Crypto growing hard, but hokey exchanges and crazy OTC pumps obscure solid business plans

My mother calls me fairly often, as moms tend to do. Usually the conversation is about why I didn’t call family member X on their birthday, or why haven’t I flown to the other side of the world recently to hang, which is fair. Lately, the calls have increased. Because, Bitcoin.

I can tell my mom about any number of stocks and she’ll fiddle with her coffee cup and say, ‘hmm, really..’ and yawn a little, but when she asked me about what all this hullabaloo about Bitcoin was and I gave her the ten minute after school special presentation, suddenly shit got real.

Now she’s talking about the pros and cons of a given exchange, and what’s happening in Korea, and I’m hearing conversations on buses about it from seniors and my exchange of choice is down more than it’s not, and Litecoin trades were halted for a while today and… I figure when the moms are getting all up in the alt coins and crashing networks, it’s time to put a field guide together.

Another reason to go deeper: the blockchain/crypto sector, after a several week leveling off, is starting to sound like it’s about to go on another run. But we’ll get to that.

First, the real issue that will stop crypto from entering the mainstream: It’s not ready for actual real world financial traffic.

My exchange of choice, Einstein.Exchange, which I signed up for after talking to them at the Grit Capital blockchain conference a few weeks back mostly because the sign-up process was lightning quick, is in crisis times at the moment.

After the boss put out a ‘sorry it’s taking us two days to manually process your credit cards’ message on Twitter a few days ago, the site has been down as much as it’s been up, and Twitter users aren’t happy.

They’re most certainly not the only exchange getting pounded with new users, but how they’re dealing with it is a stunning example of ineptitude.

If I give you my money to buy crypto, and the money doesn’t show up for two days, which means I’m missing out on what may be as much as a 100% daily profit, that stinks.

And if I can’t login to your site because it’s busy/you’re under a DDOS attack/someone put a colon instead of a semi colon in the code, that stinks.

And when I finally get in to make a trade and the system just plain doesn’t recognize it, instead giving me rows of empty fields, that stinks.

And when people decide to tap out and ask for their money back, but you can’t find your way to make that happen, and the support emails aren’t being answered, that stinks.

My bank sucks, but when I ask for my money, it’s there for me. When I login to their system, it responds. When I send money through them, it shows up on the other side.

The only thing stopping me from dropping six figures into crypto is the thought of trying to get my six figures back from whatever group of neckbeards with quirky bio photos, only to be told, “Maybe next week?” – or ignored altogether as they hide behind DDOS attack excuses.

Funny story: When I decided this outfit felt at best, undercooked, and at worst, fraudulent, I tried to withdraw my money.

To do that, you have to be ‘verified’.

To verify your account, you must submit a photo or photocopy of the following documents for validation:

  1. A valid government issued ID card, driver’s license or passport that matches your account name and address.
  2. A second piece of ID (credit card, health card, etc) matching your account name.
  3. A recent (< 3 months) utility or bank statement that matches your account name and address.
  4. A selfie holding the piece of ID from number 1 above.

Note: This is more than you need to bring to open a bank account.

Also note: You’re supposed to send all that via email, which is about the most attractive thing I can think of to lure an army of hackers to your set-up. Thousands of instances of multiple forms of ID, there for the taking? No wonder their system is being pounded.

Also note: You don’t need to verify anything other than a credit card number to GIVE them your money. But getting it back? That’s for reals time.

This can’t be a thing when you’re holding people’s money, preventing them from being to capitalize on trade activity, and claiming you’re a “safe, secure and transparent virtual currency exchange designed for the world’s smartest investors.”

And, not for nothing, but when you’re claiming high level professionalism but you’re tweeting stuff like this, you better be sure you’re sitting on a bulletproof system.

So if I want to profit from the rise of cryptocurrency in any sort of substantial way, I find myself coming back to the public markets, where brokers will at least look you in the eye as the eye as they screw you.

From Stockwatch:

The Globe and Mail reports in its Tuesday edition that Canada is plunging head-long into cryptocurrencies. A Bloomberg dispatch to The Globe reports that little-known Canadian stocks such as Hive Blockchain Technologies, Glance Technologies and NetCents Technology have surged as much as 20-fold this year, giving retail investors a way to embrace the mania without actually having to buy bitcoins. There may be more ways to invest soon. At least two Canadian firms have filed to launch what could be the first bitcoin exchange-traded funds. Canada’s stock markets are no strangers to investing fads, with cobalt, lithium and marijuana stocks all bubbling higher this year.

Ethereum miner HIVE Blockchain (HIVE.V) had a big event this week, as some 40 million early financing shares came free trading. A lot of people were sitting out the HIVE opportunity, waiting for this moment to pass, convinced that it would see a big sell-off when all that paper came available, since those early financiers got in at $0.30 or less.

That just didn’t happen. Instead, it appeared there was renewed interest in the stock – at least until it announced a $100m+ financing to expand their Nordic operations. Now they’re rolling backwards as folks presumably sell their existing stock to buy it back for less, with warrants tossed in.

HIVE is savvy in how it handles potential downward-momentum events. They released financials a few weeks back – another situation that naysayers said would hammer the stock, as the amount of crypto being mined couldn’t possibly justify their market cap.

But HIVE timed it well and popped out numbers with just a few weeks of their early mining included, from one facility that had since been joined by two more, and that had rapidly increased in size in the months since, in an alt coin that has shot up in value several times in the last few months.

So that whole ‘compare revs to cap’ event is now pushed by another three months, which gives the company time to release more news that they’ll hope will go a long way to justifying the current cap – and growth in it beyond. And if, in the meantime, Ethereum goes on another run (better than average chance), their holdings will grow with it.

Other companies are quietly hoping HIVE gets the momentum train rolling again, because there isn’t a blockchain/crypto company on the public markets and beyond that doesn’t have HIVE name-dropped in their investor deck at least once.

Indeed, even the legacy media folks are starting to step back from the “HIVE must be a pump and dump because we don’t know how to explain it otherwise” narrative of two weeks ago, though they still can’t scratch themselves without saying the word “bubble.”

From Stockwatch:

The Globe’s Brenda Bouw writes that [5i Research Chief Executive Officer Ryan] Modesto says investors need to approach the sector “with caution and their eyes open.” For investors with some “play money,” Mr. Modesto suggests sticking to better-known companies or those with underlying businesses beyond just bitcoin or other virtual assets.

Some of his suggestions include Mogo Finance Technology and Goldmoney, as well as Hive Blockchain Technologies, the latter of which is backed by famous financiers in the gold-mining industry such as Frank Giustra. “If you’re looking [for] exposure to digital currencies or blockchain, these are the three names you might look into first before going into some of the smaller, higher-risk names,” says Mr. Modesto

Others are starting to make the sort of noises that indicate to me blockchain will be busy next week. I called on Leonovus (LTV.V) so give me an update, and they said they couldn’t talk til next week. I also called eXeblock (XBLK.V) for the same reason, and was given the same response.

Adding to the mystery, LTV just closed a $13.7 million raise at $0.50 per share, which is impressive given the share price currently it $0.445. They’ve been cutting sales deals on the regular, which is what you do when you actually have a product to sell, rather than just slapping the word ‘blockchain’ in your name.

LeoNovus Inc. has signed a strategic partnership agreement with ApexIT of St. Louis, Mo. ApexIT will sell and support LeoNovus’s blockchain-enhanced enterprise software-defined storage products and services product line across the United States.

Together, LeoNovus and ApexIT will give enterprises access to an on-premise, hybrid or multicloud software-defined storage solution that puts control back in the hands of the IT (information technology) department and allows for enhanced data security and compliance monitoring for regulatory requirements while reducing storage and operating costs. Regulatory compliance examples include HIPAA (Health Insurance Portability and Accountability Act), PCI (payment card industry), SOX (Sarbanes-Oxley Act), GDPR (General Data Protection Regulation) and C-198.

If Leonovus can start announcing sales contracts soon, this thing will have rocket fuel.

Ditto, eXeblock, which recently released its white paper on its 50-50 draw blockchain tech, thereby marching towards market release and revenue,

The release of the eXe50/50 Draw white paper is a key milestone toward commercialization and revenue generation for the company. Full-scale commercialization is expected to commence in the second quarter of 2018. Dapp revenue will be generated as a percentage of the funds raised during each 50/50 draw. Following full rollout, the eXe50/50 application will be established to be used concurrently by multiple charities in any jurisdiction from a local to a global basis.

The market hasn’t given them the same launchpad they’ve given others with less real world business being done, but by cranking out actual functionality that can be utilized by other developers (in return for a cut), and with their FreedomLedger Dapp rolling out soon, this is a good time for eXe to get seXy and drop some more news into next week’s flow.

Atlas Cloud Enterprises (AKE.C) announced it has closed it’s $14m opening bow financing, which should pop the leash on that stock. The $0.75 raise has kept the share price at around a buck for most of the last month.

AKE’s business? Data centres. I’m told that money is going to be put to good use pretty quickly.

There are other new players: Hashchain Technology (KASH.V) will land on the Venture Exchange on Monday after raising $4m pre-listing. A tight 41 million common shares issued and outstanding should make it a fun ride.

The Company is initially focusing resources on mining Dash and Bitcoin cryptocurrencies utilizing Application Specific Integrated Circuit (“ASIC”) mining rigs, which are high-performance computer systems used for cryptocurrency mining. The Company is currently operating 100 Dash mining rigs which commenced mining on November 3, 2017 and has purchased 770 Bitcoin rigs which are expected to be received and installed to commence mining in January 2018. Both models of rigs are the most powerful on the market at mining their respective currencies. With all 870 rigs in full operation, HashChain’s initial energy consumption dedicated to digital currency mining is approximately 1.2 megawatts.

This deal is heavily in on DASH:

In addition to mining digital currency, the Company has also acquired a Dash Masternode for approximately USD $280,000 which requires a collateral investment of 1,000 Dash coins. Based on current prices as of December 15, 2017, the Masternode investment is worth approximately USD $880,000. By holding this investment, Hashchain receives the right to participate in budget funding decisions for the Dash network while also receiving a return on investment in the form of virgin coins and currency appreciation.

Down on the OTC, things are getting weird. UBI Blockchain Internet (UBIA.OTC) has run from $6 to $72, with highs up to $114, in the last week or so. Good news for a company that doesn’t appear to have any functioning website or business or rationale for being worth $7.9 million, let alone $7.9 BILLION.

UBI Blockchain Internet Ltd (OTCBB:UBIA) promulgates itself as a company that encompasses research and application in blockchain technology with a focus on the Internet of Things covering areas of food, drugs and healthcare. Management plans to focus its business in the integrated wellness industry, by providing procedures for safety and effectiveness in food and drugs, but also preventing counterfeit or fake food and drugs.

Riiiight. Shorters? If you’re not pounding away on this goat rodeo but you think HIVE is overvalued, I don’t know what to tell you.

— Chris Parry

FULL DISCLOSURE: eXeblock and Leonovus are Equity.guru marketing clients. The author owns stock in all other companies mentioned, except for UBI, which is built on a throne of lies and will hurt investors in ways one can hardly fathom, at some point.

 

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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