Thoughts on a Rapidly Changing Marketplace
BITCOIN FUTURES SEPARATES THE SPECULATOR FROM THE BITCOIN CASH MARKET
Speculation in the cash market moves to Bitcoin futures. Investment by speculators on a regulated exchange, in US Dollars, will have no direct effect on the supply and demand of Bitcoin Cash. The cash market for mature exchange traded commodities should reflect real time commercial use and producer or digital owner activity. The cash market shows the shift in real assets, with some arbitrage activity. Bitcoin Cash, as a decentralized currency, will find fundamental price strength or weakness with the shifting of those assets during times of uncertainty or prosperity. Bitcoin futures are a pure decentralized hedge, unlike gold with reserves controlled by governments.
The forecast for most major economies is prosperity, conversely the forecast for Bitcoin’s fundamental strength is bearish. The supply of Bitcoin Cash today far exceeds the commercial use. Technical analysis resulted in my forecast of 3999, fundamental analysis shows weakness. With little increase in commercial use the decentralized currency could trade below 999. However, Bitcoin could strengthen or form a short-term bottom with a continued sell-off in U.S. Equities. The fear of higher U.S. interest rates and profit taking could see a 15 to 20% pull-back in stocks. This is the platform that Bitcoin has been training for, a decentralized currency hedge against uncertainty!
FIRE IN THE HOLE
With the speculator in futures, the cash market of Bitcoin is transparent now to large purchases identified by volume and open interest. This activity, without increased commercial usage, might signal illegal movement of capital to the regulators; the rats are jumping ship, Coin holders are selling or hedging, commercial holders are selling or hedging. Faux crypto currency companies, who offered coins or tokens in Bitcoin, are selling or hedging. New ICO volume has waned, taking pressure off the supply and demand squeeze in Bitcoin.
THE CRYPTO CURRENCY CRASH
If you want to hold your portfolio, you might protect your entire position in the short term by selling Bitcoin Futures, hedging your portfolio of ICOs, aka crypto currency. I believe Bitcoin will survive as a hedge against economic downturn, world disaster or government uncertainty at much lower price levels. The SEC has started enforcement action issuing subpoenas to crypto currency companies and their affiliates that solicited U.S. investors. These companies must rescind their offerings, escrow the funds and file with the SEC. Most unregistered coin or token deals (ICOs) that involved U.S. investors will be investigated. Professionals and promotors that assisted these ICOs could be prosecuted.
An Opinion From BlackStar’s CFO, Joseph Kurczodyna, 12/28/2017
This is the BIGGEST SHORT in my 43 years of trading Commodities & Securities. As I mentioned in early December, it’s happening fast on the heels of the Chicago Mercantile Exchange (CME) opening of Bitcoin Futures. The high was put in the first day of trading on the CME at 20,650 Bitcoin, Monday 12-18-2017. We saw a low of 12,229 Bitcoin on Friday 12-22-2017 a 40% drop after only 5 trading days on the CME. Traders might legally capitalize on it by selling Futures contracts or buy Puts in BITCOIN, then buying it back under 3999. The margin will decrease as the market falls and volatility wanes, which will put more pressure on Bitcoin. Bitcoin may survive like Crude Oil futures in 1983 or fail like rapeseed, eggs or tulips futures. All cryptocurrencies (coin or tokens) that are not the few 2-3 derivative currencies, or a new recognized listed commodity, may fall to zero. Many of these cryptocurrency companies holding Bitcoin have seen their wallet account soar, but their use of proceeds only to fund an idea with no or little tie to “ownership equity”. My experience in human nature tells me that the principals of those unregistered ICO's may spend their proceeds in salaries and bonus. An eighty percent drop in Bitcoin might deplete most of their holdings.
The 2017 Un-Regulated Coin & Token Crash
ICO's mimic U.S. IPO's sold to non-accredited and accredited investors after SEC review. IPO's go thru registration process as required in the 1933 Securities Act. The ‘33’ Act was brought on by the 1929 Stock Market crash, where we saw young entrepreneurs and old sharks post white papers on the street. The process took 15 minutes to incorporate and one day to write the poster paper. Today you can create a coin or token in 15 minutes and post a white paper on the internet. SEC rules have been in place since 1933, so it could be curtains for all the unregulated equity derivative coin or token deals sold to US investors without securities compliance. The SEC may investigate and order these ICO's to rescind the proceeds of their offering. Then they might re-file with the SEC and hope for their ’33 Act registration to become Effective after comments, the process that protects U.S. investors. The ICO principals could face time in the Cross-Bar Motel (potentially) because of their failure to discloses and their violations of the Securities Act of 1933. You can check-in to a BlockChain, but you can't get out. This cyber-security platform will spread thru industry. The BlockChain cybersecurity feature of anonymous encrypted information on a BlockChain inspired investment of billions of dollars of bitcoin into unregulated equity derivatives and may unfortunately lead to their demise as well. Risk management and transparency will always lie at the center of not only what the SEC does, but the CFTC, the U.S. Federal Reserve, and other regulatory bodies the world over. The SEC may ask for the key to every ICO BlockChain. If ICO’s have ability to disclose, this may violate the security features, revealing information that could bring potential charges for fraud, market manipulation, money laundering and tax evasion. The only unregulated space for coins or token to trade with liquidity is at the bottom of the decentralized Oceans. The SEC is looking at the ‘Principals prior to ICO sales.
MARKET COMPLIANCE AT ITS BEST
I assume the SEC, CFTC, IRS and Federal Reserve converged last Summer and were faced with the potential decentralization and destruction of our Equity and Commodity Markets along with our Monetary System and IRS tax transparency. (The Russians weren’t there).
Why haven’t the regulatory bodies in every country stopped this obvious violation of Securities & Currency Laws?
Conversely, the Board of Governors of the U.S. Exchanges and other Securities Markets are making significant moves to preserve market integrity, transparency, and preservation of our capital markets. The Officials first decided to regulate the head of the beast “Bitcoin”, by allowing Future contracts.
If the SEC had shut down “cryptocurrency” in July it would have meant blood in the streets for all those investors that can now hedge in Bitcoin Futures.
THE CFTC APPROVAL TO TRADE BITCOIN FUTURES IS BRILLIANT
For the Bitcoin to survive as a World Decentralize Currency/Commodity it must trade on a regulated Commodity Exchange.
Bitcoin may eventually separate its association with the bad crypto actors riding its blockchain coat tails. Futures contracts will give users in commerce the ability to hedge their risk while accepting Bitcoin as a convertible currency. The owners of Bitcoin can hedge their asset by selling for future delivery on the Exchange. The speculator can bet against the owners and users that may be lying about supply and demand fundamentals. There is an unlimited supply of futures contracts on the Exchange, therefore it is much more difficult to manipulate prices like the BITCOIN squeeze to the upside prior to Futures trading. The Bitcoin is playing with the big boys in Chicago.
THE SEC GRACIOUSLY IS WAITING TO RELEASE THE HOUNDS ON ICO’s
Thanks for the exit into the futures market giving us the ability to hedge our bets on illegal unregistered crypto equities, if they crash. The SEC has been caged up since July, no cell phones, or laptops, just waiting for other officials to say thumbs up, open the gates to the Arena. Crash the cyber crooks, make small change of the crypto minions, and slaughter those unregulated unregistered crypto derivatives.
The Unfulfilled Crypto Forecast
An Opinion From BlackStar’s CFO, Joseph E Kurczodyna CFO, 12/04/17
The Chicago Mercantile Exchange (CME) announced that it opens future/option Bitcoin trading in late 2017. In my opinion, we will see a sell-off until the position trading and hedging smoke clears. At that time speculators can bet in U. S. dollars, on a regulated exchange, with leverage, that Bitcoin will go up or down. Look out below ’fire in the hole’, speculators will cover their position in a later month, (hence futures). History shows, 90% of the time speculators liquidate their long or short positions. Future contracts are unlimited, so the fundamental factors of Bitcoin will find support at a true price level, maybe to its demise, maybe not? Before the CME approves trading, I think we could hit 9,000 to 49,000 then see up to an 80% drop in the Bitcoin spot market. The downside risk is Bitcoin trading at the 900 to 1900 level. The “Secret Sauce” is blockchain technology the very reason Bitcoin and other cryptocurrencies are “secure” to trade.
Investors may soon flock to U.S. public companies in the cybersecurity-blockchain space. These companies which are writing code for blockchain for multiple industry applications might even offer coins/tokens for sale back by their equity/assets to obtain funding, but, only after pre-registering those coins or tokens with the SEC before they trade globally in cyber space. We express concern at the price level of Bitcoin and coin or token deals not backed by 100% of the company’s equity/assets (if they have any). Fair warning, if Bitcoin trends lower will all cryptocurrencies deals suffer? Bitcoin is not the “Secret Sauce” .......blockchain is to the Internet as Bitcoin is to just another application.
The blockchain technology that keeps Bitcoin and all cryptocurrency safe ‘unbreakable’ chain is the alleged cybersecurity ‘Secret Sauce’ that we should be talking about. We have seen that it can have faults in execution. A distributed ledger secured platform can be utilized in almost every business and personal aspect of life. Blockchain systems may open a P2P playing field with pure supply and demand pricing on products and services. There is a limit to the supply of Bitcoin but, is there a limit to how many US Dollars can be printed? That fact alone appears to make Bitcoin a legitimate decentralized currency and a potential hedge against every nations currency.