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Observations from a Post-Bubble(?) World

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If you have any kids, you’re by now familiar with the phenomenon of the Angry Birds. The game series and subsequent branded clothing and the like have created something literally insane: a $1 billion IPO valuation for something called Angry Birds. We’re not making this up.

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Rovio Entertainment, the Finnish maker of Angry Birds, is targeting an IPO that would give it a market value of €802 million ($956 million) to €896 million ($1.1 billion). […] Rovio said it would price shares between €10.25 ($12.20) and €11.50 ($12.30). […] Rovio has built an empire around its popular mobile game Angry Birds, including toys, clothes and an animated 3-D movie. […] The gaming app, which was released in 2009, allows players to sling virtual birds at enemy pigs to save their eggs.

Meanwhile, people are concerned that we’re in a bubble with cryptocurrencies and, more specifically, with initial coin offerings and the technologies coming out of them. Let’s be real: the two things are not the same. For better or worse, games and movies are proven ways to make money, while most of the technology we’re offered in the ICO space is speculative at best.

But, of the technologies that we’re offered, those that actually do succeed, well, some of the will re-shape society. And that’s what we’re betting on: the kind of money that is made then. But it’s clear that if we were in a bubble, it recently popped. The bloodshed may not even be over, there may be speculative pumps left before the whole market has some time to rebuild. All the same, it’s helpful to monitor what’s going on in the rest of the world to determine if we’re really overvaluing things.

Most firms in the ICO space differ from Rovio in two ways: they don’t have a working product or solid revenue to point at. As such, most of them aren’t trying to value themselves at nearly the same level. But if society can afford this amount to value a games company, then certainly we’re far from having too many fundamentally transformative companies come out of the cryptocurrency space.

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We’re either a long way from the bubble or somehow in a world where bubble economics don’t truly apply. Every token brings with it a stagnated exit from the cryptocurrency market, thereby inflating the amount of value that is actually invested in the crypto economy. The amount of demand to liquidate it actually is less important when the activity around ICOs is viewed through this lense: even when people, or the network as a whole, loses a bit of money, it gains in new participants, who later are likely to re-add the lost value.

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Market Overview

Uncertainty in Saudi Arabia as Dozens of Princes are Arrested

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Just a few days back we were impressed by the steps taken by the Saudi Crown Prince Mohammed bin Salman. He played a major role in allowing women to drive and in allowing women to attend sports events from next year. He, then, announced the construction of a hi-tech city ‘NEOM’, which was a move to generate additional income for Saudi Arabia and wean the economy away from its dependency on oil.

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Key observations

  1. Crown Prince Mohammed bin Salman cracks down on corruption
  2. Dozens of Prince, former ministers, business executives and government officials arrested
  3. A move widely looked as consolidation of power
  4. Uncertainty has increased
  5. We withdraw our previous recommendation of buying the ETF KSA

We expect crude oil prices to rally in 2018, which should benefit the oil-rich Kingdom in the short-term. As both the short-term and the long-term picture started to improve, we expected Saudi Arabia to make a quick recovery. In order to benefit from this, we had recommended a long position in KSA iShares MSCI Saudi Arabia Capped ETF, which has a significant exposure to Saudi Arabia. However, the events of the last few days have forced us to reassess our call.

The Rise of the Crown Prince

Prince Salman, also known as MBS was an obscure figure just a few years back. However, since his father King Salman ascended the throne, he has quickly risen in stature. In June of this year, the King named Salman as the crown prince and removed the then existing Crown Prince Mohammed bin Nayef of all his duties by a royal decree.

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This move cleared the way for MBS to ascend the throne if the octogenarian King Salman abdicated his throne. With power in his hands, it was expected that the new Crown Prince will implement his Vision 2030 plan with ease. However, last week, MBS made an aggressive move to consolidate his power further.

On Saturday, the King formed a new anti-corruption committee with the Crown Prince as its head. Within hours of its formation, the committee arrested 11 princes, 4 former ministers and hundreds of high ranking officials on allegations of corruption. They are being housed at Riyadh Ritz-Carlton, which has been closed for outside public.

The Saudi Council of Ministers said that the arrests were ““based on specific evidence of criminality and acts that were intended criminal transgressions and resulted in unlawful gain.”

However, experts believe that with this move, the Crown Prince wants to purge all rivals and fire a warning shot at any other possible dissidents.

Will this move ensure that Saudi Arabia stays corruption free?

Unlikely. In Saudi Arabia, the royal clan is more or less above the law. The sources of their income are never revealed and for years they have enjoyed government patronage in various businesses.

Even the current purge is unlikely to reach the royal family members who are loyal to MBS.

In fact, in 2016, MBS had purchased a 440-foot yacht priced more than $500 million. Neither has he disclosed the source of his funds nor will be asked about it.

The recent anti-corruption drive will only shift the power from his rivals to the members who are close to the Crown Prince.

Young Saudi population in support of the anti-corruption drive

The Saudi millennials are likely to support the arrests. They have long despised the unwritten immunity extended to the royal family.  The current move offers a confidence that no one is above the law and it will benefit the nation in the long-term.

Absence of opposition is not a positive development

The Crown Prince has stated that he will steer the nation towards a moderate version of Islam, unlike his predecessors who have followed the hardline. With most of his rivals arrested, decision making can become faster and will help MBS to push aggressive reforms.

However, the involvement of Saudi Arabia in Yemen, the aggressive confrontation with Iran, and the boycott of Qatar have all been inappropriate decisions taken by MBS. With no opposition in future, he may make a blunder that can be detrimental to the nation and also to the region.

Investors are Likely to Be Wary

Vision 2030 can be successful only with the support of the private sector. With some of the top businessmen like billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Amr al-Dabbagh, chairman of builder Red Sea International; and Nasser bin Aqeel al-Tayyar, founder of Al Tayyar Travel arrested, their businesses are likely to be affected.

Additionally, the foreign investors are unlikely to be interested in projects until this whole drama comes to an end. This can delay many existing projects.

The royal unity will be tested

For the past many decades, power has been divided among the various branches of the Saudi royal family. This has kept them together.

However, the recent purge is unlikely to go down well with the royal clan. Though voices may be silenced now out of fear, it is likely to rear its head sometime in the future. A bloody coup or power struggle can’t be ruled out.

We don’t want to invest in uncertainty

Considering the uncertainty, we would like to withdraw our recommendation to invest in the future growth of Saudi Arabia. The risks far outweigh the potential benefits. We shall keep a close eye on the developments and reassess our call if things change for the better. For now, please don’t invest in the ETF KSA.

Will the Princes park their wealth in cryptocurrencies

Thousands of bank accounts have been frozen in this anti-corruption drive. Saudi Arabia’s attorney-general Sheikh Saud Al Mojeb has said that the current exercise is only Phase one. So, we may expect more such drives in the future, especially if MBS faces any opposition to his decisions.

The combined wealth of the persons who have been arrested totals more than $33 billion. The remaining members of the royal family and wealthy businessmen are likely to remain on the edge. Considering the situation, it is reasonable to expect at least some money to find its way into cryptocurrencies.

Featured image courtesy of Shutterstock. 

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Bitcoin

Sunday Devotional: Keep Your #Hodl Hand Strong

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If you bought now, at the all-time highs of Bitcoin and you’re itchy about $5,000 or $10,000, perhaps taking a look at those who’ve been in your shoes before is in order. Or perhaps you don’t have much Bitcoin, but you’ve got a lot of Ethereum and tokens on its blockchain. Even better, perhaps you’re holding a number of one of the alleged Bitcoin long-term contenders, XMR or Dash.

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If you look historically at the people who’ve bought during other highs, the ones who got impatient are the ones who lost the most. The ones who quietly held through were rewarded the most richly.

We can take the example of a friend of the publication, who sold Bitcoin very near the ultimate bottom. Strictly speaking he could have had $50 million in Bitcoin assets today if he had instead decided to hold, but things certainly looked bleak for the currency in those days. He was not alone in selling the bottom, nor truly irrational when one considered all the angles. No one ever is. This is what you have to keep in mind: people who were buying at that time were paying the most anyone was willing to pay, and people who were selling were accepting far less than they had seen others sell coins for. But some people were just off the market in those waters. These people played a successful strategy through a long, cold winter.

Some mining outfits are always dumping their coins, no matter the price. Bills have to be paid, after all. So while it may seem that Bitcoin is “stable” at its current prices, we’re just as likely to see turbulence and dips. Unless you’ve some more performative place to put your funds (such as one of the trade recommendations or ICOs reviewed here at Hacked), you’re still probably going to end up with a greater long-term profit by retaining the coins. Especially if you retain them in ways that ensure they truly belong to you, IE, off exchanges during times when you don’t anticipate actually trading them.

There’s nothing wrong with selling the highs and buying the lows, but long-term, some people have done equally as well by doing nothing at all. While this article is meant as a broad overview, one can imagine that some people had to take measures to deal with the old weak hand syndrome. After all, if everyone is panicking and letting you know the building is on fire, it only makes sense to try and escape with everyone else.

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But if you believe firmly in the longevity of your asset, sticking it out may become worth it. Increasingly, products will emerge that will allow people to maintain possession of their crypto assets but extract leverage via peer-to-peer and even institutional lending. Such a paradigm will enable the crypto class to enter the business world in unforeseen ways, perhaps in unforeseen numbers.

Buy and hold is a strategy that will work well for so-called “blue chip” cryptos, but it is not future-proof. Aside from security holes that can arise in cryptography from generation to generation, simple innovation can displace something like a cryptocurrency, and network effects can shift current. If one region of the world becomes less friendly, in a regulatory sense, to do business in, then perhaps cryptocurrency will move its volume to another.

Cryptocurrency is by definition censorship resistant, after all, because a design which does not enable its fungibility is essentially the opposite of the “digital cash” paradigm. When such problems arise, those who kept their hold hand strong will still be able to conduct business, and where things are most repressive, in a more catastrophic forecast, still be able to escape troubled waters.

featured image courtesy of Pixabay

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Has The Bull Market Returned for Bitcoin?

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In a twist of sorts, instead of bitcoin’s first chain-split hardfork sending price down under, it has fueled it up to an all time high of $3,339.50, some $350 higher than its previous brief all-time high of $3,000 on June 11th.

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That was followed by a sell-off which nearly halved bitcoin’s price to what might be a bottom of around $1,800 on July 16th, with a sharp price increase soon after to $2,300, a segwit bull-run to $2,700, a Bitcoin Cash crash back to $2,300 and now the recent bull run to an all-time high.

Bitcoin’s Spring Summer

That’s not what was meant to happen according to the hardfork naysayers. There was meant to be doom and widespread confusion. Bitcoin was meant to be over, done, gone, if it chain-split. People were to lose money, poor newbies would run to mummy and on and on.

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What actually happened was what cooler heads predicted. The fork would unlock new value, giving everyone exactly what they want. Thus restoring confidence and optimism, leading to a price rise.

In this case, the price rise has been higher than many thought. That’s probably because bitcoin has become just a bit more interesting and cool. The currency has proved now you can’t control it. It has also proved its decentralized nature is inherent rather than a point of debate.

Rather than smoke filled rooms or closed door meetings, bitcoin has now shown its true governance in action. That of giving the free market exactly what it wants by forking, placing both currencies under its mercy.

That is something that has never happened before in this manner and shows the full power of bitcoin and any public blockchain based currency. You can’t choose your centrally issued fiat. With bitcoin, you get exactly what you want and no one can deny you such right.

If you want full blocks, empty blocks, or no blocks at all with IOTA, if you want smart contracts or simple multi-sig scrypt, Lightning Network or Raiden, Rootstock or the EON lot, you can have what you want in the great cryptocurrency amazon.

Where birds have flashy colors and some flowers even eat meat, where lions rule and snakes bite too, where elephants roam above them all yet get terrified by a little mouse.

The mix in this space isn’t too much different. The wall-street testosterone pumped jockey hangs around with glassy nerds, looked upon by flashy artists with the swindlers all around.

Cryptocurrencies’ current combined market cap.

No wonder we are seeing what looks like a sharp V recovery with the combined market cap of all digital currencies nearing its all-time high of around $116 billion. Currently standing at just under $113 billion.

That’s more than many household brands. Eth and Bitcoin Cash have not yet even had their all-time bull run. So some are wondering, billions were cool last century, can this space manage a trillion?

I’m not one for hype, but the millenial generation is now entering a stage where their lives and careers are starting to stabilize after the confused teenage years and rocky early 20s.

They are now getting a stable income, maybe even settling down, with real purchasing power – perhaps higher than any other generation. They experienced first hand how the Middle East wars robbed them from some of the teenage fun. How the bank collapse ruined for many of their friends the early out of university years.

So when they look at gold they may think it outdated. When they look at stocks they may think it too stiff upper lip, when they look at cryptocurrencies they may think it as fun.

Because they’re not just buying something, but becoming part of a movement. A movement that returns money to the people. A movement that brings back investing to the masses, taking it off from the restricted and secluded VC ivory towers.

A movement where we are in charge. We, the free market. Where we have liberty and choice by just a click to get the exact thing we like and if its not on offer we’ll just code it and wala – it is now.

The young, those currently in university or just about leaving, will follow them. The old, those in the 50s or 60s, will hear them, because they are right. As such, real power has or is about to shift to the millennial generation, the late 20s early 30 somethings.

A generation that has found a solution in digital currencies where they may argue about bitcoin or bitcoin cash or ethereum or whatever else, but they all know it’s all just fun, not much different than brothers fickles.

For while some might see hate, I see passionate love between the three main ones. Sure, there are some currencies that objectively deserve polemics, but bitcoin, bitcoin cash, ethereum, some of the tokens, deserve the highest respect.

Because all three are pioneers in a very new world we are building. All three have sound bases, good foundations, great aims and either could lead. More importantly, the three currencies are all focused on actually achieving something that goes beyond mere price.

That is, they employ no tricks, through marketing or otherwise. They are not a get rich project, here today, gone as you sleep. They are serious attempts towards providing a solution to the problems the millennial generation saw and experienced as they were coming of age.

Their competition, therefore, although it may appear ruthless, it is in fact friendly. Long may it live and long may liberty reign above all three and above us all for a very, very long time.

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