McAfee Says Adios to ICOs – Bows to SEC Threats, Eliminates ICO Activities
When McAfee says adios to ICOs that’s really saying something. He baffled and bluffed Belize law enforcement. He showed guile in Guatemala and returned to the US despite a pretty tight dragnet. But Mr. McAfee realizes when he’s outgunned and outnumbered vis a vis the SEC. This Tweet yesterday says it all…
So what did the SEC say that forced McAfee to Say Adios to ICOS ? Details aren’t available at this time but we suspect a cease and desist letter. Since there aren’t clear laws or policies where ICOs are concerned with either the SEC or the FTC, we can only speculate that Mr. McAfee received a very stern letter from the SEC which probably said something to the effect of “Knock it off!”
McAfee’s cryptic comment about an ICO alternative is intriguing. He has shown a capacity for innovation and brilliance so we can be sure of a fantastic new idea. What it might be and how it could sidestep existing laws remains to be seen. The only thing clear right now is that McAfee Says Adios to ICOs under legal pressure. This should worry everyone and anyone where ICOs are concerned especially the ominous warning from McAfee that anyone doing ICOs “can all look forward to arrest.”
No one should be surprised by a legal crackdown on ICOs. Exit scams have cost investors millions upon millions of dollars through cloned white papers, stolen identities and out-and-out deception from would-be ICO issuers touting their new coin’s usefulness, expected wide acceptance, etc. while promising ICO issuance bonuses intended to entice even the most cynical ICO investor.
While McAfee Says Adios to ICOs he also said he is staying very involved in the cryptocoin markets themselves. He’s still an ardent supporter of Bitcoin and his unwavering support and endorsement of Bitcoin should be carefully noted.
Cryptocoin Market Dilution – There Are Too Few Dollars Chasing Too Many Cryptocoins.
Visit any discussion on the Internet and the question asked more than any other is “When will coin X rise in price?” The answer seldom if ever heard is “never” Why? Cryptocoin market dilution. Simply speaking there are more coins out than investors able to buy enough to move the price in any meaningful way.
To put cryptocoin market dilution into perspective let’s look at the all-time high number of IPOs on the United States stock markets. There were 848 IPOs in 1996 raising $78.6 billion (Source: CNN Money). Now let’s look at 2017 ICO statistics; 913 ICOs raised a total of $5.6 billion (Source: Business Insider). And that’s GLOBAL – encompassing the US markets and the rest of the world.
Numbers don’t lie; there aren’t enough investors to support all of these different coins. I suspect this is why Bitcoin pricing is struggling to gain footing past $9,000 to let alone $10,000 and not even dreaming of reaching it’s high of $19,000+ just two months ago. That’s also why other coins aren’t exploding in value; cryptocoin market dilution makes it impossible for a sufficient number of cryptocoin investors to make a significant difference in any given coin’s price. Long story short? There’s not enough money to go around so cryptocoin values remain stagnant.
With cryptocoin market dilution clearly evident I forecast a lot of coins will crumble and drop off the cryptocurrency markets due to lack of investor interest, frustration with ROI, etc. leaving the big coins on the block left standing; Bitcoin, Ethereum, etc.This will become more apparent in 2018 as even more ICOs are expected with all of these altcoins further diluting cryptocurrency markets.
I see two silver linings in these clouds of cryptocoin market dilution: Weiss Cryptocoin Ratings will empower investors to make informed decisions on a select few cryptocoin investments (which will starve out the rest) coupled with an inevitable rise of Bitcoin prices followed in tandem by BTC’s little brothers ETH, BCH and LTC.
Investing in ICOs and SAFTs is not a simple process. If you’re not an accredited investor it’s even more complicated as only accredited investors are permitted to invest in ICOs. The qualifications to be an accredited investor would peg you as rich in terms of either a $200,000 annual income for the past two years ($380,000 for a married couple) OR a net worth not less than $1 million.
Startups are raising funds by creating and selling their own digital “tokens” or “coins,” using blockchain technology, that serve as the payment mechanisms within their products. The tokens have an advantage over regular money in part because startups can program simple rules for them that go beyond mere currency of a kind but to actually guide product functionality by using such cryptocurrency within the product itself, such an app.
Blockchain brings its own set of advantages independent of investing in ICOs and SAFTs themselves.
Investors buy digital tokens from startups in hopes the value will rise as the startup adds customers and builds revenue. The tokens are artificially limited in quantity, so the value of each token increases as demand increases. Customers of the startup won’t notice the rise in token value because prices within the product are based on the value of conventional currency. Otherwise stated, if one token is worth a dollar today, but worth ten dollars tomorrow, the startup auto-adjusts the price within the product to be 10% of a token to compensate.
SAFT tokens are seen as a simplified way for startups to sidestep standard ICO regulations. For mind-numbing, even eye-watering examples of this feel free to research the finer points of SEC Regulation D Offerings via Rules 506(b) and 506(c) which are limited to accredited investors, or in the case of 506(b), additionally up to 35 sophisticated investors. However, an alternative is possible — crowdfunding up to $1.07M/12 months under Regulation Crowdfunding (RCF) which allows unaccredited and unsophisticated investors (or perhaps under SEC Rule 504).
Everybody got all that? That’s the basis for SAFTs being more appealing to startups in raising necessary capital without all of the hoops and hidden pitfalls of a standard ICO offering. More importantly, startups can gain access to a wider base of investors since accredited investors, by definition, tends to be a club with somewhat exclusive membership.
So how does investing in ICOs and SAFTs make any money for the investor? Tokens can easily be exchanged for Bitcoin or cash on cryptocurrency exchanges.
For the avoidance of doubt, ICOs and SAFTs are not investments in the purest sense of the word and owning such coins don’t confer equity ownership. Their appeal is in providing an easy path to share in whatever success the startup experiences which is something that was reserved for the ultra-exclusive angel investors club up until now.
Is investing in ICOs and SAFTs something you should do? Quite possibly. Just make sure you acquire and assimilate all of the material available on any given offering and make an informed investment decision just as you would with an IPO on the stock market with the full knowledge that your money is on the line with all of the risks and rewards that may come.