Welcome to the lucky 13th edition of our crypto roundup, brought to you by HEAT.
ICO Markets Remain Hot; But not Secondary Markets
We are witnessing a strange divergence between ICO/primary markets and exchanges/secondary markets with new projects. The ICO market remains hot, even though it has cooled significantly from earlier this year. This is especially true for many of the upcoming Ethereum-based tokens.
Take the latest example of Golem. It reached its fundraising goal of 820,000 ETH (around $8.5 million) in around 2 hours. Although not as crazy as the fundraising times for SingularDTV and FirstBlood, this is still an impressively fast raise by any standards. You're talking serious Series-A level funding in a couple of hours instead of the weeks and months it would take in a traditional VC fundraising round (not comparing them directly of course, but still interesting to note as a ballpark).
Now the Golem token isn't trading yet, but I suspect it isn't going to see those 2x, 5x, 10x in a short period of time. That was so early-2016 but not today. Some of the hottest tokens are treading water at best. Some of the most hyped tokens, like SingularDTV that raised $7.5 million in 10 minutes, today trades below its ICO value.
Of course we can't extrapolate from this, but I suspect these projects could easily raise more than $10 million - again, a sizable chunk of money even by traditional measures, not just crypto-measures.
The simplest explanation for this trend - the divergence between ICO exuberance and lukewarm reception in subsequent trading action on exchanges - is the rise of speculators in the ICO markets. These speculators aren't in it for the long-term and don't really care much about the project. They are mostly interested in short-term speculation, and hope the price jumps from the ICO price to immediately sell in the secondary markets.
This is a little bit similar to how the IPO markets work. There are a lot of speculators looking for that first-day bounce who don't even properly understand the underlying business. This seldom ends well when repeated over a long period of time.
For all the ICO speculators out there - the least you can do if you're trying to speculate in the ICO markets is to read the whitepaper! You'd be surprised how many "investors" don't even bother with that first step towards researching what they are putting their money into.
For those still follwing the Ethereum-based projects, Wings is the next big ICO, and we'll probably have a break after that.
The World in Turmoil?
The big political news of the day of course is Donald Trump being elected to become the 45th President of the United States. Now, we don't discuss, or want to discuss politics in this newsletter. However, this event, and the earlier Brexit, do tie into crypto in several ways.
The first thing to notice is that the prediction markets got this event wrong. This is the second high-profile political event of the year that the prediction markets got utterly wrong. The earlier one was Brexit.
Now the simple explanation is that the prediction markets are of course wrong sometimes, almost by definition. If the prediction markets says the probability of event X is 80%, it necessarily means that it would be wrong 20% of the time. This is a fair answer to the question.
However, people are starting to ask if there are fundamental deficiencies of prediction markets and whether they are unable to handle these kinds of uncertainties. We won't really know, until a system like Augur gets into place. It opens up the markets for everyone.
Augur has been trading above its ICO price, but perhaps mostly due to the rise in price of BTC and ETH since the ICO. It was always meant to be a complex project. There are some updates from the team though, such as better UI. It seems the Augur team is really working and putting in a lot of hours into the UI. This isn't necessarily bad, but it's always good to remind everyone that UI is easier to tweak than the core backend functionalities. There is still no set release date for Augur.