Finding Value: Going To The “Dark” Side

Finding Value: Going To The “Dark” Side
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Initial Coin Offerings are a dirty word these days. That’s because many scams are popping up. In large part, most ICOs popping up are scams. The cryptocurrency market is the Wild West right now and the ICO market is the Wild Wild West. Regulation is coming and that scares many investors. It’ll be a good thing for ICOs. Right now, many ICOs appear to be frauds and scams. Companies with virtually useless, or products that will never be built, are raising money via ICOs.

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Granted, the idea of a decentralized platform for raising money for startups is very exciting, it can also bring out the worst in people. With that, some regulators might overreach, as China and South Korea are both looking to reign in ICOs and prohibiting all forms of ICOs. This might be an overstep, at least per startups who are looking to raise legitimate capital and embrace a decentralized marketplace. Still a few bad apples can spoil the whole thing.

That’s where I want to change the discussion. Sure, there are many an ICO you should be avoiding, but if anything, the avoidance of all ICOs might create an opportunity for finding some undervalued ICOs - yes, you heard (read) that right, ICOs that might be worthy investments.

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The state of the ICO market is that there’s already been billions raised and there’s a flood of new ICOs every week. That is, we have an investment fund, Sharpe Capital, launching an ICO for using crowd-sourced sentiment as a strategy, a decentralized advertising ecosystem with Papyrus and a peer-to-peer VPN network in Privatix - all within the next month.

There’s a lot to digest in this market, as it’s like the IPO market times 100 - as there’s a lot more ICOs hitting the market on a monthly basis and there’s a lot less disclosure and regulation.

With that, we’re digging through the ICO market and looking to bring a more formal research process to an industry that’s growing exponentially. One ICO that was really interesting is Kin. This is a non-blockchain based token raise done by the messaging service Kik. They raised nearly $50 million. But unlike with an IPO, if you miss the ICO, you miss out on the opportunity. So timing is everything - and you have to have a beat on this market.

Speaking of ... blending the ICO market and investing is Protos.

This is an ICO we’ll be watching and could be worth watching for investors looking to drip their proverbial toes in the space.

Protos is starting its ICO on 10/9 and is planning on using the money to manage a cryptocurrency portfolio. Basically, they’ll be an investment fund that is managed by those with blockchain experience - more importantly, experience in investing in blockchain protocols and related vehicles. By investing in the ICO you get a token and have a stake in the fund.

You can use US dollars, bitcoin and ethereum to invest in the ICO. Here’s their investment memo. Now, all ICOs come with risk. Protos is going to allow access to your money by giving you a PRTS token that can be redeemed. They’ll also be offering access to the portfolio performance in real-time - unlike the hedge fund structure of offering quarterly letters and yearly redemptions. Right now, there are no ‘good’ ways to invest in cryptocurrencies, with the only public market vehicle - the Bitcoin Investment Trust (GBTC) being inefficient. The PRTS is expected to be traded on the cryptocurrency exchanges (in Dec. 2018), which would make it inherently more liquid than other hedge fund style investments.

The Protos fund strategy will look something like this - putting 35% of assets under management in ‘new’ blockchain assets and 65% will be toward current blockchains. So you’ll get exposure to the likes of litecoin, ethereum and bitcoin, and the other under-the-radar digital currencies, but also have a first-mover advantage when it comes to investing in new and upcoming blockchains. The guys running this have plenty of exposure in crypto investing - see the team here. These guys, their technology and experience, make it easier for them to do a deep dive into mechanics and computer code to determine whether certain technology and digital currencies will work as promised. In the case of ICOs and blockchain, it pays to have a deep understanding of these technologies -- having a knack for trading just isn’t enough. Most ICOs make little sense and most will fail. Protos helps sort through the wheat chaff (read: garbage), something similar to what we’re trying to do here. Reading the white paper isn’t enough when it comes to technical due diligence, being able to build and recreate the code is extremely helpful.

As always, do your own due diligence and read the full investment memo. Cryptocurrency markets are inherently volatile, so make sure you have the risk tolerance and never invest more than you can afford to lose. Now, the conversation around bitcoin is still interesting, and if you’re new to cryptocurrency, getting a grip on just what bitcoin is might be overwhelming enough. But if you’re a bit more seasoned and looking to find returns in places where few are looking and interested in learning more about ICOs + getting updates, follow us.

Article by Millennial Investing

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