The bullish ICO beast has returned.
For me this represents both good and bad, a bitter-sweet taste of nostalgia.
BitTorrent Token (BTT) launched its ICO on the fairly new Binance Launchpad late last month. It wasn’t the first project launched on Binance (Gifto and Bread launched there too), but it was the first very popular one.
BTT has since listed in a flurry of hype and alarmingly high daily trading volume.
As an analyst this worries me a little. I’m worried because I fear that people may fall into the ICO pitfalls. Correction: people will fall into the ICO pitfalls; I’d like to try to prevent you from becoming one of them.
Fortunately I am the veteran of many ICOs. At one stage I used to invest in several every week. I have certainly learnt a lot about ICO’s, most of it the hard way. I would like to share the benefit of my experience with you.
Picking and analysing an ICO to invest in is a whole story on its own, we won’t be looking at that today. Today I am looking at coins which have just launched onto exchanges – fresh out of ICO. Specifically, we will be looking at BTT.
I have been getting rather concerned watching the actions of BTC traders this last week, so concerned in fact that I posted a Tweet about it yesterday:
The Tweet says it all really: BTT is being traded at an extremely rapid rate. By way of comparison, look at the table below. It’s arranged in order of volume. While BTT has dropped two places since my Tweet about it, it’s still unrealistically high in position 7.
BTT has even higher daily volume than Tron, the chain on which it runs and the best performing top 10 coin of 2019. It’s higher than big names like Bitcoin Cash, Dash, Binance Coin, NEO and Stellar!
This is typical of an ICO in a bullish market.
Well yes, because that’s pretty much how ICOs used to behave back in the boom times. On the one hand this is a good thing: ICOs have performed dismally for a full year now. The last time I saw ICO behaviour like this was in January 2018.
That’s a strong indication that people are feeling confident enough that crypto has bottomed and are ready to start putting money back into it again. It’s confirmation of the end of the bear market, which is good news for investors in general. It’s also very much in line with what I wrote about two days ago.
I looked at BTT prior to the ICO. Even in the bear market, I have never stopped looked out for good deals, such are the habits of us value investors. When BTT came along I ran the numbers, but they didn’t look good to me. Once again I went to Twitter (albeit a little after the fact):
I reiterate what I said earlier: there is nothing wrong with BTT, in fact I like it very much and I’m sure it will do well.
Anatomy of an ICO
It’s over-hyped. That hype is causing unsustainable price climbs – typical of bullish ICOs, but dangerous to investors.
I have taken the trouble of drawing you a rough chart of how a coin usually behaves fresh out of ICO in a bullish market. I have seen this cycle many times and have been through it myself on too many occasions.
BTT rode the hype wave up and now it is starting to crash. I actually wish I’d written this a day earlier, but I didn’t , which is why I did send out that Tweet out over a day ago.
(If you aren’t already following me on Twitter then please do so. It takes several hours to write a post and I can’t write one about everything that I would want to. Tweets allow me to send the messages out rapidly. Follow https://twitter.com/brain_bit to stay in the loop.)
Using the chart above you can see that price should now fall rather radically, before slowly stabilising, usually on a descending trajectory. Realise that this does not mean the end of BTT hype, a second hype wave usually kicks off sooner or later (later rather than sooner in a market like this). A third wave follows this, and a fourth etc…
Here are some examples of launches which have behaved this way in the past. In some cases the hype takes a little while to build first (remember that there were many competing ICOs when these launched, unlike now).
If you hold BTT right now then my suggestion (for now) is a firm “Sell”, you can always rebuy the coming dip. but before you do that, make sure you know enough about BTT…
The BTT ICO was simultaneously launched in two sessions on the Binance Launchpad. One was for Tron (TRX) purchases and the other was for Binance Coin (BNB) purchases. In another event reminiscent of the bullish ICOs of old, the unprecedented amount of interest caused significant problems during the sales. I remember that the CargoX ICO I was a part of sold out in 7 minutes; it’s good to see that kind of thing happening again.
What’s notable is that only 6% of total BTT token supply was offered in the sales: 23 760 000 000 in the BNB sale and 35 640 000 000 in the TRX sale. And this is why I’m cautioning people.
You see: only 9% of the 990 000 000 000 total tokens are already in circulation, meaning that there is another 91% to come. I’m not sure where the other 3% of tokens have come, from because BTT tokens are split between many investors who were not part of the public sale on Binance. (See chart below)
With 10x more tokens than what there are in circulation now still waiting in the wings, you can expect price to fall as they slowly hit the market. At the very least it will keep prices from rising rapidly in a sustained fashion. Note that (as usual) I’m speaking about price in BTC terms, in USD terms the broader market movements may cause the price to continue to climb.
[Reminder: you should always analyse your altcoin performance in BTC terms – it’s the only way to tell if the coin was worth buying or not. Did it perform better than BTC, or did it perform worse?]
To illustrate this issue visually, take a look at this graph:
The important part to us is “Public Sale” – the tokens from the ICO. To analyse this in more detail, we zoom in (a lot) and extract the following graphics from the chart above:
Public Sale BTT tokens compared to other BTT tokens in early 2019: (Yellow line area = public sale tokens)
66.7% of the tokens in existence are Public Sale tokens.
Public Sale BTT tokens compared to other BTT tokens in late 2022: [with over 20% of the tokens still to enter the market]
(Yellow line area = public sale tokens)
Public Sale tokens are less that 10% of the tokens in circulation – and are dropping towards their 6% final state.
As my readers may remember, I always like to look at the number of tokens/coins I hold of a cryptocurrency relative to the Total circulation. It’s important that crypto investors understand this method of investing and why market cap based on circulating supply does not mean much. Luckily for you I once wrote an article on it: HOW MUCH to INVEST in a CRYPTO
It was using the method linked to above, combined with an anaylsis of the potential BTT market cap based on total circulation and ICO price per token that led me not to invest in the ICO – I’m looking for good coins to hold over a few years, not a quick but risky flip straight out of ICO.
Having said that I think that BTT will do well in the long run. The whitepaper looks promising and I really like the idea of paying BitTorrent users to host/upload files.
I don’t really like that so many tokens (58.9%) are in the hands of large players, but at least they have split that between Tron, BitTorrent and the Team members with no one entity holding more than 20% of the tokens. This is in stark contrast to Ripple (I’m still laughing about that “Ripple is much more decentralised” video I posted yesterday! ).
BTT is a good project. What I haven’t mentioned yet is how closely it is tied to BitTorrent itself. As the whitepaper says:
“BitTorrent Protocol is the world’s largest decentralized protocol with over 1 billion users, far surpassing the second-ranked decentralized application of Bitcoin”
“… software managed by BitTorrent Inc. is incredibly widespread around the world. Software clients maintained by BitTorrent Inc. are in use today by approximately 100 million monthly active users in almost every country in the world with around one million new software installs every day. Over 160 countries have more than 10,000 users, and 23 countries have more than 1 million users. “
I have little doubt that BTT will be a roaring success. But this in no way makes it immune to the negative effects of a bullish ICO. Be very careful about getting caught up in the hype! Look at the investment realistically and remember to account for the many other tokens which have still to enter circulation.
Be careful with ICOs in general. As the market brightens up a bit, you can expect this ICO pattern to be repeated many times over with other coins, the more positive the market becomes, the worse the hype effects get.
Yours in crypto
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“By this means (fractional reserve banking) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
~ John Maynard Keynes