TL;DR: In this post I discuss what Synereo is, how its ongoing crowdsale works, and whether you should buy into it. After some analysis & number crunching, I conclude now is a good time to buy directly on exchanges, but the crowdsale should be avoided.

If you're into cryptocurrencies, you probably know that Synereo launched a new round of crowdfunding a bit more than a week ago, and there was a good deal of initial excitement. The month-long sale runs until October 19, with more than $3 million raised in the first 24 hours alone (however the pace has slowed since then, and with good reason as we'll see).

These days speculators in the crypto space go crazy over every so-called ICO (Initial Coin Offering) that comes along due to the lucrative profit potential of being an early adopter. And Synereo seems to be no exception. But this crowdsale is not exactly an ICO, and the differences are enough to keep me from investing in it.

When considering the merits of investing in a cryptocurrency, as with more traditional investments, one must carry out both a fundamental and technical analysis of the asset. Let's start with the fundamentals:

What is Synereo and why should I care?

Synereo is not just a single application. Rather, it is a technology stack consisting of several interacting layers that together make up an entire blockchain-based ecosystem, similar in some ways to both Ethereum and Steemit. Some of the highlights are:

• smart contracts platform - think of this as a blockchain that can execute computer programs, called smart contracts. Smart contracts are the building blocks of decentralized applications, or dApps.
• Rholang - a specialized programming language for creating smart contracts on the Synereo blockchain.
• Social layer - this is how users will interact with dApps in the Synereo ecosystem. I'm a bit fuzzy on concrete details, but I gather from watching the recent alpha technology demo that this will be somewhat analogous to a social network like Steemit.
• AMP - the cryptocurrency fuel for executing programs on the blockchain, which can also be used to "amplify" content, thereby drawing more attention to it in Synereo's social network.

There's a lot more to it, but this serves as a high-level summary. You should care about this for a few reasons:

• It's becoming clear that smart contracts are the up-and-coming next phase in the cryptocurrency revolution started by Bitcoin. The only real question is which smart contracts platform will win out and achieve market dominance over the others.
• Synereo could be a serious competitor to Steemit, offering a different enough approach to social networking that some percentage of Steemit's user base could be interested in switching platforms. And the early success of Steemit has shown there is plenty of interest in this type of product.
• The developers behind Synereo are a talented bunch. They have been collaborating with the Ethereum team on the development of Casper, a proof-of-stake protocol that will be used to secure both the Synereo and Ethereum networks in the future. This is an improvement on the proof-of-work mining method employed by Bitcoin and currently used by Ethereum.

Sounds pretty cool. Any drawbacks?

Well, when I evaluate the potential of a new crypto platform, two questions I always ask myself are:

1. Does it bring something new & unique to the table that would give me a reason to use it?
2. What are its possible competitors?

With those questions in mind, let us do a quick & dirty comparison:

Component of Synereo	What it's analogous / similar to
smart contracts platform	Ethereum
Rholang	Ethereum's Solidity programming language
Social layer	Steemit
AMP - cryptocurrency fuel for executing smart contracts on the Synereo blockchain	Ether (ETH) - cryptocurrency fuel for executing smart contracts on the Ethereum blockchain
AMP - amplify content / reward users for content	Steem / Steem Power / Steem Dollars have an analogous role on Steemit

So we see that Synereo is like the mad love child of Ethereum and Steemit, which are also its main competitors. Which begs the question: why should someone switch to using Synereo, when Ethereum and Steemit are both leading platforms in their respective areas, that already have a rapidly snowballing network effect in place?

Competition is good, but right off the bat Synereo has already lost the first-mover advantage and will be playing catch up with the competition. And that's the main drawback in my eyes. It's the same reason Litecoin, which is a perfectly good technology, will forever remain in Bitcoin's shadow.

For now I just don't see a compelling reason to give Synereo a try. As far as I can tell, the only real difference between it and Ethereum is that it's a smart contracts platform designed specifically with social networking in mind. So in that sense Ethereum is a bit more generalized. However, I don't claim to be a Synereo expert so if you feel differently, by all means please share your reasoning in the comments below!

Is there a silver lining?

There always is. Being second-mover is not necessarily a terrible thing. People who want to get in on this hot new technology but feel they missed the boat with Ethereum and Steemit may jump at the chance to invest in Synereo before it launches. AMP has plenty of potential upside and I expect there will be some nice trading opportunities in the months ahead. It's all a matter of getting in at the right price and not being too eager.

Okay then, let's pivot to the technicals!

Time for some number crunching. I won't regurgitate all the details of the crowdsale rules; you can read it all on Synereo's web site for yourself. But the main points are:

1. You get a bonus depending on how much BTC you invest.
2. The price rises in time-based stages, from 33,000 satoshi / AMP (the current rate) to 40,000 satoshi / AMP near the end of the sale.
3. There was an extra bonus for investing within the first 24 hours of the sale.
4. This is the second Synereo crowdsale! AMP has been trading on major exchanges such as Poloniex for some time already (so it's technically not an ICO).

What makes this crowdsale very unusual is point 4. Since AMP is live for trading on exchanges, we must determine if it's more beneficial to buy directly from an exchange or participate in the crowdsale. From point 2 we already know there is an upper bound on the AMP price for the duration of the sale. Market price on exchanges is unlikely to exceed the crowdsale price, because if it did people would stop buying on the exchanges and flock to the crowdsale, meaning that market demand would dry up and increased selling pressure would push the price back down again.

For the sake of simplicity, let's imagine I'm going to invest now, at the lowest price tier of 33,000 satoshi / AMP. Furthermore, let's assume I didn't invest in the first day so I don't get the extra bonus for the first 24 hours. Given that, here would be my real cost basis depending on how much BTC I choose to invest (you can double check these numbers for yourself on Synereo's web site):

BTC invested	Bonus Rate	Effective price / AMP (in satoshi)
2	3.33%	31,936
10	6%	31,132
20	9%	30,275
50	11%	29,729
100	13%	29,203
200	15%	28,695

These numbers come from the handy price calculator on the crowdsale web site:

One of my investing rules is to invest no more than 5% of my net portfolio worth into any one particular crowdsale, and I'm certainly no whale, so 2 BTC is near the maximum I'd feel comfortable investing. I'd prefer to get a bigger bonus, but it's quite a large leap up to the next bonus tier at 10 BTC, and that would take me beyond my investment comfort zone. So let's say I stick with 2 BTC and at least get a small bonus of 3.33% extra AMPs. My effective price per AMP is 31,936 satoshi. Not great compared to the whale buyers.

Now let's extend this thought experiment further by imagining I actually bought into the crowdsale during the first 24 hours, so I got the extra bonus on top of my meager 3.33%. What would my effective price be in this case?

I took a screen shot of the price calculator right before the end of the 24-hour bonus period:

As you can see, with the extra bonus added my price per AMP is reduced to 29,095 satoshi. And how exactly is this number calculated?

Quoting from the sale web site:

AMPs will be offered at 33000 Satoshi per AMP and include an extra bonus of 1 million AMPs for the first 24 hours of the sale, distributed among all AMP buyers in proportion to their purchase amount during that period.

And here's how much money was counted for the purposes of this bonus calculation:

$1,950,168 USD

Since that value is in USD, we have to convert it to Bitcoin to figure out how much of the pie 2 BTC represents. It's hard to be exact here, but we can fudge it and pick a number from historical prices available at any of various sources on the Internet. Let's wave our hands around and use $612 as the price of Bitcoin at the close of September 19, the first day of the crowdsale.

Then $1,950,168 / 612 = 3187 BTC.
So my 2 BTC is (2 / 3187) x 100 = 0.063% of the pie.
That means I would get 0.063% of the 1 million AMPs available for the bonus, or around 630 AMPs.

And don't forget that's on top of my 3.33% bonus, which works out to about 202 AMPs.

My base amount of AMPs is 2 BTC / 0.00033 = 6,060

So my total is base + 3.33% bonus + 24 hour bonus = 6,060 + 202 + 630 = 6,892

Thus my final cost basis is 2 BTC / 6,892 AMP = 0.00029019, or 29,019 satoshi per AMP. Which is close to the 29,095 reported by the sales page calculator (the small difference can be explained away by rounding methods and whatever Bitcoin price the web page uses).

Okay, so that extra bonus really made quite a difference. As a final thought experiment, let's imagine I'm a whale that bought in with 200 BTC in the first 24 hours. I'm not going to write out all the calculations again, but if you do the math you'll find it works out to a price of about 26,326 satoshi / AMP.

Conclusion 1: Whales who bought in the first 24 hours of the sale got a huge discount on the listed sale price of 33,000 satoshi / AMP. Anyone who is not a whale and buys now will get a comparatively poor price.

Conclusion 2: We can take 26,326 satoshi as a rough lower bound for the sale price (there may be very large whales who got even better prices, but these are hard to quantify so we won't consider it). And we can take 33,000 satoshi as the current upper bound, which will increase as each new price tier goes into effect.

Give me a market check!

Here's a daily price chart from Poloniex showing recent AMP prices going back to before the crowdsale started.

The price has been consolidating in a well-defined range since the large spike around the end of August. It should come as no surprise that the upper & lower limits of the range roughly match the upper & lower crowdsale bounds discussed above (which I've marked on the chart with red lines). On the few times the price has breached these limits, it snapped back within the range fairly quickly.

The daily EMA (yellowish line) is acting as strong support, and you can see the SMA (blue line) & EMA are squeezing together, resulting in some upward momentum as they converge. A couple days ago I placed a small buy order at 26,760 satoshi. Unfortunately, even though the price flirted with that level for a while, it was just a tease and never quite kissed it. But no matter, chances are good that price level will be revisited by the end of the crowdsale.

Conclusion 3: Want to feel like a Synereo whale? Then forget about the crowdsale and simply buy on an exchange next time the market price drifts near the lower bound of the crowdsale price.

Yes, yes, but how will this picture change toward the end of the crowdsale?

It's impossible to say for sure, but let's consider the possibilities:

1. Price drops

If the market price breaks down below 26,000 satoshi per AMP, then everyone who bought into the crowdsale will be very sad, and everyone who didn't will be ecstatic that they stayed away. If that happens, I'd look for a bounce at previous resistance-turned-support points around 22,000 or even lower at 18,000. You can see those levels marked with red lines on this chart:

This zoomed out chart goes back to when AMP first started trading on Poloniex. The box highlights the region shown in the first chart above.

2. Price stays within the range

I consider this to be the most likely scenario, with range-bound action peppered by occasional short-lived spikes, lasting until the end of the crowdsale. It wouldn't make much sense for the market price to chase the rising crowdsale pricing tiers, for reasons I'll mention below (but we all know markets can behave irrationally at times, plus there is some upward pressure from the still rising EMA & SMA lines). Under these conditions it would be reasonable to buy any dips down towards our 26,326 satoshi lower bound.

3. Price rises

If by the end of the crowdsale the market price is hovering around 33,000 satoshi or higher, then we might see an interesting scenario play out: all the whales who bought at much lower effective prices will be tempted to cash out once they receive their AMPs. Some will be in it for the long-term, of course, but crowdsales often attract speculators looking to flip the coins for fast profits. And if enough of these speculators sell, we could see a sudden plunge from the abrupt increase in selling pressure, followed by a rapid rebound as opportunistic buyers come in around the crowdsale lower bound.

This is why I consider possibility #2 above to be the most likely scenario. The market may already be pricing in the possibility of whales cashing out following the sale, thus helping to suppress the market price and keep it drawn to the lower end of the range.

So the proper course of action here is the same as for possibility #2. Don't chase the price; set some buys around the lower part of the range and wait for the price to come to you following the end of the crowdsale.

Okay, buy low and stay out of the crowdsale, got it.

That about sums it up. Synereo is already up considerably from spring-time lows that briefly touched 5,500 satoshi / AMP, so there is absolutely no reason to chase the price. Smart money already bought in a long time ago. Obey the old trader adage: last one in the pool swims with the turd.

That said, I think there is more upside to come. The technology behind Synereo looks solid and is in a hot, growing niche in the crypto industry. So even though it lacks first-mover advantage, it is likely to do well as a competitor to Steemit and Ethereum. Synereo's cryptocurrency AMP is in a multi-month uptrend that is currently going through a consolidation phase and looks likely to resume after the crowdsale is complete. Just don't jump the gun and be too eager.

Now is a great time to buy, but to get the best price, avoid the crowdsale like the plague (unless you're a diehard fanboy and like giving your money away to the Synereo team to "help out the cause"). Instead, you can effectively get the same price as crowdsale whales by buying directly on exchanges whenever the price dips down below 27,000 satoshi / AMP. I'd consider anything between 26,000 - 27,000 to be a good price.

Links & sources for further study

Synereo crowdsale site: https://sale.synereo.com

Synereo home page: https://www.synereo.com

Synereo team bios: https://www.synereo.com/about/

An interesting news story about the crowdsale: https://news.bitcoin.com/facebook-killer-synereo-crowdsale/

Some background knowledge on ICOs: http://www.smithandcrown.com/what-is-an-ico/

Historical Bitcoin prices: http://m.investing.com/currencies/btc-usd-historical-data

Source for info about Ethereum / Synereo proof-of-stake collaboration: https://bitcoinmagazine.com/articles/synereo-unveils-tech-behind-its-decentralized-web-1473099722

Alpha tech demo given by Synereo's Technical Program Manager - it's quite crude at this stage but gives you an idea of the direction things are headed.

For more posts about cryptocurrency, travels in Japan, and my journey to escape corporate slavery, please follow me: @cryptomancer

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Disclaimer: I am not associated with Synereo in any way, but I do own a small amount of AMP. All opinions expressed in this post (and any flaws in the analysis) are my own personal views. I am not a professional trader so do your own due diligence and don't follow my advice blindly; always consider data from multiple sources before making any trading / investment decisions.

Image credits: Title graphic is the Synereo logo taken from public github assets, superimposed on a Poloniex price chart. All other Synereo graphics come from the main Synereo home page & crowdsale web site. Price charts are all from Poloniex.