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State of Securities: Token Regulation and Solutions

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Over the past year and a half we have witnessed an incredible volume of international news and speculation, much of which regarding the matter of government authorities and their attempts to implement regulatory measures / controls on cryptocurrencies.

Not since the advent of digital payment services (from PayPal, to Revolut and mobile-only banks) have we seen phenomenon affecting finance in such a revolutionary way.

Blockchain is still a nascent technology however, and to liken it to previous innovations (backed by the old guard of central-banking titans) would be to do it a disservice.

Millenials and ‘The Crypto Rush’

In today’s economy, throughout much of the western world, we have experienced a challenge that has widely been referred to by many names. We’re going to call it ‘the millennial problem’.

It denotes the differences seen between the economic and professional opportunities that were available to past post-WW2 generations (such as ‘baby boomers’) and those offered to the young adults of today.

Generations which have grown up and lived through the new millennium as young adults.

It is not unreasonable to make the comparison between the desperation for fortune of today’s disenfranchised youth in light of blockchain – to that during the successive gold rushes in the 18th and 19th centuries across North America.

Regulation: What is it good for?

Like the days of the wild west (admittedly with less violence!), there is little to no effectively implemented regulation in much of the current crypto sector…

Regulation is important because it helps to protect unsuspecting individuals from being taken advantage of by the likes of confidence tricksters, scammers, and other types of fraudsters that are rife in the ICO market.

It is also important to implement appropriate and functional controls like KYC and AML (‘Know Your Customer’ and ‘Anti-Money Laundering’) to successfully combat activities such as money-laundering

Such illicit practices have been known to be used by criminal groups and terrorist organisations.

Security Tokens: Difficulties of Definition

Source: Smithandcrown.com

According to a piece published by Nasdaq in January 2018, there are three primary types of cryptocurrency which you need to know about.

‘Transactional’, ‘utility’ and ‘platform’.

They give little attention to the fact, however, that tokens can also fulfill functions of assets or company shares.

These are often referred to as ‘security tokens’ and they should be considered as something of an investment contract. They are considerably more difficult to regulate and, as of late, have been subject to great scrutiny and critique.

Furthermore, roughly 98% of ICOs launched are considered to be security tokens. This metric is exacerbated by the fact that the the United States Securities and Exchange Commission (AKA the ‘SEC’) has been heavily investigating ICOs of late.

Furthermore, their chairman Jay Clayton appears to believe that every ICO he has seen is a security, remarking that he wants:

“to go back to separating ICOs and cryptocurrencies. ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”

The Benefits of Security Tokens

There are many primary and secondary uses to security tokens.

The most prominent is to provide an opportunity to contributors for investing in various projects, with the expectation of future profits. These may be delivered via dividends, revenue share or, most commonly: price appreciation.

Secondary trading (as well as liquidity) is vastly diminished as well for security tokens as this ruling could limit or damage the platform, ecosystem and network they are built upon.

Additionally, for coins that fall within the ‘securities’ classification: there are heightened legal risks, duties and obligations that the issuer must consider.

Market, Industry & Regulator Challenges

Source: Cryptocompare

Many believe that this year’s announcement of regulatory implementation in the US was largely responsible for this years record market crash.This comes alongside news and uncertainty surrounding East and South-East Asian regulation activities.

To this day, we still haven’t managed to recover fully from this drop.

Understanding new and culturally disruptive technologies has infamously been one of the weaker suits of many governments across the world, when compared to industry and this is no different when it comes to cryptocurrencies.

Regulations Worldwide

We have seen how easy it is for countries to make decisions, without fully appreciating the extent of the their consequences.

As such, another problem is that many fear that governments will not implement regulations properly due to this lack of understanding.

From China for example, have implemented an outright ban of security tokens and ICOs. Just across the border, however, they are much more legal as Hong Kong is a ‘crypto haven’ – much like Singapore and Taiwan.

Additional concerns come from the effects which these regulations will have on blockchain as an industry, in addition to public fears of wasting tax-payer funding on failed initiatives.

Is 2018 The Year of the Security Token?

It should be repeated that there are considerable benefits to the security token structure, with far eaching ones coming from ICO operator issue security tokens under regulatory frameworks.

Take Regulation A+, Regulation D, Regulation S and Regulation Crowdfunding. Each of which offers its own respective and far-reaching benefits, and while these security-token frameworks are still strict: they allow for ICOs to be conducted in a cheaper and faster way than utility tokens. They also greatly help to reduce legal risk / liability.

Such regulations are a clear example of a government implemented approach, however there are also blockchain based organisations which are developing their own solutions in parallel.

Regulation in the USA (‘The ‘Howey Test’)

No matter your opinion regarding the the US government’s SEC deciding to rule all ICOs as securities, the authority has clealy shown themselves to be a pro-active proponent in the definition of distinct standards for crypto tokens.

In order to help educate their own domestic investors, the Securities and Exchange Commission created what they call the ‘Howey Test’ which helps to educate investors in determining if paritucular transactions can be classified as “investment contracts”.

It is exists alongside a mock ICO called ‘HoweyCoin’, which Josiah Wilmoth (over at our sister site CCN) deemed:

“a landmark embrace of technological innovation,”

and

“a clever campaign intended to teach investors how to identify ICO scams – and troll the fraudsters who continue to operate them.”

The United States of America is home to a great number of projects, however funding processes crypto investment (such as ICOs) are subject to strict limitations.

A result is that many crowd-sale operators opt to refuse US investors at KYC level.

Industry and Community Solutions (‘MOBU’ and more)

Industry lies on the other side of the coin, with inherent features of blockchain such as decentralized decision making.

Projects such as start-up ‘MOBU’ combine a number of these features with proprietary tools and assets with the hopes of becoming greater than the sum of its parts. The end-goal is meant to be to provide an alternative, yet (potentially) compatible solution to those provided by government authorities / think-tanks.

MOBU is a ‘self-regulating’ platform which facilitates the release of compliant security tokens on the blockchain and, according to the platforms whitepaper, it offers Know-Your-Customer (KYC), Anti-Money Laundering (AML) and SEC approval.

Seemingly, the platform / team (according to their whitepaper) intends to bridge a gap. To close the distance between the cryptocurrency developers seeking to offer security tokens, and actual release of said coins: compliantly, legally and successfully.

Final Thoughts

Considering the real use cases, and ability to denominate value, security tokens could rankle traditional financial markets, with a favourable hybrid model from blockchain projects like the aforementioned.

Even more so when considering the news that Nasdaq has begun incorporating blockchain: into public company listings and via it’s Linq platform!

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Bitcoin

Price Prediction for Bitcoin, Ripple, Ethereum: Crypto Bloody Tuesday Sees Falls that Shake Convictions

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  • The BTC/USD hits a low of $4,212 and eyes $3,500 in the next few days.
  • The XRP/USD panics below $0.41 but recovers $0.45 amid high uncertainty.
  • The ETH/USD marks a trough at $125 and could move below $100.

If Hollywood creates the script of what’s happening on the Crypto Board, they wouldn’t have done any better. When it seemed that the story had a hero called Ripple, untouchable and immutable to his environment, the scene begins where the saving hero on which the civilization of Cryptocurrencies depended falls and exposes its weaknesses.

After a first attempt by the BTC/USD to the $5,000 price level through the American session was rejected, a new attempt hours later has broken forcefully that level and reached $4,600.

We saw the same with ETH/USD, once drilled at the psychological level of $150, it reached $137 in the Asian session.

In the short term, the indicators that we will see in the detailed analysis invite us to think about a possible short-term rebound in the next 24-36 hours. This rebound would initiate the process of rotating the charts in the daily range. However, we are going to see new lows, levels unthinkable two weeks ago.

My personal opinion is that at that point, with practically all hands weak and empty, the strong hands will enter the market with full steam, buying a selection of assets that will probably leave some cryptocurrencies in the mud and lift others’ heads. However, the Crypto board will have changed hands, or whales, forever.

BTC/USD 240-Minutes

The BTC/USD is currently trading at the $4,432 price level, drawing a chart that looks very scary. The drop is extreme and except for a slight recovery after piercing $5,000 yesterday, the comeback didn’t last long, and sellers have come back strongly.

The plummet takes away any level of buying if there is anyone still in the market trying to catch falling knives. With this violence, it is most likely that any rise is merely a closing of short positions than a movement of real accumulation. The price reductions are in their early hours, and there are still a few days left until Black Friday.

Below the current price, the first support for the BTC/USD is at the price level of $3,930 (support for price congestion). The second support awaits at $3,250 (price congestion support) and the third support level at $2,900 (price congestion support). These are levels that represent wild drops in percentage terms and that, if they occur, would raise a whole series of comments about the very survival of this market.

Above the current price, the first resistance to consolidate at the current price level is $4,400 (price congestion resistance). If the BTC/USD manages to hold and close above this level, it will begin to consider it as a support point for the first considerable pull-back of the current bear storm. The second resistance level is $4,918 (price congestion resistance) and it may stop the brief bullish attempt done yesterday. The third resistance level at $5,381, is a confluence of the long-term down channel baseline, a price congestion resistance and a few dollars above the EMA50.

The MACD at 240-Minutes shows a profile of strong bearish inclination and with lines very separated. Momentum continues to be strongly bearish, and it may still take quite some time to see a rebound of some intensity.

The 240-Minute DMI shows how bears have absolute control of the situation. They mark levels above the 50th level of the indicator, a level considered as a healthy trend. On the other hand, the bulls give up and move for minimum standards that, if only for extremes should react to the rise. The ADX responds to downturns by increasing its trend level to levels not seen since December 2018.

XRP/USD 240-Minutes

Ripple is the hope that holds firm the conviction that there is a future in Cryptocurrencies at this time, and seeing it plummet has raised doubts throughout the Crypto ecosystem.

Below the current price, the first support is in the long-term trend line coming mid-September at $0.44. The second support at $0.429 (price congestion support) would take the XRP/USD out of its bullish scenario and into the same bearish chaos scenario as Bitcoin and Ethereum. The third support at $0.413 (price congestion support) would be the last hope for a fall to $0.367 (price congestion support).

Above the current price, the first resistance is at the price level of $0.48 (trend line leading the movement from lows). If the XRP/USD can exceed this level, the second resistance at $0.505 (price congestion resistance). The third resistance level is at $0.584 (price congestion resistance) holds the key to a strongly bullish scenario that would aim to exceed $1 quite easily.

The MACD at 240-Minutes has cut down the zero line, currently losing that important support and forcing to consider bearish movements in the near future. The opening between lines is minimal for now. If the price were to rise it would leave a divergent formation of a strong bullish component. On the contrary, price declines would deepen the bearish side and we could see really strong declines.

The 240-Minute DMI shows us that bears are taking advantage of the ADX line, which would indicate a continuation of the price decline. The bulls decrease their activity but far from the minimum levels. The ADX reacts to the recent declines but in trend levels considered as moderate.

ETH/USD 240-Minutes

The ETH/USD is currently trading at the $132 price level after leaving the minimum fall in support of the $125 price level indicated a few days ago. I don’t consider that the drop is going to stay here, but it is possible that from this level there will be a small rebound in the next 24-36 hours.

Below the current price, the first support in the already commented level is at $125 (support for price congestion). The second support at $94 (price congestion support), would break the mythical barrier of $100 and would cause the headlines of the best horror movies. However, this could only be the headline since terror would be in the third level of support at $80 (price congestion support). In the edited FXStreet Chart you can see more levels.

Above the current price, the first resistance is at $155 (price congestion resistance). The second resistance is at $170 (price congestion resistance). Finally, as a third resistance, the EMA50 at $178 meets the fourth resistance at $180 (price congestion resistance).

The MACD at 240-Minutes shows a very downwardly inclined profile with very open lines. This structure protects the continuity of the descents at least for today.

The 240-Minute DMI shows us a situation similar to that seen in the BTC/USD. The bears go to maximum levels while the bulls retire and show us no intention to enter the game. For its part, the ADX reaches levels not seen since December 2018 and support the continuity of direction and strength of the movement.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Crypto Update: Damaging Crash Continues, Bounce Likely Ahead

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The cryptocurrency segment continues to trade under heavy selling pressure, and yesterday’s lows weren’t able to hold up the top coins, and the market entered another waterfall decline today. Bitcoin and Ethereum both fell below their next major support zones today in early trading amid a spike in trading volume, and given the deeply oversold momentum readings in their markets, together with the panicky sentiment, a stronger counter-trend move seems likely in the coming days.

That said, the long-term picture is overwhelmingly bearish, with the exception of the still very strong Ripple and Stellar, and traders should only consider very short-term trades with active risk management against the dominant trend. Until at least a confirmed short-term trend change, new lows remain likely in the coming weeks, but given the extent of the plunge, a violent short-covering rally is in the cards.

BTC/USD, 4-Hour Chart Analysis

Bitcoin fell as low as $4250 today, overshooting below the $4450-$4500 support zone in the process, possibly forming a short-term panic bottom after the sharp two-day selloff. Now, holding short positions is risky, from a short-term perspective, and a rally up to the $5000-$5100 zone is possible in the coming days.

Despite that, traders and investors shouldn’t enter new positions here, with the exception of ultra-short-term traders, as volatility is expected to remain very high, and odds favor further new lows in the coming weeks. Further short-term resistance is ahead at $4700, $5350, and $5600 while primary support is found between$4000 and $4050.

ETH/USD, 4-Hour Chart Analysis

Ethereum also spiked below the next major support level near $130 in Asian trading amid the selling panic, and now the third largest coin is hovering near that level, trying to form a swing low similarly to Bitcoin. Given the current sentiment, a bounce towards the $150 is likely, and a choppy consolidation phase could follow the strong momentum move and the initial bounce.

The bearish long- and short-term trends are intact, and despite a likely bounce traders and investors should still stay away from the coin, with the next support zone found near $118 and with further resistance ahead at $160.

Ripple Turns Volatile Amid Crash, but Support Zone Still Holds

XRP/USDT, 4-Hour Chart Analysis

Ripple has been dragged lower by the latest round of the segment-wide crash, and the now clearly second largest coin briefly spiked below the key $0.42-$0.46 long-term support zone. The fact that XRP managed to stay above the lower boundary of the zone is a plus for bulls here, but the short-term picture remains bearish, and it is far from being safe to enter new positions here.

That said, long-term investors should hold on to their positions, with further support levels found near $0.375 and $0.355, and with resistance ahead at $0.51, $0.54, and $0.57.

LTC/USD, 4-Hour Chart Analysis

Litecoin not just hit the $34.50 level as we expected, but it spiked down to $30 amid the rout and now, the coin is deeply oversold from a short-term perspective. A counter-trend move is now likely in the coming days, but again, only very short-term trades should be considered in the coin with strict risk management in the extremely volatile environment. Further resistance is ahead at $38 and $44, while support is found near $28 and $23.50.

EOS/USD, 4-Hour Chart Analysis

EOS entered a freefall in Asian trading, plunging as low as the support zone near the $3.50 level which has been a crucial level for the coin in the past. The coin is now deeply oversold from a short-term perspective, similarly to the majority of the top coins, and a larger bounce is in the cards in the coming days, with resistance levels ahead near $4 and $4.55.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 398 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Bitcoin Cash Price Analysis: BCH/USD Hard Flops as Price Moves Within the Abyss

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  • Bitcoin Cash price falls into uncharted territory, struggling to find a bottom.
  • Weekly chart still points to further downside, RSI not within oversold territory as of yet.

The Bitcoin Cash price remains heavily on the back foot, the standout under-performer across the major altcoins. BCH/USD is currently running at three consecutive sessions of losses. The streak could have been much longer, however the price was given a breather ahead of a pick up in downside intensity. In the past two weeks, BCH/USD has dropped over 60%.

As covered in an article earlier in the month, BCH/USD failed to break down a key area of supply. This was seen within the $650 territory; the price had faltered here in early September. It was forced back down to the south, to then retreat at some neckline support, $410.

BCH/USD daily chart

The most recent occurrence within the above-mentioned supply zone was seen between 6-8 November. Heavy sellers piled in, forcing the price initially down to the neckline support, $410. Between the 15-19th November, BCH/USD had breached, retested and consolidated around this area, before a resumption of further bloodshed.

Downside Targets

Looking via the weekly chart, the BCH/USD exchange rate demonstrates that the price is literally falling into the abyss. This fall is very much uncharted territory, so the bears are free to drive this a far south as it needs to be taken. In terms of the RSI, this indicates that there is still some room for this to be driven lower. It has not quite reached oversold territory yet.

BCH/BTC weekly chart

When observing BCH/BTC, at the time of writing the price is testing the previous session’s low. This area is significant as it provided much needed support in October 2017. A break here and close below 0.04775 could be punishing. This again is movement into an unknown realm of price action, so it remains unclear where the bottom will be at this time.

Upside Targets

In terms of upside barriers, given the recent price action, new areas of resistance have been formed. Firstly, around the $370 level, as this was the former acting support during the consolidation between 15-18th November. Furthermore, eyes would then be on a retest of the breached neckline former support, $410. Lastly, should both these areas be conquered again, the supply from $600-650 would be next up.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 60 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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