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Where in the World to ICO Part 3: Malta

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I don’t know about anyone else, but I scooped up some great deals over the past week. Bitcoin falling back below $7,000 and ETH below $400 was a real shock to me. People are starting to log into their cold storage and dump the coins they own, which is obviously never good news. For people who are actively watching prices, we can’t let some of these go by the wayside. I took a position in ETH at $383 and I am very happy with it.

If you’re like me and have been hoarding your coins in cold storage, times like these are when money is made. When your friends are ragging on you for your investments, when the SEC is banging doors down – now is the time to re-align your cost basis for the next 6-8 months. It is easy to be confident when you’re making money, and that is why there was a mass exodus the moment the market turned.

I didn’t think buying ETH at $500-600 was all that great of a deal, but $383? These are the prices that all of us wish we got in December. Don’t overlook great prices because of irrelevant news. If you’re confident in cryptocurrency, then you’re confident in the building blocks: Ethereum and bitcoin.

Coinbase

Coinbase has recently come out with support for ERC-20 Framework tokens for eventual listing on their site. To be honest, this means nothing to me. By market cap, EOS clearly would be the most likely choice for an ERC-20 that would be listed. However, Dan Larimer (Founder of EOS) has said EOS will be unrelated to Ethereum by the time his main net launches. Tron is second by market cap, and just launched their seemingly unrelated main net as well.

What does this mean? Coinbase is going to have to clarify what they mean by ERC-20 framework. ERC-20 tokens were fundraising chips that were used by many ICOs. However, once the ICO took off, they had money to build out their own blockchains and smart contracts that were not related to Ethereum.

Just like many things that happen in this crazy industry, I have to throw my hands up. The clear choices for listing would be Ripple and Stellar. They are both American companies based in Silicon Valley that have actual customers. The chatter online is that they “don’t fit the framework for listing” that Coinbase put out. This company has pissed me off too many times to count, along many other investors. There will be a time when Robinhood is allowed in all states, and I am hoping that this new entrant sticks to their guns and actually listens to the people who use their network.

ICO Environment

I can’t imagine many ICOs are happy with Ethereum being so low. Most investors don’t want to fork over multiple ETH coins for one single offering, and times like these are when confidence levels in fledgling coins are at all-time lows. However, many companies are using this time to wait and plan. Most of the “Winter ICOs” had little to no code, and the oversight was basically “don’t be a ponzi scheme”. In 2018, it won’t matter where you are launching from, there will be government agencies that will come after you if you don’t have what you say you have.

My research into Singapore and Switzerland was a reminder that things are truly not as bad as they seem. The United States dominates cryptocurrency news with only  8% of their public as investors. There is a whole world out there, and there are plenty of countries who have thriving blockchain commerce that is under the guidance of technology friendly government officials.

Malta

My next stop is the country of Malta. An island in the Mediterranean right in between the southern tip of Italy and the vastness of the North African desert. An oasis I’ve come to find. With a population less than 500,000, there aren’t going to be 15 different regulatory bodies and enforcement agencies trying to get their piece of the bureaucratic pie. The country has a GDP per capita of $36,000, which is not going to be similar to countries that we have already explored.

There is a spectrum to the types of countries that are friendly to ICOs. They are either very rich nations that want more, or poor nations that want to be rich. Each type of country is going to come with pros and cons.

With rich nations, they are usually already beholden to Western powers that can influence their laws and regulations. This results in large institutions being able to help you, but only for $100,000. If you can pay the entry ticket, the SROs and advocacy groups can provide you almost everything you need to be successful in their country.

Poorer nations invested in blockchain have very limited technological infrastructure, which is the double edged sword. They will not be able to offer the incubator that a country like Switzerland will, but very few have tried intervene in a utility token offering. Some of the old Soviet bloc countries are opening the door to mining, ICOs, and other fin-tech start-ups so that they can begin to take advantage of the level playing field that blockchain offers.

Malta is right in between a rich nation and a poor nation when it comes to blockchain. There isn’t going to be the bells and whistles that a Crypto Valley Association could bring, but it isn’t going to be a phone and desk in the middle of nowhere. There are lawyers, accountants, and even other blockchain businesses that are already on the island, and more are coming. The regulatory costs are far lower, and you would not be paying $100,000 in filing for a compliant offering like you have to do in Switzerland. But, is the ease of doing business the only thing that they can offer?

Background

Malta has been an inhabited island since 5200 B.C., and one doesn’t need to think too hard about why. It is an island in the middle of one of the largest commercial areas in the world, and presents many strategic opportunities for the right governments or rulers. I will not going into each conqueror, but over time there have been many rulers who controlled the Mediterranean by their strong hold in Malta.

in 1800, the French were ousted from Malta with the help of the British, whose sovereignty lasted until Maltese independence in 1964. For the first time, this tiny strategically placed island could speak independently and make their own decisions. This could not have come at a better time, as economic relationships between countries in Europe were becoming more and more intertwined. In 1980, Malta adopted a policy of neutrality, and have since maintained that status. In 2004, they joined the European Union, thus beginning to use the Euro instead of the Maltese Lira.

Legal Framework

After their induction into the European Union (EU), Malta adopted banking standards according to Basel Core Principles, which now govern all advanced Western nations. In 2014, the European Central Bank took control over banking oversight in member countries, and that has since put more pressure to homogenize the banking industry across borders. However, Malta has purposely chosen to operate based on principles, rather than strict interpretation of laws. With a population of less than a half million people, the dialogue between businesses and regulators can be very intimate.

MFSA

This is the MAS/FINMA of Malta. It is the single regulatory body that was established in 2002 as the rule maker to take over a growing list of responsibilities from the Malta Central Bank. The MFSA was created partly due to the pending induction into the European Union, where regulations and standards were far more robust.

Unlike some the other countries I have explored, MFSA’s priority is making sure that European banking standards are implemented without mistake. This partnership between nations seems to come with a long rule book, and MFSA has 312 full time employees to make sure that everything falls in line. Financial and credit companies in Malta must apply for a license, and MFSA encourages them to have a conversation prior to an application. The application process is a dialogue, not a one-sided affair. It is explained briefly by MFSA officials here:

“Credit and financial institutions in Malta require a licence from the MFSA. Before any formal application for a licence is made, the MFSA urges the promoters to meet with the regulator to discuss set-up and regulatory requirements to ensure a smooth licensing process. The final application must be accompanied by required supporting documentation such as a business plan, the type and volume of business to be undertaken and the structure, organisation and management system of the institution.” 

With such a tiny country to operate, MFSA has the infrastructure and power to allow a wide array of businesses that may be on the cutting edge. When a regulatory body asks for a business plan along with an application, there is a group that is using an open mind when assessing whether someone can do business in their country. I looked on the MFSA website, and there are about 400 ways to get in contact with them. They want to hear from businesspeople and create solutions for them. That is simply not the case in 99% of other countries.

Government Timeline

2013

Y2013 was a very early year for blockchain and cryptocurrency, with many people truly not knowing even the basic concept of bitcoin. Even in a time where information was drastically limited, the MFSA approved the first ever bitcoin hedge fund to operate out of their country. The company, Exante, began offering a fund that gave normal investors (non-U.S. of course!) the opportunity to invest in a vehicle that could give them access to a coin that did not have very many easily accessible marketplaces. For a 0.5% management fee, bitcoin became accessible to Europe through Malta.

2016

Malta Stock Exchange officials created a Blockchain Committee in 2016 to address the growing prospect of enhancing their countries banking processes. The officials found that the growing interest in cryptocurrency and blockchain technology could save the country millions in cross-currency bank settlements that are conducted on the island. They made the intention to start a consortium to find new ways to implement the technology within their banking structures.

2017

May

Joseph Muscat, the Prime Minister of Malta, drafted a strategy document to entice bitcoin and blockchain commerce into the country. This framework could not have come at a better time, as Malta was beginning to entice U.K. start-ups to begin migrating over to a country with more favorable EU relationships. He stated to a group of government officials in May,

“I understand that regulators are wary of this technology but the fact is that it’s coming. We must be on the frontline in embracing this crucial innovation, and we cannot just wait for others to take action and copy them. We must be the ones the others copy.”

Mr. Muscat is going to be on the right side of history here. Exante, their first bitcoin based project, has ballooned to the eight figures from the appreciation of bitcoin, and are paying their 35% corporate taxes. This type tax revenue for such a small country can really mean something for the services they offer their citizens. I think many world leaders (Singapore for one) are beginning to realize they will have to take on a sales role for the country when it comes to who moves where.

November

The MFSA came out with a report on ICOs and how they will begin regulating primary offerings of digital currencies. This report was not like any other report I have ever seen from a government agency. It simply proposed the regulations they were exploring and had a blank sheet of paper following each section with survey questions about what the reader or stakeholder thought about their ideas. That’s what I call humility! The illustration below highlights how they view the landscape of cryptocurrencies, and how they will interact with it:

Securitized tokens would be regulated under a new law, and utility tokens were to be given more autonomy to conduct business without having to get a financial services license from the FMSA. Their definition of both is as follows,

“‘Securitised tokens’ are defined as those embedding either underlying assets (akin to commodities) or rights (e.g. quasi-equity rights) and effectively refer to those tokens that qualify as financial instruments (for further details please see Section 4 of this Discussion Paper). ‘Utility tokens’ are further defined as those providing either platform/application utility rights or protocol access rights, without any underlying.”

There is no mention of whether the product must be working before the ICO, rather focusing on just the intention of the product itself. This is incredibly important, as many ICOs would struggle to build out a working prototype without funding. There is also not a mention of a token losing its utility status if the company received funding prior to the ICO, which is also a major benefit for VC backed tokens. The next portion of the report was their proposal to draft a “Virtual Currencies Act”, which would be as follows:

“MFSA is proposing that, in order to achieve the objectives of financial regulation, certain VCs and activities pertaining to them would be licenced and regulated under a new legislative framework to be drafted by the MFSA and adopted by the Maltese Parliament, the Malta ‘Virtual Currencies Act’.”

Not as quick to the trigger as Switzerland, but formal definitions of ICOs and cryptocurrencies through legislation would be leaps and bounds ahead of many governments today. The Prime Minister seems to be all hands on deck with this initiative, and wants to make sure that the sales pitch to businesses is clear and thorough.

2018

January

The MFSA came back after releasing their dialogue-seeking report, and said that feedback had been very positive for the regulation of cryptocurrencies. MFSA has even taken a more liberal approach than the banks they supervise. They addressed concerns brought up by banks, such as Maltese Bank of Valetta blocking cryptocurrency transactions from their accounts since late 2017. The MFSA regarded this type of move as “Short-term”, and was the reason why they began to enact definitive regulations so that business could go back to normal.

One of the most frequently brought up topics in their follow-up was “Collective-Investor Schemes”. This would be the European equivalent of trying to set up ETFs/mutual funds/hedge funds that would charge fees in exchange for management of digital assets. While all of us are simply worried about if our coins will exist in a years time, Malta is already trying to focus on what types of fund structures they will allow. Clearly, this is a very forward thinking country that is eagerly trying to become a global digital asset manager.

Let’s check in with their first project back in 2013, Exante. The hedge fund has since opened up an exchange, and is allowing trading pairs for the likes of Litecoin, Ethereum, Ripple, and ZCash. They have been working with regulators since before the blockchain boom began, and the rules are very much influenced by the incumbents. A piece of equity in Exante would be something I would be very interested in buying.

February

The Parliamentary Secretary for the Digital Economy in Malta, Silvio Schembri, excitedly announced the inception of the Malta Digital Innovation Authority. The 3 bills proposed to parliament would be to 1) Establish the DIA, 2) Establish definitions of the different providers under DIA 3) Establish rules and regulations that the DIA would focus on in conjunction with the MFSA. If you read my article on Switzerland, this is very similar to the VQF. An SRO that really has the job of making sure that their economic partners are happy and getting the approvals they need quickly. When asked about the overlying goal of the legislation, Secretary Schembri explained:

“The document put forward for consultation is the base for the creation of a new economic sector that will be a great contribution to Malta’s economic growth. A new industry, potentially as large as the iGaming industry, and capable of creating thousands of new jobs, will compliment and reinforce other sectors and act as a catalyst for the creation or development of new economic sectors such as supply chain management and Fintech.”

For all countries involved in blockchain, it is truly a race to get sticky legislation passed. The more definitive a country can be with their regulation of primary offerings and definitions, the greater chance there will be that an entrepreneur would choose their country, pay their business taxes, and employ their people. This legislation did exactly that.

March

Japanese regulators reached a boiling point with cryptocurrency exchange Binance about not registering with their regulators, the FSA. That registration would cause regulatory scrutiny that would hinder the exchange from being able to offer non-identity verified trading accounts to a global marketplace.

The stakes are high – Binance became the largest cryptocurrency exchange by volume with almost no track record whatsoever. A website handling billions of dollars of daily transactions and holding encrypted currency for millions is a business that stakeholders do not want to alter. It’s popularity is dependent on ease of doing business, and that is the very thing that world powers are trying to limit.

This led Binance to announce that they were packing their bags, and heading for Malta. With some estimates saying they plan to hire 200 people on the island, this was welcomed news by the Prime Minister. Mr. Muscat even tweeted out his warm welcome to the company:

“Welcome to @binance. We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies -JM”

This is unprecedented by a country. Binance is a unique website that wants decentralization to take true form. They have resisted the changes that others have demanded, and remained an open marketplace for anyone on earth. Malta, a tiny EU country, welcomed them with open arms. This is truly an amazing feat for the country, as there is a very lucrative outcome for all involved if Malta can properly handle this relationship. The move has not yet taken place, but it is something I actively encourage all to monitor.

Conclusion

Malta is the best of all worlds. Thinking from an American perspective, 88% of the country speaks English. Their government most likely was not briefed on cryptocurrency in 2013, yet they were willing to give things a try, and then modify their process as time went on.

The results are blinding. Their first digital asset hedge fund has grown into a multi-million dollar exchange, ICOs are beginning to consult with Maltese lawyers, and the largest cryptocurrency exchange with goals of complete decentralization has been welcomed by the Prime Minister himself. If we take out the words blockchain and cryptocurrency, Malta has brought jobs, taxes, and infrastructural development to their tiny island. Time will tell that their early decisions will yield truly remarkable results, especially if Binance is allowed to grow autonomously.

So after my research, my hypothetical choices so far are Singapore, Switzerland, and Malta. Of the three, Malta is right in the middle. Legal/lawyer fees for an ICO offering I’ve estimated to be around $20,000, which is going to be cheaper than the other two countries. However, the true asset is their size. The MFSA can have face-to-face conversations with every single person who does business in the country, and the government is fully on board to test anything that may help them become wealthier.

The process to license and launch an ICO out of Malta would be months shorter than it would be if you were trying to launch out of a larger, more bureaucratic country. In a coin-eat-coin world, cost and speed is everything. After you’ve paid bottom dollar to launch, you are right across the street from the largest exchange in the world. I couldn’t possibly think of a bigger asset than that.

This is not a recommendation to buy or sell cryptocurrency. We have seen some of the worst volatility in recent weeks, and trading into this type of market is a gigantic risk. I would encourage all to take a step back, and watch prices. I have never felt better about my investments simply because I watch the Top 25 market cap coins diligently, and wait. I wish you the best of luck- @raijincrypto

Featured image courtesy of Shutterstock.

Sources

http://www.justiceservices.gov.mt/DownloadDocument.aspx?app=lom&itemid=8840

https://www.financemalta.org/publications/articles-interviews/articles-and-interviews-detail/malta-digital-innovation-authority-unveiled-2018/

https://www.financemalta.org/sections/banking/regulation-legislation/

https://www.forbes.com/sites/jonmatonis/2013/03/08/first-bitcoin-hedge-fund-launches-from-malta/#40f57bce3e1e

https://www.mfsa.com.mt/pages/readfile.aspx?f=/files/…/2017/20171130…pdf

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

Bitcoin’s Year of Accumulation

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Although bitcoin looks poised to extend its January losing streak to five consecutive years, 2019 will be a year of slow accumulation for the virtual currency, according to Eric Thies, a well-known technical analyst. In the meantime, traders can expect the bear market to reach its climax once a new yearly bottom is breached.

Accumulation Year

In promoting the view that 2019 will be an accumulation year for bitcoin, Thies directed our attention to the major bear trend that emerged in 2015. That was the year bitcoin exhibited significant volatility, albeit in a lower range. Following the latest breakdown in price, bitcoin could be in for a similar trading pattern this year.

“Similar to 2015, 2019 may be the year of accumulation,” Thies said, according to CCN. This means bitcoin is likely to be an attractive investment in $2,000-$4,000 range – even with wild swings priced in.

Bitcoin’s volatility regime has changed dramatically in the last two months. Following a period of unprecedented calm, volatility surged to nine-month highs in the back end of December. Volatility will likely remain a factor for the foreseeable future as the technical tug-of-war continues. More on this: Bitcoin Maintains Narrow Trading Range as Recovery Faces More Resistance.

Circulation Grows

That bitcoin will remain highly volatile is supported by the recent influx of digital currency into circulation. Anonymous owners of dormant bitcoin wallets have been trading with greater frequency since October, which means their activity may have predated the November price collapse.

Data from Flipside Crypto recently showed that long-dormant bitcoin wallets have accounted for about 60% of the market’s circulating supply in the last 30 days alone. What’s more, active bitcoin supply has increased by a whopping 40% since the summer. This, of course, feeds into higher expected volatility.

If that’s not enough, consider that 1,000 addresses hold 85% of available bitcoin. As Bloomberg recently noted, many of these holders remained on the sidelines during the 2017 bull run and its subsequent collapse. If dormant accounts are becoming active again, there’s good reason to suggest that the whales are looking to re-enter the market.

Not Overnight

It’s reasonable to expect that bitcoin will become more attractive at lower prices, especially as more institutional investors access the crypto market in the coming year. But that doesn’t mean the accumulation will happen overnight. Previous bear cycles have taught us that downtrends can stretch for 1-2 years before any noticeable accumulation takes place. The only difference this time is there are more people involved, and more eyeballs on the price.

Additional reading: Crypto Winter and the Fed?

To demonstrate bitcoin’s potential at current levels, and why 2019 will be an attractive year to boost one’s holdings, it’s worthwhile to reflect on the cryptocurrency’s yearly lows rather than its highs. Below is a quick snapshot of bitcoin’s yearly bottoms stretching all the way back to 2012:

  • 2012: $4
  • 2013: $65
  • 2014: $200
  • 2015: $185
  • 2016: $365
  • 2017: $780
  • 2018: $3,200

Traders tend to focus on bitcoin’s lack of new all-time highs as evidence that the market is going nowhere, but these figures clearly show that BTC is a solid investment at almost any period in the last seven years (of course, this isn’t the case if you bought during the peak of 2018).

Make no mistake: technical analysis and market sentiment clearly show there is more pain ahead for bitcoin and the broader cryptocurrency market. But as the long-term value proposition continues to hold, there’s strong reason to believe we haven’t seen the last bull market. In the meantime, 2019 prices could represent a unique buying opportunity for those who missed the boat two years ago.

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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4.7 stars on average, based on 741 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Lite.IM Surpasses Facebook In Race To Support Cryptocurrency Compatible Messenger

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Since the early part of 2018, crypto traders have been bombarded with bad news.  Hacks, broken promises, and overall lack of enthusiasm have resulted in huge losses.  But more than that, some promising cryptocurrencies just haven’t survived.  As traders look to the future, they should begin looking at projects that have the potential to disrupt industries and take them to the next level.  One company that has the potential to accomplish that is Zulu Republic (ZTX).

Zulu Republic is an ecosystem of blockchain tools and platforms, designed as a place where people, businesses, and organizations can thrive on their own terms.  The company’s stated mission is to advance the development of decentralized technologies, to promote human rights and empowerment around the globe, and to reduce the global digital divide.

Well the company is off to a great start with the development of Lite.IM.

What is Lite.IM? 

Lite.IM is a project aimed at expanding global cryptocurrency adoption.  With Lite.IM, users can send, receive, and manage Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and the company’s native currency (ZTX), on Facebook Messenger, Telegram, and SMS (in the USA and Canada).  To get started managing these cryptocurrencies on the aforementioned platforms, users simply need to send a text-based command to the Lite.IM bot.  The commands are as follows:

Telegram:  @LiteIM_bot

Facebook Messenger:  @lite.im

SMS (USA and Canada only):  760-LITEIM-0

Competition with Facebook

On December 21st, 2018, Facebook announced that it was developing its own stable cryptocurrency that users would be allowed to exchange through its popular chat service, WhatsApp.  But while Facebook’s initial approach will target users based in India, Lite.IM is open to everyone in the world.  Further, Zulu Republic has previously mentioned that they expect to announce support for WhatsApp in the next few weeks.  It certainly appears as though Lite.IM has the upper hand here.  And that is before even addressing Facebook’s obvious privacy concerns.

When it comes to cryptocurrency, privacy and security have always been two issues at the forefront.  Given the rough year that Facebook has had in that regard, users must certainly be forgiven if they have trouble trusting the social media giant.  In September, 2018, Facebook announced that an attack on its computer network had exposed the personal information of nearly 50 million users.  Apparently, the hackers were able to exploit a feature in Facebook’s code to gain access to user accounts.  Even prior to this announcement, Facebook was already under Congressional scrutiny over revelations that a British analytics firm obtained access to private information from nearly 87 million Facebook users.  Not to mention Facebook’s rumored involvement with Russian election meddling.  Suffice it to say, it has been a tumultuous year for Facebook.

And while users may have concerns trusting Facebook’s ability to handle cryptocurrency data, they shouldn’t have those same concerns with Lite.IM.  Private keys are RSA encrypted with the user’s password.  Lite.IM will never ask for that information nor will it be stored.  Because of this, no third party will ever have access to that valuable information.

Conclusion

The truth of the matter is that Facebook is an absolute giant and has grown at an extraordinary rate since its initial public offering.  Facebook has hired some incredible talent, from executive positions to marketing to development.  And while one should never count them out, I simply wouldn’t be able to trust them with all of the recent issues.  Perhaps in time, after regaining the public’s trust, users could once again look to Facebook as a leader.

Fortunately, users have another strong and dependable option.  Lite.IM will allow users all over the world to manage popular cryptocurrencies via their favorite messenger platform.  Users should continue to stay tuned for future developments.

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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Why Investors Should Be Paying Attention to Dotcoin

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I remember one of the first terms I learned in economics class was “complementary goods”. If one thing was bought that meant that the other would be in higher demand as well. In terms of investing, this tells you that investing in breathalyzers which can detect marijuana would be a smart move, or any other “cottage industry” to the medical marijuana rush.

But in terms of blockchain, it helps to figure out a way to make money on the trading industry, without becoming a trader yourself. One way to do this is to find a token that is tied to a trading exchange.

Cryptopia’s Utility Token

As a budding cryptocurrency exchange, Cryptopia has a lot of work to do. It also has clearly not been a good year for the cryptocurrency industry. However, Dotcoin (DOT) functions as the utility token to Cryptopia and could prove to be a good way to benefit from a comeback in cryptocurrencies. If the comeback occurs, trading would likely increase, as would the demand for DOT.

DOT is used to pay for coin listing fees and is how Cryptopia covers referral fees to traders. The requirement for listing fees to be paid means that during a crypto boom, when there are projects aplenty, something like DOT would be in high demand. The same thing applies to referral fees. Nobody is referring friends to join exchanges in a down period, so this is more likely to change when crypto hits the news again.

With over 2 million users as of the time of writing this, Cryptopia is a mid-sized exchange with not a lot setting it apart. To put it in perspective, I have only ever used Cryptopia to purchase DOT. That isn’t a “red flag in itself, but as a trader, you can actually use past experience to decide how likely it is that many traders will move to a different exchange.

In the end, so many companies (and especially trading exchanges) depend on network effects for their growth. For each new customer, it becomes slightly easier to attract another one. This applies to all exchanges though, and some of the biggest exchanges have been able to lower fees or offer deeper liquidity pools as a result of their larger user base.

What Your Investment Means

As an internal utility token, you are essentially making a bet on the platform. Currently trading around 150 satoshis, DOT has been running flat for a while. This makes it a low volatility bet with high potential upside. Previous resistance levels have been around 300 satoshis (with an all-time high at 650-ish).

As a utility token that is inextricably tied to a single exchange, it is almost for sure that it will spike again in the future. This is because a certain “price floor” exists on these sort of tokens which is hard to escape. That isn’t to say a return is guaranteed (this is a low market capitalization coin, after all), but more that there is more upside potential than downside risk.

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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