A Flipsters Paradise - Navigating the ETH ICO Jungle

in cryptocurrency •  last year

This post is in two parts, firstly I'll analyse how profitable flipping ICO's can be and secondly I'll look at the future dangers of this easy money. 

First off, let's get everyone on board

The idea of flipping in my head comes from buying a property for cheap, doing it up and then selling it on for a higher price. In the context of ICOs (Initial Coin Offerings) it's buying an ECR20 token and then selling it very soon after release for a 10-40% return. Not the same, but a similar buy low, sell high strategy.

When I talk about the Net Asset Value (NAV) I'm considering the amount these ICO's have raised minus how much they have spent. Essentially the amount of ETH they have 'left'.... if they were to fold and distribute that ETH out to investors it's what those assets would be worth.

So basics through, how can we combine these two ideas?

I'll start with what I see as the glue. That is... ETH itself. I may be wrong but I'm of the opinion that the recent rally in Ethereum is in part due to the surge in ETH based ICO's. But why?

It turns out that pretty much all of the ETH ICO's have offered up a profit on the first day of open market trading.

Given that there's an 'edge' ... an expectancy of profit from these ICO's, I think we've seen a surge in the price of ETH. Likewise the valuations of these 'tokens' as expressed in a previous article here.

Given that the lions share of these ICO's are profitable day one... what are the implications of this 'free money' on the ETH network?

Imagine for a second, that you could buy this magical token called YOLO, every now and then you'd send this token to an address and receive another token. If you were fast enough you could then sell this new token and make a very attractive percentage return, getting more YOLO in return. But wait.. there's more! If you hold YOLO for a little longer you can do the same thing again... and again.. and again. Not to mention during this entire period, YOLO has risen in price itself, by 400%- It's absolutely FUCKING INSANE... enter the recent ICO market.

YOLO is ETH (did ya guess?) and the 'again and again' is the continual offering of ICO's.

What does this mean for the companies raising money for the ICO's?

These guys in general do not have a product, do not have users and are not entrepreneurs. They're a bunch of hopeful programmers with a flashy website and a wild idea.

Why the hell would anyone in their right mind fork over 10s of millions of dollars for some questionable half baked startup idea?

Well... because it makes money - pretty much every single time and... the 'greater fool theory' a bunch of  FOMO amateurs will buy on an exchange from you... day one for 10-40% easy! Because ...reasons... because blockchain... it's irrational.

The cookie crumbles....

My view is that these ICO's are ETH 'holding companies' the only reason they're going up is because they hold ETH and one of  the only reasons ETH is going up is because subsequent ICO's are locking up all the actively traded supply. Speculators are holding ETH for the sole purpose of flipping (like me). Its a double pump.

I think the congestion in the crowdsales is a big red flag for ETH as a network. It just sucks, we have like 3 transactions per second with BTC and 30 for ETH. It can't handle it as a technology, EOS recently tested at speeds of 50,000 transactions per second - that's almost as fast as VISA's theoretical maximum of 56,000. Dan Larimer, the genius coder behind bitshares and steemit is heading up EOS.

I mean guys...come on Steemit is a social media website, capable of thousands of transactions... i.e 'upvotes and posts etc' - I'ts insanely cutting edge tech. ETH freezes up when a thousand ICO orders come in...

A House of Cards...

From the perspective of a trader and a flipper, this is unsustainable. You can pretty much buy any ETH ICO and make a crazy return on day one. It's this money that's fueling the ETH push up - ETH at the same time is becoming a victim of its own success. It can't handle the transactions.

You use the Bitcoin to buy the Shitcoins - #utility

You use the ETH to buy the ICOs - #utility

However we are now seeing these ICO crowdfunds handled off-chain - with presales - take civic for example. Or even Omise GO which released their renewed crowdsale terms today - it's all off-chain.

Maybe it's time to wake up and smell the coffee?


For further reading please check out..

Why is the Price of Ethereum Rising? The Centralisation of Ownership...

by @hisnameisolllie

Why Will Ethereum Fail?

by @joseph

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Images from Pixabay

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Thank you for helping to me realize what I have been denying for the last few weeks. I have owned ETH since last October and it has been the best investment decision of my life so far. I still believe that it holds a lot of value and will do amazing things. However, I can no longer deny that a large portion of this price surge is due to the never ending ICO's. Many of which will provide nothing of value in the future. This has made me change my position and realize a decent portion of my gains from ETH. At this point in time I am most excited about Steem and am slowly moving more dollars into the network. Thanks you again @wingz for your well worked post on a talked about topic!

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It feels very fragile at the moment, probably still a buy right now. It's getting riskier and riskier the more inflated these ICO figures get and the more scarce they become. I'll be unloading the majority of my ETH before the Kik crowdsale.

If it keeps going, that's fine, I'm happy to be more defensive.

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Sure, sure, when is the Kik ICO scheduled?

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https://tokenmarket.net/blockchain/ethereum/assets/kin/

As of now, unannounced. I'd expect next quarter though.

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Still trying to train myself out of falling into the FOMO trap. Maybe an electroshock bracelet hooked up to coinigy.com could work...
fomo.png

nice post!

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Thanks :)

I am also very skeptical of this situation. I think anyone can tell that something ain't right. I don't know if you have seen this

https://steemit.com/ethereum/@kyriacos/the-magnificent-ethereum-machine

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Haha, brilliant!

Much complexity
Such wow

thanks for the great post:)

I personally think Ethereum will collapse in a big way by either

  • lack of cofidence from the market due to High profile ICO failing, possibly Bancor (Article by @pawnuts)
  • If growth continues network cant sustain,already problems and far from mainstream.
  • Think Bitcoin after Segwit will absorb most of marketcap of other markets especially Ethereum
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If you're technically inclined , its potentially forming a big reversal pattern.

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good spot!

Averages are all converging expect further declines with bottom of 0.922 Turing to resistance with new bottom 0.888 to start

This post received a 10% upvote from @randowhale thanks to @wingz! For more information, click here!

Very interesting case. ICOs are a wild animal indeed. Half the time they spike and half the time they plummet. It's a risky game, but with great rewards. What's your next ICO pick?

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Looking at Civic, Omise go, Tezos and Kik

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Thanks, I'm gonna have to check those out. Originally I was looking at CryptoPing but not sure how much traction it's gonna have

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I'd recommend https://tokenmarket.net/ico-calendar#=

To keep yourself up to speed :)

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Thanks! I didn't know Civic was so close to the end date. Recently I've only been investing in regular cryptocurrencies such as XRP and DGB (due to the July competition results). I've thought about investing in an ICO but never pulled the trigger due to the risk. Although it seems like everyone is talking about Civic. You think a price jump the first day is likely?

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Looking at Status, but a little hesitant because it will need heavy user acquisition in order to be successful. Civic and OmiseGo looks promising as well.

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Thanks for the advice! I may invest in Civic

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Yes, but just flip it on day 1 and keep some in case it blows up. There will be more like Status down the pipe, hardly any guarantee it will be here in 5 years - but for now I think it worth a shot.

I did a post once comparing cypto to chess. ETH was a rook, and small coins were pawns. A rook, no matter how strong, when alone and unsupported, is vulnerable.

This post exposes a vulnerability that we should've seen coming, because we play this game like a game of craps, or poker, trying to just keep a straight face, bluff, and earn a quick buck. We should be playing it like a game of chess, with calculated moves based on the real, long term strength that the better devs have built into the good coins.

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I wholeheartedly agree. I think your analogy fits well. It could be that a few people swinging around a few tens of millions of ETH are actually adding billions to crypto market caps.

I'm still holding ETH, but it seems incredibly fragile at the moment.

I’m new here, but I appreciate a nice post like this that is grounded in reality. I had to mostly stop reading ethtrader on reddit because all the moon talk was getting to be too much for me.

Today, I heard status.im raised over $270 million to make a chat application. That is just absurd to me. No investor will ever give that much money to a startup.

Every time I see an ICO asking for so much money it just makes me cringe a little bit. These companies do not need this much money. It is greed, pure and simple. I would love to see a company come along that does an ICO for $1 million or less. Or better yet, a company that produces a tangible product on the blockchain creating real value for people without doing an ICO at all.

Even if the ICO landscape is pretty iffy at best, I like to think ETH still has a future, and there will be good applications of the technology to come.

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I've been linked to some ethtrader posts in the past. The king of amateurs, not that that's good or bad, just I see his perspective from a different angle.

I made a post a couple down my list about the 'Shifting State' of ICO's - this raise for status is an absolute fucking joke, plain and simple. Not worth it at all, its all just the structure of the ICO and the 'free monies' that came before.

The only good opps I see right now are civic and omise go.

I tried to buy status today, I'm happy it didn't go through. The more this shit happens, the more people will wake up to the fact that ETH cant handle a simple ICO and goes on the fritz for hours, better tech is in the pipeline.

Amazing coloring technique

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The slow decline from vibrant colour to grey, depressing coffee?

Haha, glad you noticed :P

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Hahahaha
You are really humble in speaking

Interesting thoughts, thank you for sharing.

Very good post... I like it :)

AMEN. And I'm also HUGELY bothered by the Bildeberg connections to ETH. I mostly divested and got more into Zcoin and Dash, and have not been sorry. Zcoin took off right after I did that.

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Good call :)

I had a few trades in the anon coins, kinda kicking myself I didn't hold any longer term.

And yet.. there will be perpetual winners in this market that have durability, utility and long term viability think circa 2000 Google or 2017 Veritaseum...erm visbility. Yes the start up fad will dissolve and only the real players will be left standing. Think 2000 google 2017 Veritaseum

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That's true, I feel there will be quite a bumpy ride for most though in the long run.

Interesting read, sadly enough, I did not buy any Bitcoin or Ethereum, It would have been fun, the last couple of months. But really, I was asking people and why I would buy a cryptocurrency? What does it do for you, I am an investment adviser, I have yet found the answer to buy a cryptocurrency. To me companies that produce products and make profits on selling these products, sounds just way more attractive to me to invest in, the cryptocurrency booms, bubble grow bubble, not all of them will fail, but I just look at it the way it is, or at least how I see it, dollars, Euros or Pounds, are just way more attractive to have than cryptocurrency, stocks are a better investment.
@wingz Thank you for your post, I wish you a beautiful time.

Interesting post, arghhh no-one likes to hear the beloved Eth bad mouthed :D

Should we sell it all then or trade them in for a different coin (Like BTC?)

I haven't invested in any ICO's yet, but was intending on doing a small amount into two that I liked (Wager and Hybrid)...however I am sceptical about doing a big sum as I feel there is a lack of regulation with the ICOs at the moment, at least I can see coins in my wallet and track their progress online :X

Also if you like, any feedback on my Cryptocurrency portfolio would be appreciated :) I'm blogging every day about it, started 4 days ago.

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Hey, I'll check them out.

I'll be going back mainly into BTC and then scouring to find some other coins. I'll still hold onto a few, I've just become heavily weighted in ETH and ETH tokens in the last few months with the price rise and need to rebalance. Especially given that I think ETH is a house of cards.

is the steemit chat down?

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Yeah, has been for a couple of days.

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what are you chating on ?

If project fails after the ICO and there is any ETH left (ETH raised less ETH spent on development), I do not think anyone is getting this ETH back. So, I do not think you can assign any value to the token based on how much Eth they might have left in the pocket. This eth is going to go to the founders as "ICO profit"

Very informative post, it helps me a lot.

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Glad you got something out of it :)

As someone who is actively exploring trading and ICOs, there are definitely some welcome insights in this post. Thanks, @wingz! One question: maybe you could elaborate further on off-chain crowdfunds in a follow-up post? I think I'm not the only one that would be interested in learning more. Cheers!

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Thanks @nikigenji - an on-chain crowdsale is using the ETH blockchain to send ETH and receive ETH tokens back.

By off-chain I mean something like Bitcoin Suisse where they act as an intermediary and you deal with a person. This has been for presales so far, however omise go will be entirely funded off-chain with this method due to high demand.