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Cryptocurrency Speculation and Blockchain Stocks

(December 16, 2017 by Dafang Wu; PDF Version)

After Chicago Board Options Exchange began transactions of Bitcoin future contracts last week, cryptocurrency (“coin”) is becoming mainstream.  We are quite late to this game, as many coins have appreciated more than 100 times so far this year, but it is never too late. This situation is similar to the early era of internet development, so we will need to understand the situation and cautiously catch up.

Similar to many articles I wrote on airport finance, this article provides information rather than recommendations.  Many coins are almost scams; many publicly traded companies claiming to be in blockchain technology, especially those traded over-the-counter (OTC), are also scams. Therefore, further research is required to make investment decisions, if we call coin speculation an “investment.”

Background

Instead of discussing the history of coins or technology, here are the basics that we need to know:

  • Coins are digital currencies issued by organizations or teams; ownership and transactions are recorded in a public ledger
  • There are more than 1,000 coins, with Bitcoin having the highest market capitalization of nearly $300 billion
  • Each coin has a name, such as Bitcoin, and a trading ticker like stock, such as BTC
  • There are more than 7,000 coin exchanges
  • Some exchanges allow us to purchase coins using real life money, which they refer to as fiat money
  • Some exchanges are not regulated, and only allow us to trade among coins.  For this type of exchange, Bitcoin is typically the currency.  To switch between two other coins, we will need to sell the first one and receive Bitcoin, and use the Bitcoin to purchase the second one
  • There is no customer service for any coin – if we accidentally lose it or send to a wrong party, there is no way to get back
  • Security threat and fraud always exist for coin trading – search Mt. Gox

If we still decide to put a small amount of portfolio into coins, there are three approaches:

  1. Buy coins
  2. Buy cryptocurrency stocks or Exchange-Traded Funds (ETFs)
  3. Initial Coin Offering (ICO), which I will not address in this article

Buying Coins

There are many websites providing articles on how to purchase Bitcoin with U.S. dollar.  One relatively safe approach is to purchase from https://www.coinbase.com, because Coinbase is insured by Federal Deposit Insurance Corporation up to $250,000. After a relatively easy verification process, Coinbase will set a transaction limit for purchase on credit card (higher fees), bank account, and wire transfer, and transaction may initially take several days due to security reasons.  If the initial limit is set at $3,000 per week, wire transfer of additional money will stay in the USD wallet until the limit is replenished over time.

Coinbase offers three coins: Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC), because Coinbase positions itself as an exchange for beginners.  I purchased ETH instead, because transaction time and cost for BTC are getting worse.  After we purchase ETH, we can easily send ETH to anywhere in the world. As of today, there is no regulation prohibiting sending ETH overseas.

https://coinmarketcap.com/ is probably the website providing the most comprehensive information on coins and exchanges. The trading volume page ranks all exchanges by volume, with Bithumb in South Korea as the largest. Not all exchanges provide trading of all coins. If we have a particular coin in mind, we need to check the available exchanges on Coinmarketcap, such as this page for Monero.  I registered at Bitfinex and mainly use Bittrex.  Both appear to be top legit exchanges, with relatively easy verification process. 

After an account is established, we can go to the wallet, and click “+” beside the ETH symbol. A very long address will show up, such as 0xb4d8080d7f93e54xxxxxxxxxx620a442467138. 

deposit

 

This is the address we should put into the “send” address in Coinbase. It is very important that we copy and paste the correct address. Otherwise the fund is lost forever, and no one has ability to help. For any new account, always send a small payment to test.  ETH transactions should complete within an hour or much faster, but BTC transactions may take longer.

This page lists the coins (and tokens, which we can view them as coins) by market cap. The following table is my personal note for the top 50 coins as of December 16, 2017, with interesting coins highlighted. To re-iterate, this article provides information but not recommendations.

Rank Name Ticker Market Cap (mil) USD Price Daily Volume (mil in USD) Chart Personal Observation
1 Bitcoin BTC  $  298,219 $17,810.10  $       11,472 Chart It serves as a digital currency but has not other functions
2 Ethereum ETH        67,608 $701.56            2,261 Chart Smart contract that most tokens rely upon, criticized for transaction congestion
3 Bitcoin Cash BCH        31,087 $1,844.02            1,160 Chart Offspring of bitcoin
4 Ripple XRP *        30,144 $0.78            2,186 Chart It serves as a digital currency, adopted by many banks including Bank of America
5 Litecoin LTC        16,369 $301.31            2,145 Chart Similar to bitcoin but better processing speed and lower cost
6 IOTA MIOTA *        11,228 $4.04               324 Chart Uses a new but less-tested technology called Tangle instead of blockchain
7 Dash DASH         7,190 $927.09               169 Chart Similar to bitcoin, but with privatesend, a function to make transaction hard to trace
8 Cardano ADA *         5,678 $0.22               149 Chart Re-engineered similar to Ethereum, claiming to be most advanced
9 NEM XEM *         5,633 $0.63                 53 Chart Claiming to be a better alternative than ethereum, with ability to scale
10 Monero XMR         5,125 $331.02               155 Chart Similar to bitcoin, but designed to be non-traceable; form of ransom by some hacks
11 Bitcoin Gold BTG         5,117 $306.23               163 Chart Offspring of bitcoin
12 EOS EOS *         4,859 $8.96               637 Chart Designed to be an operating system to enable blockchain development; conceptual stage
13 Ethereum Classic ETC         3,617 $36.76               954 Chart Offspring of bitcoin, resulting from a prior hack
14 Stellar XLM *         3,563 $0.20               178 Chart New technology tested by IBM
15 NEO NEO *         3,239 $49.84               172 Chart New technology mostly used in China
16 Qtum QTUM *         2,270 $30.79            1,279 Chart A blend of bitcoin and ethereum
17 Populous PPT *         2,016 $48.87                   6 Chart Invoice financing on blockchain
18 BitConnect BCC         1,946 $406.44                 27 Chart A digital currency but with interest; criticized by some as a ponzi scheme
19 OmiseGO OMG *         1,421 $13.93               224 Chart A digital currency focusing on remittance
20 Zcash ZEC         1,379 $484.51               189 Chart Encrypted transaction similar to Dash
21 Waves WAVES *         1,362 $13.62                 84 Chart New platform with ability to issue token and decentralized exchange
22 TRON TRX *         1,318 $0.02               126 Chart Smart contract designed for entertainment industry
23 Lisk LSK *         1,230 $10.61                 50 Chart Smart contract developed for JavaScript developers, with sidechain
24 BitShares BTS *         1,038 $0.40                 89 Chart Digital currency with decentralized exchange
25 Tether USDT *         1,033 $1.01            1,763 Chart Digital currency aiming to be worth exactly $1
26 Stratis STRAT *         1,023 $10.37                 32 Chart Blockchain as a service platform for other business to develop technology
27 Ardor ARDR *            938 $0.94                 15 Chart Blockchain as a service platform, built on NXT
28 Hshare HSR            922 $21.75                 74 Chart Digital currency, can't seem to see difference from other coins
29 MonaCoin MONA            808 $14.42                   9 Chart Digital currency with ATMs in Japan; otherwise no difference from LTC
30 Nxt NXT *            701 $0.70                 59 Chart Confusing development with ARDR; need to read more
31 Veritaseum VERI *            571 $281.89                   1 Chart Avoid; many claim this is a scam
32 Bytecoin BCN            525 $0.00                   3 Chart Digital currency claimed to be non-traceable
33 Steem STEEM *            523 $2.12                   5 Chart Social media rewarding content using altcoins
34 Komodo KMD            491 $4.74                 23 Chart Offspring of ZEC, claiming to be more secure and private
35 SALT SALT *            469 $9.19                 21 Chart Token to allow people borrowing true $ using altcoins as collateral
36 Decred DCR            468 $73.49                   3 Chart Digital currency, can't seem to see difference from other coins
37 Ark ARK *            445 $4.55                   8 Chart Bridges different blockchain and provide a platform for mass adoption
38 Dogecoin DOGE            442 $0.00                 18 Chart Digital currency for fun
39 Einsteinium EMC2            435 $2.01                 62 Chart Digital currency contributing to its own non-profit organization
40 Augur REP *            416 $37.83                   5 Chart Open-source prediction market (which I absolutely disagree)
41 Binance Coin BNB *            415 $4.19                 55 Chart Digital currency used by Binance Exchange
42 Golem GNT *            357 $0.43                   8 Chart Decentralized supercomputer
43 Siacoin SC            353 $0.01                   9 Chart Cloud storage
44 Vertcoin VTC            350 $8.32                 16 Chart Digital currency, can't seem to see difference from other coins
45 Electroneum ETN            341 $0.07                   9 Chart Digital currency for mobile/online gaming
46 Verge XVG            331 $0.02                 45 Chart Digital currency claimed to be non-traceable
47 Status SNT *            329 $0.09                 38 Chart Social media
48 PIVX PIVX *            326 $5.92                   3 Chart Digital currency claimed to be non-traceable
49 RaiBlocks XRB *            318 $2.38                   6 Chart Digital currency with instant transaction and low energy use
50 Aeternity AE *            308 $1.32                   6 Chart A competitor to Ethereum?

 

Before we buy any coin, here are some questions to ask:

Needless to say, almost all exchanges are open 24-7, and have a T+0 system.

Buying Blockchain Stocks

If you and I establish a shell company “Airport Blockchain LLC,” copy a white paper from one of the existing 1,360 coins, and issue stock on the OTC market, our market capitalization would be between $10 million and $100 million.

This is exactly the situation at the OTC market today. Because commercial use of blockchain technology is still in early development stage, and there are so few stocks to invest in, retail investors are chasing after every news release remotely related to blockchain.  There are three types of coin stocks:

  1. Technology firms.  Currently Overstock.com seems to be the only major player specializing in blockchain technology and its stock increased from $25 in September to $70 today.  BiOptix Diagnostics, Inc., with prior business in animal healthcare and veterinary products, saw their share prices tripled in the last two months after renaming itself to Riot Blockchain Inc.  It has a market capitalization of $279 million, and a revenue of $24,175 in the quarter ended September 30, 2017
  2. Mining and hardwire companies. After the initial distribution, many coins can continue to be mined by using computers to solve a mathematic problem.  However, in order to have a better chance in mining coins, we need computers with multiple graphic processing units (GPUs).  Therefore, NVIDIA Corporation has benefited tremendously from the blockchain trend.
  3. Other supporting companies, such as mining software developers, blockchain consulting firms, app developers, and related hardware manufacturers.

The following list is an incomplete list of companies claiming that they are working on blockchain related issues.  Many stocks are traded on the OTC market and may be scams.

ADAC, APTY, BKLLF, BLKCF, BRSE, BTCS, BTSC, CDTAF, CGUD, DGGXF, DIGAF, DNAX, ENVV, EPAZ, FVRD, GAHC, GBTC, GHHC, GLNNF, IFXY, IMMD, INOTF, INTV, MARA, MGTI, NVTQF, OSTK, PRELF, RIOT, SANP, SING, SSC, SWRM, UBIA, UNSI, USTC, VSQTF, WRIT

Conclusion

This demonstrates someone’s strong ability in doing research on ambiguous topics, and judging by articles he wrote, he knows way more about airport finance than cryptocurrencies. When you get rich by joining in the coin movement, consider hiring him as your airport financial consultant.

Happy holidays to all!