The Reason Why ICOs Have Been Going Through The Roof...

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

First it was Pets.com, and all the unbelievably stupid Internet businesses in the 1990s.

Investors were so eager to buy dot-com stocks, all you had to do was put an “e” in front of your business or product and you’d immediately be worth millions.

It didn’t matter that most of these companies didn’t make any money. Investors kept buying.

Later on after the dot-com bubble burst, another big craze developed in junior mining stocks – shares of small exploration companies looking for big mineral deposits.

The epicenter of the junior mining industry is in Vancouver, Canada, and the stock exchange there (TSX-V) throttled to record highs.

Shares of companies with literally no profits, no revenue, and no assets were worth tens of millions of dollars.

Then that bubble burst.

A few years later, a new hot craze developed– in cannabis companies.

The market has been flooded with companies (many of them curiously based in Canada’s poor climate and high cost structure) with plans to grow medicinal marijuana.

Their stock prices have soared, with valuations in some cases exceeding $1 billion.

Every time the bubble bursts with these big trends, most of the companies get wiped out.

Only a handful survive– primarily the ones who focused on building long-term, sustainable businesses instead of chasing a quick buck.

From the ashes of the dot-com bubble, companies like Amazon, Godaddy, eBay, etc. emerged in-tact and are still successful today.

Similarly, while many junior mining companies went completely bust, a handful are still operating and quite profitable.

And there will be a few extremely successful cannabis companies over the next several years who step over the remains of their innumerable, defunct competitors.

Clearly today’s big craze is crypto and blockchain.

Like the dot-com bubble in the 90s, you could add the concept of blockchain to just about anything and have a ‘business’ worth millions, no matter how idiotic the original idea.

(Someone will soon pitch me an idea for an app to publish grocery lists into the blockchain. It’s absurd.)

And like all the other big investment fads in the past, most of the companies in this space won’t exist a few years from now.

There are lot of reasons for that, starting with the fact that building a business is hard.

I’ve done it successfully a few times. And unsuccessfully more times that I care to remember: it’s incredibly difficult, so the odds are against most of these companies anyhow.

But more importantly, these big investment fads always attract people looking to make a quick buck. And that doesn’t work in the long-run.

Case in point: earlier this week a company called HIVE Blockchain Technologies went public.

It’s stock price is already up over 3x… since MONDAY, from an opening of 62 cents to $1.89.

Just prior to that, the company closed a private placement at 30 cents… and a few months ago the company was selling shares between 1 and 3 cents.

In other words, a handful of speculators made more than 600x their money in just a few months with a company that has ZERO revenue, simply because ‘Blockchain’ is so popular right now.

This has become the norm in the world of crypto and blockchain.

ICOs, another hot crypto fad, have been racking up huge returns of their own.

‘Tokens’ issued by crypto startups that have no profit or revenue are seeing similar gains of 2x to 10x or more in a very short period of time.

In the case of HIVE, the company is in the business of mining cryptocurrency.

And based on its current stock price, HIVE is worth close to $400 million.

Yet its own financial statements report that they have not generated a penny in revenue.

What’s more, the company’s “illustrative results” show that they -could- make around $7 million per year.

So investors are already paying 57x that amount before the company even gets started.

Even more curious, HIVE’s only real asset is its client relationship with a company called Genesis, one of the largest crypto mining companies in the world (and also a major shareholder in HIVE).

Genesis has more than a million customers who pay an up-front, flat-fee to have the company mine cryptocurrency on their behalf.

HIVE is now essentially a customer of Genesis.

So investors are essentially buying shares of HIVE at a price that’s 57x what the company says it -could- be making (but isn’t) by having Genesis mine cryptocurrency for them.

Seems like investors could save themselves the trouble (and forgo the 57x share price markup) by simply becoming direct customers of Genesis themselves.

Who knows… maybe HIVE is the real deal. Maybe it’s the rare eBay or Amazon that emerges from the bubble in-tact and successful.

But this is a pretty clear example of the irrationality that ensues every single time there’s some white-hot investment fad.

After a hiatus of many, many, many moons, I blew the dust off my microphone and recorded a new podcast about this topic.

It wasn’t so much a podcast as a heated rant against this ridiculous bubble… and a clear explanation of precisely WHY so many crypto assets are generating unbelievable returns.

You can download it here.

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VD's picture

yep...

crypt0/blockchain is tech to transact, NOT "coins" w/ actual value. it will all come crashing d0wn...

menchivist's picture

i keep hearing differnt things.  I think it was your Jim Cramer who said Bitcoins will be good.  I do not any have but need to know if I need to get them. 

Collectivism Killz's picture

You shouldn't keep your cryptos at exchanges. Consider them like your local bank, keep enough to cover needs for a couple months, but it is wise to keep most wealth outside of the banks or exchanges. BTW, the IRS is likely going to be more dovish to cryptos than people are thinking. They are going to expect exchanges to provide 1099-k to businesses who do more than 200 transactions per year over 20K, but that is it for now. People forget that until 2014 you even self reported gains or losses on stock sales and the IRS had a hell of a time confirming and/or challenging people. Cryptos are way, way out there in terms of the IRS being able to confirm cost basis, etc. and yes, anything they impose on cryptos will likely also be imposed on PMs and cash.

shocktherapy's picture
How to Stop Pirate Bay and Other Sites From Hijacking Your CPU to Mine Cryptocoins

https://gizmodo.com/how-to-stop-pirate-bay-and-other-sites-from-hijackin...

 

These miners have also been known to be used by malicious advertisements around the web and on occasion they can also act as trojans.

 

9/19/17 4:18pm

 

Kind of shows how imaginary crypto currency is. Crunching numbers magically creates currency.

tmosley's picture

No, their theft of your resources creates currency, just like if they were breaking into your garage and "borrowing" your pickaxe to go mine gold.

shocktherapy's picture

Thanks for the heads up. Theft is Good.

Got it !

tmosley's picture

Your brain is malfunctioning so badly that that is the message you got out of my post?

Do you smell burning toast? Is one side of your face drooping? Might want to call an ambulance, if you are able.

shocktherapy's picture
So your saying you didnt mean this ?  tmosley  shocktherapy Sep 23, 2017 1:48 PM

No, their theft of your resources creates currency, just like if they were breaking into your garage and "borrowing" your pickaxe to go mine gold.

There is a difference in creating something and stealing. Do you need the definitions ?

tmosley's picture

>There is a difference in creating something and stealing

There is. You can also steal something to create something else, which is what is going on here.

Just because VD breaks into your garage to steal your gold mining supplies doesn't mean that gold is evil.

shocktherapy's picture

A good outcome excuses any wrongs committed to attain it.

Got it !

 

tmosley's picture

>A good outcome excuses any wrongs committed to attain it.

Please point out where I said that.

shocktherapy's picture

create:

to cause to come into being, as something unique that would not naturally evolve or that is not made by 

 ordinary processes.

steal:

to take (the property of another or others) without permission or right,especially secretly or by force.

 


tmosley's picture

So you are saying that it is impossible to use stolen goods to produce something?

If so, are you stupid, or insane?

Also, you failed to answer my question. Where did I say that it was ok to steal something, whether or not you create something else with what you have stolen?

kochevnik's picture

Santa Claws makes a list of naughty and nice, to rectify all ill gotten gains

ejmoosa's picture

Use your own damn pick axe then.

mrtoad's picture

How much does it cost in computing power and electricity to make 1 bitcoin??? Any idea??

putaipan's picture

john macphee recently said about a 1000$ in electricity alone

tmosley's picture

ICOs are like the stocks of the internet bubble. CryptoCURRENCIES are like the internet itself.

The S-shaped adoption curve will continue to hold sway, and the peanutz can't do anything about it except cry.

OpenThePodBayDoorHAL's picture

Yeah that's what people don't understand...these are PROTOCOLS. Look how much money was made by the guy who invented TCP/IP...or better yet the guys who invented HTTP

BallAndChained's picture

> CryptoCURRENCIES are like the internet itself.

Oh so you are saying all cryptos are worth ZERO because the internet is free?

Got it!

Mister Ponzi's picture

Why should the rest of the world care?

VD's picture

gartman is too pleasantly all in btc now.

MikeM54's picture

Good point. He is always wrong. 

VD's picture

he's also "diversifying" to etherium, monero & lolcoin.

menchivist's picture

Excellent compare to today's problem is thje dotcom.  WHen it bursts it will be hard.  Your analysts at Shepwave.com have been predicting the moves perfectly.  Thanks.https://www.facebook.com/permalink.php?story_fbid=10155108125820326&id=166578775325

 

 

 

MikeM54's picture

If you are unfamiliar with Bitcoins stay away or purchase a small amount and be careful.  Stick with the guys at Shep wave if you want to keep making consistent proifts in stocks and commodities. 

2banana's picture

It is rather amusing.

Literally, there are thousands of crypto-currencies either in "circulation" or about to be in "circulation"

Except for one or two rare exceptions - you can buy nothing with them.  They have no value or revenue except what a speculator will pay for them.

They can't all be right...

 

VD's picture

the nice thing about tulips is that they look lovely in your home/garden.

Winston Churchill's picture

Also edible if needs be.

Fiat is backed by govt. Pb, not gold.

Speculate all you want, but remember that he who has the lead makes the rules.

VD's picture

He who has the violence controls the currency.

Winston Churchill's picture

Amazing how few understand that and persist in treating the symptoms, not the disease.

Or if they do understand, are just trying to make a buck at our expense.

"Power grows from the barrel of a gun, not a blockchain".

VD's picture

the delusion of crypt0-muppets is certainly quaint; they will be hosed like every single time before in history. but if idiots didn't BELIEVE that this time really is different, there would never be any ponzis left to fleece em with. 

 

(remember: buy silver, crash JPM? heh.)

tmosley's picture

Money doesn't produce revenue. Gold has no value without speculators, either. It just has an exceptionally well established base of speculators. Problem is, the exchanges (all two of them) are completely and totally corrupted.

Ledger money has always found use in circumventing the machinations of the kikes. This time will be no different.

2banana's picture

I would disagree.

Gold and silver are very expensive to actually physically mine and pull from the earth.

There is no way just make up a "new" gold or silver currency.

They both have certain exceptional metallurgical properties that no other metal or element has.

The both have great industrial applications (silver much more so).

With either gold or silver in any form, I can go to the remotest village in Mongolia, India, Afghanistan, Zambia, etc and buy things with it.

They both can be made into beautiful jewelry and will help you get laid.

So um...yeah.  It does have an intrinsic value just sitting in your hand.

And the thousands of crypto-currencies?  Not so much.

 

 

tmosley's picture

>Gold and silver are very expensive to actually physically mine and pull from the earth.

So is bitcoin.

>There is no way just make up a "new" gold or silver currency.

Sure there is. We already have platinum and palladium, which both have many of the aspects of money, but are relatively new additions to the periodic table, and so never saw widespread adoption outside of industry. They didn't have the "network effect". It is much the same in cryptos, which is why bitcoin continues to dominate despite being an outdated, poorly governed piece of shit.

>They both can be made into beautiful jewelry and will help you get laid.

Big bank balance will get you laid too, despite no intrinsic in paper currency. So will a fat crypto wallet (prostitute preferred, actually).

2banana's picture

Well, it seems that you are a true believer in that cryptos are as good or even better than gold or silver.

It is obvious no logic will work.

Choose wisely among the thousands of cryptos.  Hopefully, the one you choose doesn't get banned by government and then vanish into net vapor.

Or you go to to buy something with it and the speculator winds have changed and it cannot be spent.

That is the funny thing about gold, silver, platinum and palladium.  There is no counter balance.  No relying on something else (electricity, the web, some algorithms you don't understand, some hacker you don't understand, a government bureaucrat making a decision, etc.)

When all is said and done, it is there.  Unchanged.  Ready.

 

tmosley's picture

>It is obvious no logic will work.

I am open to honest arguments, but you oldbugs seem completely incapable of producing them. 

>Hopefully, the one you choose doesn't get banned by government and then vanish into net vapor.

Governments are strong, but cryptos exist in a realm that is beyond strength. The only thing they can do is attempt to police the bottlenecks between fiat and crypto. But there is no law saying that crypto can only have value if it is tradable for fiat. It is no different than some place like Venezuela trying to enforce non-market exchange rates with harder currencies.

>No relying on something else 

You rely on coin shop operators. No-one else takes gold or silver, and certainly not platinum or palladium.

Silver Savior's picture

 Will gladly take gold, silver, platinum or palladium for payment. That's one less step I have to go through. 

2banana's picture

Like I said – choose carefully.

++++++

Federal Reserve to Launch Its Own E-currency: Fedcoin

EconomicPolicyJournal.com  | September 23, 2017 | Robert Wenzel

The U.S. Federal Reserve will not only issue its own cryptocurrency but will also make sure Americans use it, according to Doug Casey.

“To start with, I suspect it’s going to be a parallel currency. Perhaps usable just within the U.S. which, in effect, would be a form of foreign exchange controls even more effective than the inability of Americans to open up foreign bank and brokerage accounts today [due to monetary control through FATCA]…I think it’s a near certainty that they’re going to do something like this and soon.”

They will call it Fedcoin.

David Andolfatto, vice president at the St. Louis Fed, proposed the word “Fedcoin” in 2015. He’s spoken publicly about this multiple times since then, and says Fedcoin could give the central bank an “added (policy) tool.”

VD's picture

as i was warning so very long ago here; Fedcoin ----> SDRcoin

 

you can timestamp this here comment too.

tmosley's picture

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>according to Doug Casey

Wew.

RedDwarf's picture

"Gold and silver are very expensive to actually physically mine and pull from the earth."

Most things are difficult and expensive to accomplish, that does not equate to them being 'valuable'.

"There is no way just make up a "new" gold or silver currency."

This is gibberish.  You can reasonably make new currencies upon anything that is divisible, fungible, scarce, and durable.

"They both have certain exceptional metallurgical properties that no other metal or element has."

Every element has unique properties.

"The both have great industrial applications (silver much more so)."

Not even close.  Only 5% of gold is used industrially, 50% of silver is and that is growing.  Furthermore you just made an argument about why you would never use silver for a currency.  The LAST thing you want for anything you are using for money is for it to have a supply and demand curve independent of it's supply and demand curve as money because that introduces volatility.  The reason gold is superior to silver as money is because it has very little industrial use.

"With either gold or silver in any form, I can go to the remotest village in Mongolia, India, Afghanistan, Zambia, etc and buy things with it."

A lot of the 3rd world now accept bitcoin as well.  In fact bitcoin is slowly replacing many of the 3rd world currencies from the bottom up because all you need to trade it is a cell phone, which many of the people in these shitholes actually have.

"They both can be made into beautiful jewelry and will help you get laid."

If you prove to women that you are rich, a lot of them will fuck you.  Crypto does that job perfectly well.  News at 11.

"So um...yeah.  It does have an intrinsic value just sitting in your hand."

No, nothing has intrinsic value you muppet.  Value is the regard something or someone has for something or someone else.  It is ALWAYS an aspect of the person.  Stuff has properties that you may or may not value, but the properties themselves are not 'valueable' in themselves.

"And the thousands of crypto-currencies?  Not so much."

It's fine that you do not value crypto.  There are people who place no value on gold either.  It's fine to have your own value system.  Your greatest failing is that you think your values are objective and universal and 'true'.  You're dogmatic and religious in the belief that you know the one real truth.  The same mistake all Marxists, authoritarians, and other busy-bodies make.

Silver Savior's picture

That's exactly right. Gold and silver are way better than crypto currency. I think of crypto as the vehicle to make fiat currency to buy gold and silver.

BallAndChained's picture

> Ledger money has always found use

Oh so you are saying cryptos are like ledgers? A paper pad and pencil ledger cost what, 30 cents?

So you are saying cryptos are worth 30c. Got it!

MySql is a free database that can be used as a ledger. It cost zero.

So you are saying cryptos are worth zero too? Got it!

css1971's picture

The more interesting applications are not coins, but a distributed ledger of who own what.

Disgruntled Goat's picture

Explain that part about AMZN again.... 10 years of obfuscated earnings, .... trading at 200x earnings .... how is that any different from a dotcom or ICO...? Oh thats right, its Bezos, the annointed one... Boycott Amazon

VD's picture

i shitcanned prime, refuse to go to wholefoods down the block and to think, over 20yrs or over 80 quarters of losses on core biz, and stawk is so beyond fantasy-land.

saldulilem's picture

With stocks though, their performance impacts not so much the company but the shareholders, right? I mean if AMZN crashed today, tomorrow their operations would go on with nary a hitch as it doesn't affect cash flow. But corporate bonds are a different story. Is there Amazon bond?