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Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

nytimes.com

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Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#81

Post by dsacco »

adjkant wrote: post #73
dsacco wrote: post #24

Earlier quoted context omitted.

That volatility is perfect for a mean reversion strategy.

I've been testing this out over the past 6 days with $500 to see how it would actually work while keeping my current amount in. I've been working a bit more on the micro level, but it still is pretty consistent in its volatility (lol). So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy. I'm going to keep doing it though to see how…

A few notes on your comment here...keep in mind none of this is intended to be patronizing, in case my tone comes across that way. I just like talking about this.

> So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy.

If you compare the returns between those two strategies (buy and hold vs mean reversion), make sure you include comparisons of their beta profiles. Their risk measures are going to be very different.

> When you hold yourself to rules, it also decreases maximum losses too.

Speaking of rules, do you have a maximum tolerable drawdown for the strategy, or a number of consecutive losses at which you stop loss or retire the strategy? In order to add more rigor to your work (and so you know there is an element of empirical strategy here instead of just luck), you should conceive a set of priors for the strategy that allow you to set a hypothetical win rate. If you deviate too far from the win rate, or too far from a drawdown as mandated by your risk management rules, you should shut down the algorithm pending a review of its inputs and retire it if it's no longer working.

> Right now if the volatility and my returns hold for even just two years, it could be going from $500 to over 100K.

There are a few hypotheses implicit to your thought here:

1. Market volatility for the target cryptocurrency will remain functionally stable for the next two years,

2. Your strategy will remain functionally stable for the next two years,

3. There is sufficient liquidity to allow you to continually compound your trading strategy's assets with its returns for the next two years, from an initial outlay of $500 to over $100,000, without hitting capital constraints along the way.

Those are all testable hypotheses (which, technically, you're involved in doing), and I can't tell you if they're realistic. I wouldn't count on all three of them being correct though.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#82

Post by JumpCrisscross »

ringaroundthetx wrote: post #77
JumpCrisscross wrote: post #58

Earlier quoted context omitted.

> This is an article about everyone getting smarter and restructuring their offering where necessary, and continuing to move forward The article specifically states "only three projects have said they are canceling or postponing the sale of coins because of the warning." It's not a doom and gloom article. It's just saying the vast majority of ICOs are (a) probably noncompliant and (b) doing nothing about it. > the SE…

If you read the Securities Act of 1933 there are TONS of ways to get around SEC rules. And as such I think your intrastate offering idea is a red herring, but I'll entertain you: Did you know that anything that is super obviously a security can be completely exempt if it matures or expires in less than 270 days? Its written right there. Turns out there is a huge market called "commercial paper" that takes advantage o…

> Did you know that anything that is super obviously a security can be completely exempt if it matures or expires in less than 270 days?

The United States is a common law country [1]. Implicitly stapled to the law are rulings and SEC rules. TL; DR There are more requirements to the commercial paper exemption than just the 270-day tenor.

That said, you are generally correct–there are lots of exemptions to registration. For example, Regulation D provides a safe harbor within which almost all private-company stock is issued [2]. The trouble with ICOs, currently, is promoters seem to be overusing this "we're marketing a product, not a security" line. As a result, they're not taking advantage of these exemptions. Failing to qualify for an exemption is a difficult mistake to undo ex post facto. (The Filecoin ICO mentioned in the article does take advantage of one such exemption.)

[1] https://en.wikipedia.org/wiki/Common_law

[2] https://www.federalreserve.gov/bankinforeg/regdcg.htm

Disclaimer: I am not a lawyer. This is not legal nor securities advice.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#83

Post by lightedman »

duxup wrote: post #78
phkahler wrote: post #62

Earlier quoted context omitted.

If you're launching one of these, you don't really need investment. You just make sure you own the first batch of currency and get rich if it takes off. If you need investment then you don't really believe in your own stuff do you? Ponzi Ponzi Ponzi.

That guy on TV keeps telling me how awesome owning gold is... it is so awesome he wants to sell me his...

If they're selling pure gold at less than or equal to $800/oz then it's well worth it at this very moment with gold trading around $1200/oz right now. 50% profit ain't shabby.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#84

Post by [deleted] »

alistproducer2 wrote: post #55

I was involved with one of the bigger ICO right at the beginning of the ICO craze. I had pretty regular conversations with the project founder and was in talks to become the dev evangelist. The project had raised ~$5 million in ETH (this is when ETH was trading around $80). Despite the fact that this project had raised a crazy amount of money the whole project was being conceptualized and coded by a single 23 old guy…

[deleted]

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#85

Post by graedus »

kgwgk wrote: post #33
ringaroundthetx wrote: post #21

Even the SEC realizes that not all token sales are securities. Some people in the industry simply aren't getting it, they are creating a straw man which the agency isn't even arguing for. > The agency said that it would focus on coins that should be categorized as securities. So there are all these people on the periphery just HOPING for their prophecy of a heavy handed government breaking the cryptocurrency rush. Th…

Matt Levine, today: https://www.bloomberg.com/view/articles/2017-08-08/ico-risks... "To me, it seems odd that people would pay millions of dollars to reserve space on a new cloud storage network, and obvious that they're really paying that money for a speculative investment." "If you do an illegal securities offering, people who bought your securities have a right to get their money back. If token prices keep rising…

Off-topic, sorry: Levine gets a lot of praise around here, and he does have a great talent for breaking down complex finance topics so that they're easy to understand and often entertaining to read about. That being said, sometimes he is awfully sanguine about bank misconduct and crimes. Edit: from the article:

"A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes money, and sometimes does evil stuff with that knowledge -- that's fine, really."

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#86

Post by wyager »

s73ver wrote: post #31
AznHisoka wrote: post #18

Earlier quoted context omitted.

And I'm investing in Bitcoin. Just because it is at its peak doesn't mean it can't go even higher! I might be crazy, but your perspective isn't any more rational than mine :)

Isn't that the problem, though? Bitcoin was supposed to be a medium of exchange. Cash for the internet, in other words. Investing means that people really aren't going to be doing that, and it's just going to sit on a dusty flash drive on the shelf.

Those aren't in any way mutually exclusive. There's always enough of a bitcoin supply (and it's divisible enough) to have sufficient liquidity for use as a medium of exchange. With the in-progress work on bidirectional micropayment channels, it's only going to become an even more useful medium of exchange.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#87

Post by adjkant »

dsacco wrote: post #81
adjkant wrote: post #73

Earlier quoted context omitted.

I've been testing this out over the past 6 days with $500 to see how it would actually work while keeping my current amount in. I've been working a bit more on the micro level, but it still is pretty consistent in its volatility (lol). So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy. I'm going to keep doing it though to see how…

A few notes on your comment here...keep in mind none of this is intended to be patronizing, in case my tone comes across that way. I just like talking about this. > So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy. If you compare the returns between those two strategies (buy and hold vs mean reversion), make sure you include comp…

Appreciate the post/points! I'm not an expert in this at all myself. Frankly, all of this is picked up from less than 3 years of various small tests in various investment strategies. I welcome all advice/thoughts on this. As said, this is an experiment truly.

Could you elaborate on the beta profiles part? I can't say I'm very knowledgeable there. Assume I know very little about formal risk measurements.

As far as the rules I referenced, I have a max single loss but have yet to set a stop loss/retirement point. This strategy evolved pretty loosely based on the idea of capitalizing on the volatility and part of the reason it's an experiment is that I'm okay with losing the $500 if it comes down to it. It's still incredibly risky, which I am aware of. Part of the reason I'm hesitant to put in a retirement point is that I can see losing a significant chunk in certain scenarios (this algorithm is not yet automated, though it very well may be soon, which would mitigate this) that would still be less than the long term gains. For example, given the returns, the strategy could still perform well taking occasional hits of say 20% in one day infrequently (read a few times a year). If/when this algorithm is automated, I will certainly be building in stop loss constraints.

Fully agreed on the hypothesis and not counting on them at all, but I think they aren't incredibly unrealistic. I carefully chose two years in the post above because I don't see the volatility lasting much longer than that. Right now the strategy is incredibly liquid, and I don't see that part of it changing given the micro focus. No hold so far has lasted longer than 24h, and when this is more formalized, I see a hold time limit (as a function of loss/gain) being used to keep the lost opportunity cost down. I think the tuning will likely occur mainly over the next month or two, and after that I'll likely either stop or let it run.

Overall, I would still categorize this much more as a personal test than a scientific one. We'll see how formal it gets.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#88

Post by stickfigure »

graedus wrote: post #85
kgwgk wrote: post #33

Earlier quoted context omitted.

Matt Levine, today: https://www.bloomberg.com/view/articles/2017-08-08/ico-risks... "To me, it seems odd that people would pay millions of dollars to reserve space on a new cloud storage network, and obvious that they're really paying that money for a speculative investment." "If you do an illegal securities offering, people who bought your securities have a right to get their money back. If token prices keep rising…

Off-topic, sorry: Levine gets a lot of praise around here, and he does have a great talent for breaking down complex finance topics so that they're easy to understand and often entertaining to read about. That being said, sometimes he is awfully sanguine about bank misconduct and crimes. Edit: from the article: "A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes mone…

It's his trademark sarcasm, and the subtle hilarity is one of the reasons I read his daily newsletter. That quote requires more context:

You're supposed to know where the money is! That knowledge and reliability is the central function of the bank; getting the dumb spreadsheets right is more important than moral probity. A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes money, and sometimes does evil stuff with that knowledge -- that's fine, really. A bank that sometimes forgets who owes what to whom is the real menace.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#89

Post by joosters »

graedus wrote: post #85
kgwgk wrote: post #33

Earlier quoted context omitted.

Matt Levine, today: https://www.bloomberg.com/view/articles/2017-08-08/ico-risks... "To me, it seems odd that people would pay millions of dollars to reserve space on a new cloud storage network, and obvious that they're really paying that money for a speculative investment." "If you do an illegal securities offering, people who bought your securities have a right to get their money back. If token prices keep rising…

Off-topic, sorry: Levine gets a lot of praise around here, and he does have a great talent for breaking down complex finance topics so that they're easy to understand and often entertaining to read about. That being said, sometimes he is awfully sanguine about bank misconduct and crimes. Edit: from the article: "A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes mone…

That's an unfair quote, taken completely out of context. His articles frequently cover fraud and illegality in the financial markets, and he's never in favour of it.

The quote in question was pointing out how bad the latest Wells Fargo scandal is. A bank that can't keep track of money is in serious trouble and is woefully incompetent. The banks ripping off customers but accounting for the profits are evil, but at least they are being competent.

Re: Despite S.E.C. Warning, Wave of Initial Coin Offerings Grows

#90

Post by wmf »

api wrote: post #42

Is there an honest non-scummy way to raise capital through this mechanism for something without an inherent scarcity built into the system and that doesn't carry nasty future litigation risks (or at least doesn't carry them more than a SAFE or a convertible note)? My impression so far is no but I could be wrong.

CoinList/SAFT is supposed to be that but it hasn't been revealed yet.
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