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Bitcoin V. The Rest

|About: Bitcoin USD (BTC-USD), LFIN

Bitcoin’s (BTC-USD) 40% recovery over the past month has brought its performance over the past year to over 200%.  If you want to place any of your cash allocation in digital currency, it might make sense to put the majority of it in Bitcoin (you can get 10% off your first purchase here). Bitcoin has fluctuated from around a third to around half of the total digital currency market and it is the most trustworthy part of this emerging market.

In ICO Quality: Development & Trading, Sherwin Dowlat estimates that over 80% of initial coin offerings (ICOs) are scams and 8% ultimately trade with 4% succeeding.

Fortunately, the SEC is actively monitoring ICOs.  They have announced seven ICO enforcement actions this year and have at least one more actively in process.  How do you spot an ICO scam?  You start by assuming that there is about a four in five chance that an ICO promoter is a scammer.  Watch for grandiose claims and verify all claims through third parties.  Get references. What do you ask from these references?  The most important ask if for other references that were not volunteered by the ICO promoter.  Monitor the schedule for broken promises and fuzzy plans.

If you fall victim to a scam: contact the SEC.  They will protect your confidentiality and might even offer a whistleblower award.  You chances of making money reporting an ICO scam are greater than your odds of making money by avoiding one.  The process can take a few years, but can be lucrative for the whistleblower if the government is able to make a substantial recovery. 

The percentage of ICO scams is at least matched by the percentage of digital currency-related equities that are scams.   The SEC already announced enforcement against Longfin (OTCPK:LFIN) and will have more to come.  Do your own work, think for yourself, and buyer beware – and be especially wary of anyone promoting ICOs or digital currency-related stocks.

Disclosure: I am/we are long BTC-USD.

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