Bitcoin crash coming?

[sammyg2]

Sorry, can't help it

[Wayne 962]

Originally Posted by Skillet83

The last one (smartlands) is a fun one. May get wiped out, but upside is huge. Platform is up now, (partially), properties listed, tier 1 exchange announcement within 30 days, wallet by end of month with staking. Go to smartlands.app, click on "news" at bottom. Exciting stuff.

Indeed. I came up with an idea nearly identical to this one about a year or two ago. Simply put - a crypto currency that is backed by real estate. Basically, you can theoretically monetize / cash out your real estate portfolio using a coin and (most likely) capitalize on the crypto craze to generate a higher-than-book-value return. Sounds brilliant, and it pretty much is.

The trouble is, it's also not legal. The problem lies in the fact that this is actually an unregulated security. Using crypto to securitize an asset is no different, in the eyes of the US government, than using paper. The securities laws are setup to prevent any pump-and-dump house from selling pieces of garbage to unknowing investors. This strategy, although very smart, runs afoul of that (most likely). In theory, the crypto should be no different than a publicly traded REIT, which (supposedly) follows the book value of the underlying asset.

This indeed can probably devolve into a detailed discussion about securities law. I have a few investments that are targeted towards "accredited investors" - these are REITs (Real Estate Investment Trusts), and a fund on mezzanine loan financing (in-between traditional banks and hard-money lenders). All of these funds require each investor to certify and prove that they are an "accredited investor", which means they have a certain minimum income level, or have a certain minimum amount of assets held somewhere else. These industries are audited often (my friend is the General Partner of one of them), and they cannot muck around with the SEC, otherwise one ends up going to jail. I'm not sure if these "real estate backed coin" efforts are located in the United States, but if they are, then they are probably an unregistered security and are probably not legal.

Someone who is a securities attorney might want to weigh in on this. My own experience is limited to the time I worked on Wall St. when I was much younger. At least here in the US, you just can't do this type of thing right now. Maybe they are trying to work within the framework of the Obama 2012 Reg A+ offerings? Or perhaps a 506(c)? My friend tried to do this with a company he had called "Asset Avenue" which was supposed to be "crowdsourcing" real estate. The legal and regulatory headaches killed that idea off fairly quickly because it wasn't legal to pitch the investments to non-accredited investors.

Don't know. Maybe Congress will eventually relax the laws on this, but for now, it's a bit difficult to legally do something like this...

More links / info:

https://www.sec.gov/info/smallbus/secg/accredited-investor-net-worth-standard-secg.htm
https://www.seedinvest.com/blog/jobs-act/raising-capital-reg-a-mini-ipo
https://www.holloway.com/g/angel-investing/sections/exemptions

-Wayne

[Wayne 962]

Interesting statement from the Chairman of the SEC:

https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11

Statement on Cryptocurrencies and Initial Coin Offerings

The world’s social media platforms and financial markets are abuzz about cryptocurrencies and “initial coin offerings” (ICOs). There are tales of fortunes made and dreamed to be made. We are hearing the familiar refrain, “this time is different.”

The cryptocurrency and ICO markets have grown rapidly. These markets are local, national and international and include an ever-broadening range of products and participants. They also present investors and other market participants with many questions, some new and some old (but in a new form), including, to list just a few:

Is the product legal? Is it subject to regulation, including rules designed to protect investors? Does the product comply with those rules?
Is the offering legal? Are those offering the product licensed to do so?
Are the trading markets fair? Can prices on those markets be manipulated? Can I sell when I want to?
Are there substantial risks of theft or loss, including from hacking?

The answers to these and other important questions often require an in-depth analysis, and the answers will differ depending on many factors. This statement provides my general views on the cryptocurrency and ICO markets[1] and is directed principally to two groups:

“Main Street” investors, and

Market professionals – including, for example, broker-dealers, investment advisers, exchanges, lawyers and accountants – whose actions impact Main Street investors.

Considerations for Main Street Investors

A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.

Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies.[2] If any person today tells you otherwise, be especially wary.

We have issued investor alerts, bulletins and statements on initial coin offerings and cryptocurrency-related investments, including with respect to the marketing of certain offerings and investments by celebrities and others.[3] Please take a moment to read them. If you choose to invest in these products, please ask questions and demand clear answers. A list of sample questions that may be helpful is attached.

As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.

Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds.

To learn more about these markets and their regulation, please read the “Additional Discussion of Cryptocurrencies, ICOs and Securities Regulation” section below.

Considerations for Market Professionals

I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects. However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require. A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed.[4] Said another way, replacing a traditional corporate interest recorded in a central ledger with an enterprise interest recorded through a blockchain entry on a distributed ledger may change the form of the transaction, but it does not change the substance.

I urge market professionals, including securities lawyers, accountants and consultants, to read closely the investigative report we released earlier this year (the “21(a) Report”)[5] and review our subsequent enforcement actions.[6] In the 21(a) Report, the Commission applied longstanding securities law principles to demonstrate that a particular token constituted an investment contract and therefore was a security under our federal securities laws. Specifically, we concluded that the token offering represented an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.

Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. Many of these assertions appear to elevate form over substance. Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security. Tokens and offerings that incorporate features and marketing efforts that emphasize the potential for profits based on the entrepreneurial or managerial efforts of others continue to contain the hallmarks of a security under U.S. law. On this and other points where the application of expertise and judgment is expected, I believe that gatekeepers and others, including securities lawyers, accountants and consultants, need to focus on their responsibilities. I urge you to be guided by the principal motivation for our registration, offering process and disclosure requirements: investor protection and, in particular, the protection of our Main Street investors.

I also caution market participants against promoting or touting the offer and sale of coins without first determining whether the securities laws apply to those actions. Selling securities generally requires a license, and experience shows that excessive touting in thinly traded and volatile markets can be an indicator of “scalping,” “pump and dump” and other manipulations and frauds. Similarly, I also caution those who operate systems and platforms that effect or facilitate transactions in these products that they may be operating unregistered exchanges or broker-dealers that are in violation of the Securities Exchange Act of 1934.

On cryptocurrencies, I want to emphasize two points. First, while there are cryptocurrencies that do not appear to be securities, simply calling something a “currency” or a currency-based product does not mean that it is not a security. Before launching a cryptocurrency or a product with its value tied to one or more cryptocurrencies, its promoters must either (1) be able to demonstrate that the currency or product is not a security or (2) comply with applicable registration and other requirements under our securities laws. Second, brokers, dealers and other market participants that allow for payments in cryptocurrencies, allow customers to purchase cryptocurrencies on margin, or otherwise use cryptocurrencies to facilitate securities transactions should exercise particular caution, including ensuring that their cryptocurrency activities are not undermining their anti-money laundering and know-your-customer obligations.[7] As I have stated previously, these market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.

[Wayne 962]

continued...

Additional Discussion of Cryptocurrencies, ICOs and Securities Regulation

Cryptocurrencies. Speaking broadly, cryptocurrencies purport to be items of inherent value (similar, for instance, to cash or gold) that are designed to enable purchases, sales and other financial transactions. They are intended to provide many of the same functions as long-established currencies such as the U.S. dollar, euro or Japanese yen but do not have the backing of a government or other body. Although the design and maintenance of cryptocurrencies differ, proponents of cryptocurrencies highlight various potential benefits and features of them, including (1) the ability to make transfers without an intermediary and without geographic limitation, (2) finality of settlement, (3) lower transaction costs compared to other forms of payment and (4) the ability to publicly verify transactions. Other often-touted features of cryptocurrencies include personal anonymity and the absence of government regulation or oversight. Critics of cryptocurrencies note that these features may facilitate illicit trading and financial transactions, and that some of the purported beneficial features may not prove to be available in practice.

It has been asserted that cryptocurrencies are not securities and that the offer and sale of cryptocurrencies are beyond the SEC’s jurisdiction. Whether that assertion proves correct with respect to any digital asset that is labeled as a cryptocurrency will depend on the characteristics and use of that particular asset. In any event, it is clear that, just as the SEC has a sharp focus on how U.S. dollar, euro and Japanese yen transactions affect our securities markets, we have the same interests and responsibilities with respect to cryptocurrencies. This extends, for example, to securities firms and other market participants that allow payments to be made in cryptocurrencies, set up structures to invest in or hold cryptocurrencies, or extend credit to customers to purchase or hold cryptocurrencies.

Initial Coin Offerings. Coinciding with the substantial growth in cryptocurrencies, companies and individuals increasingly have been using initial coin offerings to raise capital for their businesses and projects. Typically these offerings involve the opportunity for individual investors to exchange currency such as U.S. dollars or cryptocurrencies in return for a digital asset labeled as a coin or token.

These offerings can take many different forms, and the rights and interests a coin is purported to provide the holder can vary widely. A key question for all ICO market participants: “Is the coin or token a security?” As securities law practitioners know well, the answer depends on the facts. For example, a token that represents a participation interest in a book-of-the-month club may not implicate our securities laws, and may well be an efficient way for the club’s operators to fund the future acquisition of books and facilitate the distribution of those books to token holders. In contrast, many token offerings appear to have gone beyond this construct and are more analogous to interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come. It is especially troubling when the promoters of these offerings emphasize the secondary market trading potential of these tokens. Prospective purchasers are being sold on the potential for tokens to increase in value – with the ability to lock in those increases by reselling the tokens on a secondary market – or to otherwise profit from the tokens based on the efforts of others. These are key hallmarks of a security and a securities offering.

By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved.

I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws.

Conclusion

We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike.

I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. When advising clients, designing products and engaging in transactions, market participants and their advisers should thoughtfully consider our laws, regulations and guidance, as well as our principles-based securities law framework, which has served us well in the face of new developments for more than 80 years. I also encourage market participants and their advisers to engage with the SEC staff to aid in their analysis under the securities laws. Staff providing assistance on these matters remain available at FinTech@sec.gov.

Sample Questions for Investors Considering a Cryptocurrency or ICO
Investment Opportunity[8]

- Who exactly am I contracting with?
- Who is issuing and sponsoring the product, what are their backgrounds, and have they provided a full and complete description of the product?
- Do they have a clear written business plan that I understand?
- Who is promoting or marketing the product, what are their backgrounds, and are they licensed to sell the product? Have they been paid to promote the product?
- Where is the enterprise located?
- Where is my money going and what will it be used for? Is my money going to be used to “cash out” others?
- What specific rights come with my investment?
- Are there financial statements? If so, are they audited, and by whom?
- Is there trading data? If so, is there some way to verify it?
- How, when, and at what cost can I sell my investment? For example, do I have a right to give the token or coin back to the company or to receive a refund? Can I resell the coin or token, and if so, are there any limitations on my ability to resell?
- If a digital wallet is involved, what happens if I lose the key? Will I still have access to my investment?
- If a blockchain is used, is the blockchain open and public? Has the code been published, and has there been an independent cybersecurity audit?
- Has the offering been structured to comply with the securities laws and, if not, what implications will that have for the stability of the enterprise and the value of my investment?
- What legal protections may or may not be available in the event of fraud, a hack, malware, or a downturn in business prospects? Who will be responsible for refunding my investment if something goes wrong?
- If I do have legal rights, can I effectively enforce them and will there be adequate funds to compensate me if my rights are violated?

[Wayne 962]

Originally Posted by sc_rufctr

To be honest I don't know what to do...

What I don't understand: How can something be worth something if you can't point to it or hold it in your hands?

I can't point to or hold the rights to the Beatles music catalog in my hand, but it still exists and has substantial value?

-Wayne

[Wayne 962]

Originally Posted by ShopCat

If one could solve the blockchain trilemma (decentralized, secure and scalable) it may become king. So far you have to sacrifice at least one for the others. Bitcoin is ultimately secure and decentralized, but not so scalable.

I agree, but also disagree. I think the decentralized thing is not as big of an issue as one would think. I think an International body / organization / court that could intervene when fraud occurs or something against the "code" of a crypto happens could be feasible. As long as the supply of the coin is relatively stable and a function of the capital placed into it (which it is not right now), then I think the decentralization argument is less of an issue. For some it's a major issue, but I think for main-stream adoption, it's not as important.

In my opinion, the mining energy usage is the number one thing that is going to stop BTC in it's tracks though. No mainstream company is going to embrace this when it's so disastrous for the environment and contributes so much to global warming. The optics are terrible, and even Elon recently figured that out - probably after being called out on his apparent hypocrisy on the subject (pushing green cars while advocating the use of Bitcoin which is estimated to use almost 30 times the electricity of all the Tesla cars combined for a year? (https://fortune.com/2018/01/11/bitcoin-mining-tesla-electricity/)

-Wayne

[ShopCat]

I agree decentralization is not as important to most people as cypherpunks think, of course that is just because most are too uneducated or too lazy to figure out who is pickpocketing them. I doubt 90% of the population could tell you what fractional banking even is... Maybe this changes with future generations and cryptocurrencies. I saw a kid at Chicago O'Hare today wearing a Bitcoin hoodie lol.

Also, your article is from '17, way out of date, I seriously recommend watching the lecture series I posted a few pages back, taught by the current SEC chairman. Its like 25 hours but well worth the time, you'll have a more thorough knowledge than 99% of those owning crypto. Crypto was ruled not a security, could be changed, lawsuit between SEC and XRP now is ongoing, the result will ripple, no pun intended, throughout crypto. There are now ETFs as well.

As for the energy use, there is just too much to go into. I think it will self regulate over time. There are too many other items, higher on that list, that constantly get a pass that I would like to see addressed first.

[ShopCat]

Originally Posted by Skillet83

No secret here that I am a fan of crypto, but well less than 5% of my net. Still having a blast with it, the returns are absolutely amazing, zipped into 6 figures quickly. Bought more yesterday:

Bitcoin BTC
Ethereum ETH
Cardano ADA
Steller Lumens XLM
Uniswap UNI
Internet Computer (new one) ICP
Smartlands SLT

The last one (smartlands) is a fun one. May get wiped out, but upside is huge. Platform is up now, (partially), properties listed, tier 1 exchange announcement within 30 days, wallet by end of month with staking. Go to smartlands.app, click on "news" at bottom. Exciting stuff.

Have read good things on ICP, also Ergo, which is aiming to be the Cardano platform version of Chainlink+Uniswap in one. If they pull that off they will be big. I bought into Chainlink when it was 200mm, because it solved a problem. Now hoping Ergo can do the same twofold.

[dewolf]

Originally Posted by sc_rufctr

To be honest I don't know what to do...

What I don't understand: How can something be worth something if you can't point to it or hold it in your hands?

Use a credit card? Same thing. You can get Visa Bitcoin cards now.

[ShopCat]

Originally Posted by dewolf

Use a credit card? Same thing. You can get Visa Bitcoin cards now.

There are also many indirect ways to gain exposure, like crypto ETFs/trusts or even stock in companies that hold bitcoin and crypto. Some pretty big names on this list. https://www.barrons.com/articles/these-19-stocks-can-give-exposure-to-bitcoin-according-to-goldman-51619540345

[biosurfer1]

Originally Posted by ShopCat

Crypto was ruled not a security, could be changed, lawsuit between SEC and XRP now is ongoing, the result will ripple, no pun intended, throughout crypto.
.

Bitcoin and Ethereum were ruled not a security, not all crypto hence the lawsuit with Ripple Labs.

That whole lawsuit is BS and I can't believe the SEC is wasting tax dollars filing it. I have owned XRP for years and have never once, for a second, thought it was an "investment contract" with Ripple Labs.

[McLovin]

I dumped my Bitcoin at 45.
I don’t want to turn a winner into a loser, so I’ll just take the profit and be happy.
Wish I would have done it at 65 though!

[Wayne 962]

Originally Posted by ShopCat

Crypto was ruled not a security,

Not a security when not backed by anything. Any time you add an equitable (real) asset behind the security (coin), then you're creating a securitized asset. The comments I posted from the SEC Chairman are indeed from 2017, but not much has changed in securities law in the few years since then.

A pure speculative coin backed by nothing is probably okay. One backed by a real asset (real estate, cars, gold, etc.) is probably not. Ironically, that seems backwards from what it really should be!

-Wayne

[Wayne 962]

Indeed, although some of you here may label me as a "never crypto" or something along those lines, I assure you that I am not. I think that the technology and concepts behind crypto are very smart, almost genius, and a properly-designed crypto platform can and will dominate in the future. It's just a matter of figuring out what the next best thing (the Facebook to MySpace, the Google to Overture, the Apple to Palm, etc.).

-Wayne

[ShopCat]

Fire sale today!

[McLovin]

Even bigger one tomorrow!

[island911]

ya made me look...




Gum?

[Sooner or later]

Crypto folks are just like Apple, Tesla, and Game Stop fanatics. They like it and will always like it.

I have a mid 30 year old friend that has been teaching me about it. So far, I am still in Crypto kindergarten.

[jyl]

If you’re a government looking for a way to reduce financial market froth with no or minimal impact on the real economy, you could do worse than to start with crypto “currencies”.

This bubble you can pop without doing anything to rates or QE or stimulus. If Musk can jerk BTC around with a tweet, imagine what governments can do with regulations and taxation – or by talking about doing the same, or just by talking about talking about it.

This is a bubble that most people – not most traders or crytofans, but most ordinary people – wouldn’t notice being popped. Tell them how crypto is used for crime, kills the environment, and makes shady billionaires (some of which is even true) and they’ll cheer on the pricking needle.

Your economic and security advisors are warning you that this baby needs to be killed before it grows. The warnings are more forceful in China, perhaps, but every government is going to be worried about its national currency being displaced by something that is incredibly volatile, dominated by anonymous persons from other countries, hard to track and tax, and beyond that government’s ability to issue or absorb. Oh, and the darn stuff is inherently deflationary too.

China will brook no challengers to its digital yuan. The US government may send subtler signals at first, but ultimately the musings of Yellen will turn into actual actions by the SEC, IRS, Congress etc.

BTC enthusiasts should be bribing, excuse me, contributing to Republican Congressmen as fast as they can. If they can make crypto into some financial equivalent of religion or Q'anon, they might be able to stave off regulation.

[Wayne 962]

Originally Posted by ShopCat

Fire sale today!

What a fall-i-ceeeeeeee! Watching AD for the 3rd time with my oldest kid these days...

-Wayne