Trading Strategy for upcoming EOS ICO
The EOS ICO officially gets underway on June 26th, 2017. EOS is a soon to be blockchain operating system that claims to be more scalable, flexible, usable than Ethereum. Word on the street is that it could be the Ethereum Killer!
Every ICO has a different structure, and the EOS ICO is no exception. A total of 1 billion tokens will be distributed. The breakdown is as follows:
- 200 million tokens will be distributed via 1 ICO during first 5 days
- 700 million tokens will be distributed via 350 separate ICOs (1 each day) during the next 350 days.
- 100 million tokens will be reserved for the EOS team.
You read that right, there will be 351 separate ICOs for EOS tokens!
First ICO
20% or 200 million tokens are reserved for these 5 days. There is no dollar cap and only Ether can be used to fund the ICO. Everyone and their mothers can get in on this ICO during those 5 days. If you have 2,000 Ether to invest or just 0.1 Ether to invest, you can get in that. Fo Sho. As long as the Ethereum network allows your transaction to get through!
- If a total of $10 million is raised and you contributed $1,000 then you would get 0.01% of the 200 million tokens, which is 20,000 tokens.
- If only $1 million is raised and you contributed $1,000 then you would get 0.1% of the 200 million tokens, which is 200,000 tokens.
Remaining 350 ICOs
Each of the 350 ICOs will last 24 hours. There is no cap each day, and there will be 2 million tokens available each day.The EOS ICO structure is genius
In many of the previous ICOs like BAT/Bancor/Status/Civic, there was a lot of demand and very little supply. The biggest of those 4 ICOs was Bancor, which raised $150 million. It only lasted about 1 hour...a lot of people couldn't get in. After the decent ICOs have ended and tokens hit the exchanges, the tokens instantly are worth 2-6x more than the initial investment.EOS will be different..they want to keep all the returns ICO investors normally get to their greedy selves. The first ICO will establish the price of the EOS token. A lot of the FOMO buyers will be satisfied during those first 5 days because there is no cap. Everybody who wants to get in, can get in. Anyone who misses it, can get in on any of the next 350 days during the individual ICOs. Theoretically, this means that the first 5 day ICO sets the price of the EOS token. The pricing for the next 350 ICOs should be in sync with the exchanges. That means there would be no 2-6x return.
FOMO Buyers
A lot of buyers, if not most, don't understand the fundamentals or technology or business model of the ICOs they are investing in. That being said, a lot of ICOs with horrible fundamentals or horrible everything have offered an amazing return to ICO investors. I am an analyst and investor by profession, with a MBA, a computer science degree, and am very pessimistic. And even I'm getting in ICOs that I think have horrible business models and virtually no chance of success....for the simple reason that demand is 50x the supply. The FOMO is real!
The FOMO buyers are going to invest in EOS because it's being touted as the Ethereum killer. Everybody wants to get in on the next Ethereum at the ICO stage and experience exponential returns. The problem is that EOS might be smarter than all of us FOMO buyers. They have effectively eliminated the crazy instant returns for ICO investors by running uncapped ICOs for 351 days.
Could EOS became a great platform with the ICO investors making great returns in the long term? Maybe or maybe not. But, I just don't see how there is any hope of a instant 2x return from this ICO during the initial week or two. Mathematically, it doesn't make sense.
What a buzzkill
Now that I have possibly killed your buzz and my own, how can we profit from this ICO? I'm sure there are many ways to do it, but I see some low hanging fruit to make money.1. Fight the FOMO
I'm going to try really hard to fight the FOMO and avoid the first 5 day ICO. The supply doesn't die at the end of this first ICO....which is unlike profitable ICOs. The people who miss this can just buy directly from EOS anytime during the next 350 days.2. Stock up on Ether now!
Ether is the only way to get in on this ICO. The Ethereum trading volume on a daily basis is about $1 billion. Last week, during Ether's run to over $400 the volume spiked to $3 billion...this was during the time of Bancor and BAT ICOs. After those ICOs were over, volume dropped back down to around $1 billion a day and price of Ether has settled down as well.Since this ICO is uncapped, it's not unreasonable to think the first 5 days could be bigger than Bancor's $150 million ICO, which only lasted 1 hour. A conservative guess for the first 5 days could be $200 million...maybe even $300 million? Whatever the number is, it will be bigger than Bancor and Ether volume will go through the roof.
3. GDAX limit orders
GDAX is the sister company to Coinbase, they use the same login. Coinbase goes down at the thought of an ICO, so they will be down again for the EOS ICO (at least during the first 5 day ICO). If you setup limit trade orders ahead of time (before GDAX and Coinbase freeze), your order can be executed in the background even if GDAX/Coinbase freeze. If you want to know more about the logistics of doing this, see my post on how-to-profit-from-flash-crashes-and-sharp-spikes-when-coinbase-freezes.For example, I'll be placing limit sell orders on Ether that I have on GDAX. I'll probably set my sell price at around $475. If the Ether price on GDAX spikes (even if only for a second) to above that, then my sell limit order should get executed. I am holding Ether long term, but I want to take advantage of short term spikes...if my $475 trade goes through, I'll be able to buy back in much lower after the Ether volume settles down.
4. Number 2-351 EOS ICOs
I'm going to sit out the first 5 day ICO and see what the final pricing per EOS token is. I'll then be watching towards the end of the 1 day ICOs and calculating the price per EOS for that particular ICO. If the ICO look to be at least 10% cheaper, then I'll contribute to the ICO. If the exchanges look at least 10% cheaper, then I may buy some from the exchanges.Why I'm not investing in EOS for long term (for now)
Assuming my guess of $200-$300 million being raised on the first 5 days of this ICO is correct, that puts a market cap value for EOS at $1 billion to $1.5 billion. There is potential, but right now it's an undeveloped product...over a billion seems a little high for that. I'll wait until the team hits some of the development road map before jumping in. Buying now would be like investing in a time machine company....if it worked it could be worth a gazillion times my investment, but it doesn't exist yet.A valuation of over a billion provides $100 million to the developers. How many tech companies get a valuation that high this early in their development cycle? I would rather keep my money free to invest in fundamentally flawed ICOs and get 2-6x returns. And what is the motivation to actually develop this when you got paid $100 million to just talk about developing it. There are no regulations, couldn't they keep most of the money and start another ICO? Oh wait, that's already happened several times by this co-founder.
I really appreciate the critical review of this ICO and I agree with many of the points. I would like to say though that this type of ICO which reduces the likelihood of huge returns in a short period of time may be a good thing for the sector in the long run.
It means investors would need to believe in the long term prosperity of the company they are investing in. So we should see a large reduction in pure FOMO speculators investing in crappy ideas that are eventually going to crash spectacularly.
This should drive the industry to change the way they operate. Companies would need to actually deliver throughout their protracted ICO period in order to get the most value for their tokens. It also means investors would be doing more due diligence to ensure the company/team they are investing in are dependable and trustworthy.
Good point, I didn't think of it that way. Only way some crypto day traders will learn is by losing or not making those 2-6x returns.
Excellent write-up.
I would like to add a thought: do not pledge funds in a given window until the very end of that window round. That gives you the best idea how much your precious ETH will get you in terms of EOS tokens in that round.
Second, I would like to emphasize that this coin should be available on third party exchanges after the lapse of the first 5-day-window period. That means that buying it on an exchange is possible after 5 days into the ICO. It is generally thought that the price on these 2ndary markets will affect the pricing in the next windows (rounds) in the official ICO, which will indeed last for another 360+ rounds each day after the first 5-day-window.
Still confused? Just let us know in the comments.
Good point. How much do you think they will raise in the first 5 days?
they will sell 200,000,000 coins for sure. I do not have a clue about the proceeds thereof, but probably $10-20M+
I guess we will find out in about a week, but my guess is 10x that amount!
If you're newbie and you're watching this post, Don't buy at ICO
Everyone should probably sit out the first 5 days based on the results of the Bancor ICO. Prices dropped like crazy on the exchanges.
$10 Free worth of Eth tokens!! https://goo.gl/9uD4Tn Authorship ICO you will receive 75 ATS tokens! just need an Eth Wallet!
Uncapped ICO's scare the heck out of me. The whole "letting the market set the value" is great, but the backlogs we get means that no one has complete information... So it may look like, for example, $50m is put in for 1/3rd of coins = $150 valuation, when in reality the currency in transit is worth another 50m and you've got double the valuation...
If they can reliably show valuation without significant time lag then this is a great way to do it. I just don't think that's possible given what we've seen on the blockchain networks these last couple weeks...
Since everything is open, you could just look at Etherscan and figure out how much was invested. Not sure I would trust the company to provide accurate info on that. In any case....is the CPA investing in this?
Even looking at etherscan I think it would be tough. I was keeping an eye on Civic yesterday after I got in, and there were so many bounced transactions due to people not knowing how to transfer, transferring even without a deposit ID, and gas limitations, that even if you looked at all transactions to the contract, you wouldn't know which would actually go through, which were duplicates, etc.
I'm no pro about this whole blockchain thing, but just seems like even with this beautifully open/DL system, it's hard to really know.
For now I am planning to stay hands off. I think I share most sentiments with you -- especially in that most ICO's the exclusivity gives you a great guaranteed pop when it hits an exchange, whereas with EOS you are almost guaranteeing you'll have limited upside (and with any of these projects, potential full loss downside)
Thumbs up if you love dogecoin!!!
Sure we love Doge, but this is about EOS.
But dogecoin is love, dogecoin is life.
I'm using exchange ETH pairs to forecast the likely range of investments in the second phase. From what I can see, the only way it makes since to jump in in the first 5 days is if something goes horribly wrong.
The guy behind EOS (Dan Larimer) is the same guy who built Steemit and Bitshares. Good interview with him and Jeff Berwick a few nights ago which is well worth a look. He seems a real chilled out cool guy who just wants to change the world.