Cashing in on BCH while BTC hits record highs (Part 1)
By bitnet
6 August 2017
So much has happened over the past month that it is almost impossible to decide what to write about first. AMD has launched their much vaunted high-end desktop (HEDT) Threadripper CPUs and “sandbagged” RX Vega GPUs, there was a fork in Bitcoin with Bitcoin Cash (BCH) going in the exact opposite trend while Bitcoin (XBT/BTC) breaks new highs, and Ethereum (ETH) becoming “hostage” to EOS altcoin.
Let’s start wit the lattermost. Looking at the activity over BTC and ETH it seems comparable with gold and silver where the divergence ratio is increasing in tandem. Confidence in BTC is picking up fast because the fork failed to materialise as planned for BCH. Transactions were supposed to be faster with BCH but the reverse seems true. Investors who wanted to cash out when the price was high at the opening found that they could not transfer their BCH into the limited exchanges which accepted BCH, or sell it as liquidity was very thin, and because initial transactions took nine hours per confirmation and six confirmations are needed to complete the whole transaction!
As soon as the exchanges opened their BCH books, prices started to tank from a high of over USD750 to the current price of about USD280. Investors wanted out as their promised speedy transactions failed to materialise. Why? Too few miners went on board. Too few miners to perform the transactions required. This shook investor confidence and many liquidated BCH and pumped the money into the original BTC/XBT causing it to rise to new heights. And by many I mean less than five per cent of BCH holders, which is the whole BTC community! The masses have yet to sell off their BCH because they cannot transfer it to the exchanges and there are too few buyers! The people supporting this do not have bottomless wallets so they will give up trying to support BCH at a high price. Expect this to be more volatile and prices to drop below USD200 even though some pundits are putting out videos to discourage selling to stymie the descent.
ETH on the other hand, is facing a different challenge. Within their ranks is EOS, a scalable “multi-core” blockchain technology platform that promises to challenge Ethereum itself. With Dan Larimer (Steem, Bitcash) as the CTO behind block.one which is issuing the ERC-20 Tokens, people are hoping for some success by investing in the tokens in EOS’ Initial Coin Offering (ICO).
However, the legalese behind the issuance of the ICO points out that block.one does not have any commitment to see it succeed! Again, pundits claim that this is for block.one’s protection from the long arms of the US Treasury, IRS and Securities Commission. They claim that block.one already has the funds needed for development, and that this ICO is to get as many tokens as possible into the hands of the common investor instead of the groups of whales trolling the altcoin seas. An altruistic community development programme, it seems. A proposal based on an idea that will not be tested until after they take money they do not need!
With that in mind, the rationale behind issuing these ERC-20 tokens for a whole year would also mean that block.one will become a major holder of ETH, perhaps up to 10 per cent of the total issued of USD1 billion when they finally launch next year. Not a bad strategy to get free money and a definite proof of stake when ETH undergoes the next exercise of maturity! It would also mean that they could sell off their ETH later and push up their own “EOScoin” thus “proving” investor confidence in their own product compared to ETH.
In common parlance, any thinking investor would suspect that EOS is simply an economic parasite riding on ETH with a view to fatten itself and then morph into a new body after weakening its host! This view is enhanced by the performance of ETH over the past few weeks ever since EOS was pushed. ETH prices have been brought down low to below USD180 and kept at just over USD200 range despite the huge interest and development in the cryptocoin. Each time it tries to move up a whale comes in to sell huge volumes to cap gains, sometimes forcing prices to hit stop-loss breakers, and then buys it back at lower prices. All this while, some other whales mop up the ETH liquidity in the market at bargain prices as shaky speculators trading on margin are forced out. Price are moving north, driven by the renewed interest in BTC/XBT but are crawling at a snail’s pace as the accumulation continues.
Whether block.one is behind this is impossible to say. People think that the market is huge and too big to manipulate with billions involved, but the actual fact is that ETH liquidity and market capitalization is barely a daily sneeze compared to the interest on funds moved in the global financial markets. Any single hedge fund manager can control the prices of ETH at any time if they bother. Don’t believe me? Check the silver market where prices have been kept below USD17 per ounce or USD540 per kilogram! Some say that this is because global demand has dropped because manufacturing has decreased in slowing economies, while ignoring that the price ratio to gold is also widening, meaning that gold is still in demand because manufacturing has not decreased!
Also, the biggest tip may have been that a single sell order placed in July on one exchange was comparable to selling the whole global silver production for years at one go! It caused a mini-crash and a mega-commotion! If that is not manipulation, then all the illegal immigrants in the USA are peaceful bunch who desperately want to contribute to the country’s economic progress instead of sucking up the wealth of the country.
But I digress. The point is that EOS should not need to have such an ICO using ERC-20 Tokens and then issue terms and conditions that make it impossible for investors to find redress in the event of a default. Investors truly have “irrational exuberance” if they are not bothered that EOS has plainly stated that they have no responsibility to do anything with the tokens that they buy!
If EOS does not need to raise capital, as they have clearly stated they have sufficient development funds, then they can actually issue some other form of tokens or security and invite investors to buy them with the same “no value given” assurance to ERC-20 Token holders. Using ETH resources to prove ETH is inferior to EOS is simply disingenious! Especially when EOS is still just an idea while ETH is a proven platform that is continually improving each month.
Personally, I would be most wary of EOS no matter which cryptocoin stalwarts are behind this. Not only do investors have nothing of value to hold, the price of ETH also cannot appreciate considerably if they keep issuing ERC-20 tokens at USD6 million per day! It is the equivalent of the Federal Reserve printing money unreservedly. I know that people will tell me that I am wrong and that I should place some trust in block.one as they really do have a proven track record. Doesn’t this strike you as weird as it is the same rationale for AIG which caused the last global financial crash. I suppose that AIG got out of it without any penalty is a plus point to investors. Lessons to be learned are soon forgotten! Sigh!
And now for some AMD fun in Part 2!