, which are traits of a crypto-currency like the original Bitcoin.

The tokens offered in the pre-ICO sales are generally intended to fund the business operations, which, if all goes well, will turn a profit and be able to provide token based services. Details of the venture and how proceeds from projected profits are to be distributed are usually outlined in the white paper. Tokens may be able to be openly traded as a currency, depending on various applicable rules and regulations which may apply and being able to be listed on the various exchanges.

For example a current energy token on the market, PowerLedger.io (4) –  is a blockchain-based peer-to-peer energy trading platform enabling consumers and businesses to sell their surplus solar power to their neighbours without a middleman.

<From a Media Press Release>  Power Ledger is based in Perth and uses blockchain technology to allow households to trade excess solar power over the electricity network.

Major Australian power retailer Origin Energy recently announced a three-month trial with Power Ledger to explore the benefits and challenges of peer-to-peer energy trading across a regulated network.

“Blockchain technology and cryptocurrency underpins our business offering and we are excited to be working with Perth-based DigitalX” said Power Ledger Chair Dr Jemma Green.

POWR tokens will be offered via the Ethereum cryptocurrency network in an uncapped price offer, meaning the tokens’ final price will be determined by the market demand.

“POWR will be the Ethereum blockchain protocol token required throughout the Power Ledger eco-system that can be converted to ‘Sparkz’, which is the crypto-currency we have set up for users to trade electricity using the platform,” said Dr Green.

As part of the engagement,DigitalX will introduce cryptocurrency investors to Power Ledger in exchange for a fee which consists of a mix of Ether (ETH) and POWR tokens.

“Blockchain-enabled innovation is disrupting traditional industries and digital currency is changing the way companies access capital. DigitalX is pleased to be able to facilitate this quantum shift in traditional mechanisms for accessing funding,” said Mr Travers.  (5)

Generally speaking, however, most crypto-currencies will have many advantages over fiat currency or stock markets. For one, their trade is not restricted to one market, or country to operate. Beyond anonymity one can store value in one token, exchange it for another, buy services on a network, or hold it speculatively. There are the other aspects related to smart contracts and the block-chain where physical assets or other attributes, such as counting operations of a machine or device can be linked to a token. In fact the possibilities seem endless, only bounded by the limits of imagination.

Cryptocurrency Offerings and Exchanges

Every day I receive more notifications regarding new offerings on a multiple of news feeds. Many of these offerings look good and viable. There are many new white-papers to read, and some are quite technically advanced and detailed in outlook and projections. As more cryptocurrencies are introduced into markets and traded on platforms investments will be expected to continue.

As cryptocurrencies are rapidly gaining acceptance and appeal, the task of evaluating all emerging offerings would be odious without methods of categorization, comparison and establishing legitimacy. At this time, according to the coinmarketcap.com, there are 1257 Cryptocurrencies with a total market cap of $199 Billion USD currently listed on exchanges. Currently there are 121 active exchanges trading cryptocurrencies (5) and in the last 24 hours there was a “volume of 614,489 BTC and $4,396,051,516 on 5915 trading pairs” (6).

Other resources of current token or coin offerings and other related information can be found on various websites, including tokenmarket.net and coinranking.com.

The Future of Cryptocurrency

At the current pace of innovation, new offerings, and investment as determined by market capitalization, it does not appear that current rapid growth in cryptocurrencies  slow down. Rather, examining current trends in cryptocurrency and comparing to models, it appears that we are in the innovation and early adoption phases of a technological innovation, as seen in figure 2. (7)

TechAdoptCurve2

Figure 2. Technological Adoption Curve (7)

In addition to the known bell curve of adoption, the value of the networks being formed on the internet, obeys Metcalfe’s law, see figure 1.

Metcalfe’s law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).

As we can surmise from the effect of Metcalfe’s law as it applies to the development of cryptocurrencies is that we are currently in the earlier phases of value development, which will be expected to grow at an exponential rate associated with a nodal peer to peer model.

220px-Metcalfe-Network-Effect.svg

Two telephones can make only one connection, five can make 10 connections, and twelve can make 66 connections.

For innovators and early adopters these are exciting times as the number of participants continue to grow, and more capital continues to be invested in fledgling commercial enterprises. New business plans for ICO and Token issues are being issued every day. There are technical developments coming, apps, games, lenders and financial instruments, as well as new types of Tokens being issued with a variety of proof’s or calculation methods. Blockchains technology is changing to become increasingly efficient to handle ever increasing numbers of transactions. At this time there appears to be no limit to the possible applications of blockchain technology.

combined_curve

Figure 3. Combined Curve – Crossing the Chasm (1)

[…] The combination of Moore’s and Metcalfe’s laws explains the rise of information technology and the growth of the Internet as we know it today. […] And finally, in an unprecedented apotheosis, by combining the three preceding charts and by ― I have to admit ― visually cheating with axes, scales, and representations I came to the observation that the chasm is actually the point where the transition from a technology driven business to a value driven business needs to take place ― and if this doesn’t happen, that any new product or technology introduction is doomed to fail.

Disclaimers:

Expect that there are traps and pitfalls, some ventures may be fraudulent or simply fail. No guarantees on individual outcomes of ICO’s or other value propositions, and, as in all markets expect that there will be both successes and failures.

Expect, in various regions, government control and regulation, which may attempt to prevent or limit participation by populations or otherwise affect and manipulate markets.

Every participant in any new market, such as a cryptocurrency,  is advised to perform their own due diligence and research before investing capital.

No guarantees or warrantees are implied or expressed by the author, who, may at any time, hold vested interests in a variety of cryptocurrency tokens for speculation or other purposes.

End

References

  1. The Metcalfe Curve
  2. 7 Trends in Cryptocurrency Entrepreneurs Should Know
  3. Blockchain-Technology (for the Built Environment)
  4. How PowerLedger Works -Snapshot
  5. PowerLedger.io Home Page
  6. cryptocoincharts.info
  7. The Early Days of Cryptocurrency

 

An Engineering Blockchain Cryptocurrency

The revolutionary aspect of the blockchain is starting serious discussions in the Professional Engineering community. Indications are that there are some fundamental problems in Engineering may be solved by the issuance of a token, in this case called Quant (1) and is currently in the “sand-box” phase of development.

The plan, in part, involves mining Quant to create a public key, or data-base called Engipedia.  There is also a “proof-of-stake” (2) aspect, which forms an engineer’s private key summarizing by algorithm the engineer’s personal data such as education, qualifications, projects, and other contributions or related works.

The Quant token, which is proposed to have inherent smart contract capabilities will be mined by engineers in a variety of ways, most of which are intended to establish an expanding  knowledge base, one such enterprise is called Engipedia. This is a knowledge base which has a formidable upside for democratic technological advancement and dissemination of workable knowledge worldwide.

As a virtual currency, the Quant token may provide a necessary bridge to financing that was previously inaccessible to engineers. Often pools of capital are controlled by vested interests or politically minded parties. Economic opportunities, which previously were unavailable due to lack of funding, may now have a financial vehicle for entrepreneurial Engineers.

The Design is the Contract

Engineering is different than finance and insurance. Finance and Insurance merely need to represent a physical object in a party / counter-party transaction script.  There is no design involved. Engineering represents a physical object – the engineering design and specification IS the smart contract. Then, what happens in construction, operations, maintenance, renovation, and replacement is far too complex to be scripted in a single smart contract. Engineering outcomes involve enormous mass, forces, and real-life consequences. (3)

References:

  1. The Market for QUANT
  2. QUANT Proof of Stake
  3. A Warning to Engineering Firms Concerning Blockchain Technology

Twelve Reasons Why Globalization is a Huge Problem

Globalization seems to be looked on as an unmitigated “good” by economists. Unfortunately, economists seem to be guided by their badly flawed models; they miss  real-world problems. In …

Source: Twelve Reasons Why Globalization is a Huge Problem

SEC Rule Changes – Small Businesses Get Funding Cap Raise to $50 Million

Nearly three years after the law was signed, the Securities and Exchange Commission has taken an important step toward implementing the so-called JOBS Act, making it easier for small and mid-sized businesses to raise capital through small public offerings.

Source: www.washingtonpost.com

>” […] Commissioners on Wednesday approved rule changes that allow companies to raise up to $50 million a year, up from a longstanding cap of $5 million, through what’s known as Regulation A offerings. Under Reg A offerings, as they’re commonly called, companies looking to raise relatively small amounts of money through a public offering are subject to a much simpler SEC registration process, putting fewer bureaucratic hoops between them and investors.

Until now, the Reg A path, which is nearly as old as the SEC itself, has been sparingly used. Congress voted to lift the cap as part of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in April 2012, largely to encourage more small and mid-sized companies to consider that option. […]

The finalization of the rules was the latest step in what has become an exceptionally long process to breathe life into the JOBS Act. Now on the cusp of its third birthday, only about half of the provisions in the statute – which, by providing better access to capital to new and growing businesses, was touted as a potentially powerful gust of wind in the economy’s sails – have been put in place by the SEC.

Among the most highly anticipated changes mandated by Congress but not yet implemented by the SEC are rules allowing companies to raise small amounts of money from mom-and-pop investors via what are known as online crowdfunding portals. Initially, the SEC was to give that process the green light by the end of 2013; however, the agency has been slow to move on the rule-making process. The SEC put forth proposed rules in October 2013, but it isn’t clear when they will be finalized.

While the crowdfunding rules, which are outlined in Title III of the JOBS Act, have drawn most of the JOBS Act’s spotlight, Paul explained that the Reg A changes (contained in Title IV of the legislation) will likely have a much more significant impact for certain companies.

“With Reg A, we’re talking about businesses that are going to be much further along in their life cycle than the ones that would benefit from Title III,” Paul said, noting that the online crowdfunding rules will limit entrepreneurs to raising no more than $1 million from non-accredited investors. “Obviously, a company raising $1 million is in a very different place than a company raising $40 million, or even $10 million.”

“It’s all part of a continuum,” Paul added. “While crowdfunding will be important for getting capital to genuine start-ups – ones that have three people working for them – this will help those that have 300 people working for them and are still looking to grow.” […]”<

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