Fear, Loathing and Opportunity: How Crypto Traders Are Handling the Drop

Fear, Loathing and Opportunity: How Crypto Traders Are Handling the Drop

Markets and Prices

The last 24 hours have been the worst the cryptocurrency markets have seen since the 24 hours prior. Things have been looking grim for weeks in fact, but on Nov. 19 the situation went from bad to critical as BTC fell below $4,500, dragging the rest of the market down with it. While some investors used this latest blow to bow out, others have used it as an opportunity to re-up on cheap coins.

Also read: Hash Wars: A Successful BCH Upgrade and a ‘High Risk’ Exchange Listing

Mind the Drop

There’s rarely a dull day in cryptocurrency, but Nov. 19 will go down as a particularly memorable one, albeit for all the wrong reasons. Plummeting crypto prices, on top of a week of plummeting crypto prices, have left many traders in despair and others vowing to rage quit. So somber is the mood that the normally morbid humor that accompanies a price drop has been largely absent from crypto Twitter.

“Now is the time for compassion, patience, respect,” tweeted Andreas Antonopoulos. “Lots of people have lost lots of money recently and it is not helpful to make empty promises, share shitty memes, or criticize others’ choices.”

On 4chan’s /biz/ messageboard, the atmosphere was equally downbeat. “That’s it, I sold,” conceded one poster, accompanied by an image of weed-smoking Elon Musk photoshopped to resemble Brendan Fraser being justed. “I’m free. I’m finally free from this fucking hell of scammers … It was fun and games for a while, but now it’s just a cruel sick joke. I bought [BTC] at 15K. No human can look at their money disappear before their very eyes and not be bothered. You know we’re going to 3K, right?… Let’s all stop pretending that this is gonna be anything but a bear market until 2020.”

One Man’s Fear Is Another’s Opportunity

Fear, Loathing and Opportunity: How Crypto Traders Are Handling the DropPeople respond very differently in times of crisis. For those who missed out on buying bitcoin during last year’s bull run, now blessed with fiat currency sitting on the sidelines, today has been most serendipitous.

“I’ve transferred 100 now for bitty,” read the message I awoke to from a friend. “If it goes down I’ll pick a tiny bit more up, if not, at least I got a wee bit at a decent price.” I duly hooked her up with BTC, and true to her word, she messaged later to say “I transferred another 100 … bitty is having a dip again.”

How many more dips bitcoin can endure before it finally bottoms out is anyone’s guess. What can be said with confidence is that sub-$4.5K BTC is an attractive proposition for investors who thought this day would never come. While some members of crypto Twitter sought “the best capitulation tweet” (and found no shortage of candidates), more sanguine heads have urged delicacy. The majority of cryptocurrency traders had the perspicacity not to invest more than they could afford to lose. For those who got greedy, however, the current market has brought nothing but pain and regret.

Fear, Loathing and Opportunity: How Crypto Traders Are Handling the Drop

There are also those whose very jobs could be at stake should assets such as ethereum fail to recover. One ICO that raised funds in 2018 and elected to keep its war chest in ETH has conceded it will struggle to cover its payroll should current prices persist for another two months. Despite conceding that his job may be at risk, an employee told news.Bitcoin.com “this is Wall Street crash ’87 for the modern age. It’s actually extremely exciting.” Few would dispute that assessment but they would welcome some respite from a year that started with a roar only to finish on a whimper.

Where do you think the cryptocurrency market goes from here? Let us know in the comments section below.

Images courtesy of Shutterstock and Twitter.

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Study: ‘Compliance Trilemma’ Limits Potential of ICOs

Initial coin offerings (ICOs) are facing a regulatory “compliance trilemma,” according to a recent study funded the government of Canada and the University of British Columbia (UBC).

To prepare the report, the research team investigated the ICO space over the course of six months, focusing primarily on North America, but also delving into some other countries and jurisdictions. The team conducted 45 qualitative interviews with individuals in the ICO space, including representatives of the finance, law, and science sectors of the field.

Per the study, ICO issuers face a “trilemma,” wherein they can only address two of three objectives at a time, those being “having a compliant offering,” “reaching a distributed pool of investors,” in a manner that is “cost-effective.” The researchers define compliance as following regulations in the home jurisdiction of both the issuer and investor.

While a broadly distributed pool of investors is said to be the principal benefit of an ICO as a funding mechanism, the cost of complying with financial regulators becomes “much greater” if the investor pool becomes more distributed.

“If issuers forgo these costs, the risk of being non-compliant rises significantly. The result is a trilemma, whereby issuers currently must forgo one of these goals to realize the other two, or to compromise on all three,” the study explains.

The trilemma further reveals four basic approaches available to ICO issues, which are “the Maverick ICO,” “the Private ICO,” “the Hybrid ICO,” and no ICO at all. The first option refers to ignoring compliance for maximizing ICO reach and cost effectiveness, which reportedly runs a huge risk of regulatory enforcement.

The second approach focuses on targeting only accredited and institutional investors by sacrificing distribution, which may not affect cost-effectiveness but raise challenges in secondary market trading control.

Regarding the Hybrid ICO, the report reads that it “compromise[s] on all three dimensions by issuing in select markets, resulting in bounded cost effectiveness, compliance and investor scope,” resulting in a combination of risks.

The researchers found that companies wishing to undergo an ICO sought relief from the trilemma through relevant regulatory authorities. Participants in the study reportedly called for amendments to regulation, including clarifications of existing regulation and development of “fundamentally new” regulatory definitions and frameworks. The study concludes:

“…To date, the ICO has been hampered by a trilemma that has substantially limited its potential… Many actors with legitimate ventures that could benefit from ICOs are likely holding back, due to combination of confusion over how exactly they might comply with financial regulations within and across jurisdictions, and the prohibitive costs of doing so manually.”

Tokens Plummet 15-20% Following SEC’s Crackdown on ICOs, Dark Days Ahead

A broad selling action in the cryptocurrency market today saw ICO coins losing 15 to 20 percent of their value. And the sentiment is likely to extend thanks to the U.S. Securities and Exchange Commission (SEC).The U.S. regulator at the beginning of this month charged the founder of a decentralized exchange (DEX) EtherDelta on accounts of enabling the trade of unregistered securities. The Exchange until this time was available to investors as a source of liquidity for the ICO tokens.Its “decentralized” status allowed ERC20 projects to list their assets without regulatory approval, but the SEC’s crackdown has closed their doors effectively. For the regulator, the creator of a smart contract-enabled exchange would also need to register its work with the authorities. And whatever asset these exchanges would list on their trading platforms, would have to get a securities license as well.The news sent shivers across the lower market cap coins, each registering huge daily losses on the top of what they had already lost amidst the Bitcoin Cash fork. Loopring, for instance, dropped 19.11% against the U.S. Dollar on Monday, followed by Maker, Self, and ICON that also noted steep drops in their value.SOURCE: CoinMarketCapRelated Reading: Ethereum Plunges 12%: Will ICOs Continue to Drag ETH Down?DEX, ICO Industry in TroubleThe SEC decision has led the crypto community to believe that the regulator would target more exchanges in the future.It has been warning about the potentially unlawful trading platforms for trading crypto assets already. The EtherDelta case particularly has validated that even exchanges without a central authority in place could land their developers in trouble. Zachary Coburn, the creator of EtherDelta, became a test study after he agreed to settle and pay a total of $388,000 in penalties, disgorgement, and interest.The impact of the SEC’s crackdown can affect developers in the longer term, especially those who are U.S. residents. While it is true that the regulator cannot stop a DEX from running online, they are still able to hold someone liable for beginning the trading platform at fault. Therefore, the only way a DEX developer can avoid punishment or a fine is by moving to locations with no U.S.-treaties. It sounds good on paper but, in reality, it would not be feasible.The only option these developers are left with is to go anonymous. But that doesn’t always work.As far as the ICO industry is concerned, the backers of the now-listed assets have two options: either get a security license or unpin the U.S. from their crypto market map. In the near-term it could disallow U.S. residents to trade the unlicensed digital assets that the SEC deems as securities, provoking them to sell-off.“I read this as the SEC laying the groundwork to prosecute ICOs directly for failure to register under the Securities Act, which they still haven’t done so far (except for blatant Ponzi & scams),” said Jake Chervinsky, a lawyer at U.S.-based Kobre & Kim agency. “If you launched an ICO after the DAO Report, you might be in the line of fire.”Featured image from Shutterstock.