What’s that “August 28 ICO” pitch from Martin Hutchinson about?

Checking out the introductory "will be bigger than bitcoin and ethereum" ad for Crypto Alert from Agora Financial

By Travis Johnson, Stock Gumshoe, August 15, 2017

“An entirely new digital currency will hit the net on August 28

“It will rapidly replace ALL current “crypto-currencies”… and then ring the funeral bell for the mighty U.S. dollar

“Profits on this new currency are completely uncapped (unlike Bitcoin)… and based on past modeling, I predict they’ll be 1,000 times higher than we’ve ever seen before

“Making this your ONE LAST chance to get in on the ground floor of the hottest market trend in more than 2,300 years… RIGHT NOW”

That’s the attention-getting promise from Martin Hutchinson’s pitch for his new Crypto Alert service with Louis Basenese, which is a fairly pricey ($3,000 one time fee, $199/yr maintenance fee) newsletter published by Agora Financial.

And I’ll warn you up front, I don’t know for sure which coin it is that Hutchinson is hinting at — though I’ll share a low-conviction guess with you after we roll through the clues.

The time is ripe for these kinds of pitches, of course, because we’ve seen cryptocurrencies skyrocket over the past year, even big ones like bitcoin and ethereum, and we’ve also gone from fewer than 100 cryptocurrencies a year ago to more than 1,000 now, with dozens more being launched each month as new developers try to get in on the frenzy or add something to the blockchain/altcurrency/cryptocurrency marketplace.

Hutchinson also claims credit as an expert on cryptocurrencies, partly as a result of the article he coauthored for the Cato Journal a couple years ago. He says that he “won’t bore you with all the technical details” of that article, perhaps partly because the article was entitled “Bitcoin Will Bite the Dust,” but I thought it was worth reading (and he has backtracked some from that assertion of late).

That article did wisely point out one of the problems of Bitcoin, the reliance on that network of miners to validate Bitcoin transactions, and the extent to which economies of scale (and an arms race in computing power) would pressure the system:

“Despite its success, the Bitcoin system is unsustainable due to a design flaw at the very heart of the system. The problem is that Bitcoin requires competition on the part of “bitcoin miners” who validate transactions blocks, but this competition is unsustainable in the long run because of economies of scale in the mining industry. Indeed, these economies of scale are so large that the bitcoin mining industry is a natural monopoly. Furthermore, there are signs that competition in this industry is already breaking down. Once that happens, the system will no longer be able to function as it hitherto has. Its key attractions (decentralization, absence of a single point of failure, and anonymity) will disappear; there will no longer be any reason for users to stay with it; and the system will collapse.”

And there’s some interesting info in the conclusions as well, here’s part of the sum-up about bitcoin:

“Even in the unlikely event that it survives into the medium run, we would still rate its longer-term chance of survival as zero. First, we should remember that a recurring theme in the history of innovation is that the pioneers rarely, if ever, survive. This is because early models are always flawed and later entrants are able to learn from the mistakes of their predecessors. There is no reason why Bitcoin should be an exception to this historical rule. The second reason is that in the very long run bitcoin would be uncompetitive against efficient closed-wall systems such as PayPal or COEPTIS, the successor to e-gold. Once the production of bitcoins becomes insignificant, then the Bitcoin system will entirely depend on transaction fees to cover its operational costs, and its fee levels would be higher than those of more traditional payment systems because of the need to maintain excess hashing and excess capacity to deter new entrants into the transaction validation business. Put differently, Bitcoin can never achieve the technical economic efficiency of competitors that can operate with a very small number of servers, or even just one. In the very long term, when there are no new bitcoins being produced to subsidize the validation process, the Bitcoin system will no longer be able to compete.20 Last but not least, there is still the problem that Bitcoin is not backed by anything.”

That doesn’t mean anything about the near-term value of an asset that is traded based almost entirely on sentiment and momentum, of course, and it doesn’t really give great insight into the immediate prognosis for any of the other cryptocurrencies — bitcoin was trading between $200-$250 at the time that article was published, during the doldrum