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 doldrums following the first real run in bitcoin prices in the years previous (and many of the first wave of “me too” cryptocurrencies had already lost 99% of their value), and it recovered sharply over the following year and, as we now know, went almost parabolic in 2017 as the bitcoin price surged from $1,000 to $4,000.

Let’s get back to the ad…

“When you see teenage hackers with backward baseball caps start getting clued into the same exact tipping point as gray-beard economists with silk ties… and Silicon Valley venture capitalists… and Wall Street investment bankers…

“Even ordinary Americans like Jared Kenna (a beer brewer who made more than $30 million trading Bitcoin). Or Charlie Noble (who revealed to CNBC that a fellow Ethereum trader made a 300,000% gain in less than a minute).

“That’s when know that something must be about to happen.”

That scares the heck out of me, mostly because it’s the same thing that drove sentiment during the internet bubble in 1999 — and, frankly, that drives most bubbles: “We’re all making money because we’re all making money!” When a cab driver gives you stock tips about the next internet sensation in 1999, that’s scary… when the waitress talks up the twelve houses she bought with no money down in 2005, that’s frightening… and when the high school kid who mows your lawn tries to convince you to buy the latest initial coin offering for a new cryptocurrency in 2017, I can’t help but feel that same twinge of fear.

Sometimes, as we know, the “something” that “must be about to happen” is a big old slap in the face as reality hits all at once.

Reality might not hit, of course, or it it might not hit anytime soon, I don’t know — many of the pundits persist in predicting that the next debt ceiling showdown will drive the prices of cryptocurrencies higher, as arguably happened during the first bitcoin surge a few years back, but that’s clutching at a rational reason for things that have already increased by thousands of percent, in some cases, for no real reason. Maybe it will happen — the cryptocurrencies do tend to react to crises like gold does, at least recently (as in, they rose during North Korea fear last week, and fell during the return of North Korea complacency this week), so you can place your bets where you like regarding the next possible dollar crisis this Fall (or whatever the next crisis du jour might be).

What Hutchinson seems excited about here is the potential for this alt-currency market to become a “winner take all” arena… where, naturally, he’ll have chosen the winner:

“You’re talking about a toll-booth for every single transaction that happens, every single second, all around the world. And it’s all no sweat, because there are NO physical barriers whatsoever to one currency dominating ALL of it. And FAST….

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“… the whole point of a currency is that it becomes the standard that all other transactions are measured by.

“Again, winner takes all.

“That’s why your grandchildren won’t use ‘dollars’ to describe a big score.

“No, they’ll use the name of the coin being issued in this historic ICO…

“How do you make the best investment opportunity of the 21st century 1,000 times better? Just add a few more zeroes…”

The big pitch is that bitcoin and ethereum have been huge winners, but that this next coin offering will supplant both of those and the US dollar and become a ridiculous profit-maker… more from Hutchinson:

“… what’s even more amazing here…

“Is that there are still so many more zeroes on the table, by getting in on this next big ICO.

“Remember, if I’m correct that this ultimate digital currency will replace not only Bitcoin and Ethereum, b