What Are "Whales" Doing In An ICO

Wednesday, January 10, 2018

First off you must understand what is an initial coin offering, or ICO.

 

 

An ICO is an unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.


As of today there are currently over 900 cryptocurrencies that trade on a number of different exchanges.


Think of an ICO in relation to a company that is about to do their IPO and they have a private placement.

 

A private placement is a capital raising event that involves the sale of securities to a relatively small number of select investors. Investors involved in private placements can include large banks, mutual funds, insurance companies and pension funds. A private placement is the securities are not made available for sale on the open market to any type of investor.

 

The same concept is involved with and ICO.  Instead of a Private Placement it's called a "Token".

 

Tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain. Tokens can represent basically any assets that are tradeable, from commodities to loyalty points to even other cryptocurrencies.

 

Creating tokens is a much easier process as you do not have to modify the codes from a particular protocol or create a blockchain from scratch. All you have to do is follow a standard template on the blockchain – such as on the Ethereum platform – that allows you to create your own tokens. This functionality of creating your own tokens is made possible through the use of smart contracts; programmable computer codes that are self-executing and do not need any third-parties to operate.

 

More than $1.5 billion has been raised via ICO's to date. 

The real story is the underlying innovation of crowdfunding through a sale of digital tokens, verified through a novel use of blockchain technology. 

 

ICOs are such a new concept that the market is way ahead of policy. Governments are still wrestling with how or whether to oversee them. The U.S. Securities and Exchange Commission has given only the most cursory of guidance about what types of ICOs should be regulated as securities.

 

China flat-out banned them earlier this month, no exceptions, sending cryptocurrency values into a tailspin. Estonian officials, meanwhile, were considering an ICO for the nation’s very own cryptocurrency until the EU got spooked and made them stop.

 

According to the sources close to the Finance Ministry, Israel’s black market is approximately 22 percent of the country’s gross domestic product. A digital currency, registered with the government of Israel, would make black market transactions less possible. Additionally, per the news source, the government is considering legislation that would substantially reduce the amount of physical cash in the economy. For example, one suggestion would be a law against paying wages in cash.The process for the creation of the digital shekel is just getting underway, however. The government has offered the ‘Economic Arrangements Bill,’ which, if passed would create a separate panel for the Bank of Israel to consider creating the digital shekel.

 

https://cointelegraph.com/news/israel-government-considering-national-cryptocurrency

 

In theory, ICOs should be pretty vanilla: Entrepreneurs announce and promote their new idea online. The ICO customers who are excited about, and want to use the product, buy the tokens. Then the entrepreneur uses the funding to build the product using a token that has a value only on that system.

 

A real world corollary would be an arcade that pre-sells tokens, using the funds to buy all of the best video games, and then opening its doors to its pre-sold community. Those tokens would only have the value of playing a game, no more no less. 

 

Why I am so excited is smart people right now have a once in a lifetime opportunity as the bigger money will come into crypto. Just like in the stocks the individual investor can be at a distinct disadvantage.

 

Global crypto investors — the biggest ones are called “whales” — are sought for every ICO. New “institutional” crypto investment groups, and even self-styled hedge funds, get in early to buy tokens in bulk at a discount, to sell later to the community at a premium. 

 

 

During the gold rushes of the 1800's, the only ones guaranteed to make money were those selling tools, provisions, maps, etc. to the gold rushers. In this modern gold rush we see see their descendants: cottage industries of specialist crypto-investor relations and marketing companies sprouting up on the sidelines, looking to charge well over a hundred thousand dollars for a successful ICO launch.

 

The tokens for sale in the ICO are intended for a community that will use the product itself, but nothing is stopping speculators from scooping them up. In fact, the momentum is part of what drives a successful ICO. 

 

With every ICO their are people who offer help in exchange for tokens. In this context those tokens are called a “bounty,” making them ... bounty hunters. This help comes in every imaginable form. ICO's to get started draft a white paper that’s given to investors. Swarms of bounty hunters appear offering translations into Mandarin and Russian but also Romanian, Turkish, etc.

 

bounty manager
, someone hired by the company who by necessity is a strict taskmaster. He or she bans the shady bounty hunters, controls the purse strings and checks their work. All I know is this is a very exciting time in the markets as the Dow approaches now 30,000 and Bitcoin to 20,000. See you there and thanks for reading. Great posts to come on passive income generation with crypto. 

 

Keep it profitable,

ProTrader Mike

 

 

 

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