Deadline for Ethereum Classic DAO Withdrawals Extended

Lost in the headlines over the SEC’s recent pronouncements on cryptocurrency was important practical advice for both promoters of and participants in initial coin offerings (ICOs).

Most coverage was rightfully garnered from the Report by the SEC’s enforcement division which deemed that DAO Tokens are securities, after subjecting the offering to the Howey test. However, the simultaneously issued Investor Bulletin should also be closely read by issuers of ICOs and their counsel.

Advice for Issuers and Counsel

Even though the bulletin was prepared as a cautionary statement to investors, it contains at least one disclaimer (in boldface type) that attorneys advising ICOs should add the following language to any offering document or white paper:

Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities laws, your ability to recover may be significantly limited.

We have previously discussed the importance of these disclaimers and risk factors. By discussing the vulnerabilities of cryptocurrency exchanges and the potential difficulties associated with any recovery of invested or stolen funds, the SEC signals at least some of the risk factors counsel should consider adding to ICO offering materials.  

In fact, prudent attorneys advising their ICO clients would be wise to employ the cut-and-paste function, adding the above caveat to all their documents.

This additional wording is significant in that it spells out three key characteristics of ICOs:

(i) the difficulty of tracing or securing virtual currency;

(ii) the international scope of ICOs; and

(iii) the fact that lack of any central authority may limit an investor’s remedies against an issuer.

Practical Advice for Investors

Besides the usual bromides about being wary of any offer that sounds “too good to be true,” the SEC demonstrated an appreciation for the unique due diligence required in carefully evaluating an ICO.

According to the bulletin, investors should “ask whether the blockchain is open and public, whether the code has been published, and whether there has been an independent cybersecurity audit.” The SEC is communicating that those factors are indicative of companies whose products are verifiably real and secure.

Given the importance the SEC placed on these three items, rather than await questions, such points should be clearly addressed by an issuer in its ICO materials distributed to potential investors. Issuers of ICOs should include those factors and other “good facts” that can help to demonstrate their product’s value, security and legitimacy.

While the recent flurry of documents emanating from the SEC likely has given issuers of ICOs and their counsel pause (and caused them to walk each token through the Howey test), it does not appear to have stifled these transactions.

However, where the report reiterates the conceptual framework under which any potential token offering be evaluated to determine whether it constitutes a securities offering, the bulletin provides practical advice, and investors should expect to see some of the SEC’s language repeated in ICO offering documents going forward.

This is a guest post by Gray Sasser and Joshua Rosenblatt. The views expressed do not necessarily reflect those of bitcoin Magazine or BTC Media.

One of the most intriguing stories underpinning the recent rise of bitcoin prices is how financial institutions will interact with the currency.

The upcoming CBOE futures market is going to open the door for Wall Street giants to participate in the market. That could spell moon or doom for bitcoin, and everyone is speculating on what may happen next.

It is this Wall Street/BTC interaction (phenomenon) that may be driving the unbelievable price spike of the past few days — at least partially.

On the macro scale, however, we may be witnessing a more grand pattern forming; a price-correlated S-curve.

The S-curve is the classic adoption curve applied to the advent of new technologies. As a percentage of the population, adoption looks like a lag phase where the technology is utilized by the innovators of said technology, followed by an early adoption phase led by people who often take risks in order to be the first movers in a space. After the early adopter phase (~16% of the population is now participating), there comes a great “tipping point” where the wide use of the technology seems inevitable. The tipping point gives rise to the “Early Majority” joining in on the fun, followed by the late majority and, finally, the holdouts who allow the top of the S to asymptotically approach total adoption. The curve, as a factor of time and adoption, looks sort of like the following:

This curve correlates nicely with adoption of some of the greatest technological innovations in our recent history:

Some important things to note is that this is just U.S. adoption. Much of the world lagged behind the U.S. in the consumer appliance boom of the 1900s. All of these curves, however steep, do follow the same S-curve trend fairly nicely.

So what could that mean for bitcoin? It’s difficult to choose a metric to define bitcoin adoption, and, in fact, there are disputes about if one metric accurately captures it. However, for simplicity I’ll highlight Google searches for bitcoin and Coinbase user count as microcosms of the global adoption trend.

(from CNBC)

This seems to show a very similar pattern to what could be the transitional phase between “innovators” and “Early Adopters.” Just to harken back to the earlier statement though — it’s very difficult to put a number on bitcoin adoption.

So why is this remarkable? bitcoin may be the first “buyable” S-curve. Because this is a capped-supply currency, more users adopting and using it necessitates an increase in price. Whether that correlation is even reflective of the current price action is a practically unanswerable question, and the obvious leaning would be towards there being a speculative additional value. However, with an increase in adoption, there seems to be a floor rising up to catch whatever “bubble burst” might occur, if and when it happens.

“Eternal September” is the phrase used to describe September of 1993, when widespread internet adoption began to look inevitable. It occured after AOL began a mailing campaign offering free trials of its internet service, leading to an influx of internet users that has since never ended. Hence “Eternal September.”

To compare bitcoin’s adoption to its complement — the internet — this may very well be the “Eternal September” episode for bitcoin.

If the S-curve adoption theory applies to bitcoin, then buckle up. I won’t pretend to be able to predict a spot price, but I will say I think we may be sitting close to another order of magnitude this time next year.

See y’all on the moon.

Corollary: Bulls sound smart in bull markets. We may look back and laugh at this thought, or it may hold true for years to come. Time will tell. ‘Til then, buy bitcoin.

Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.