The latest ad from Manward Press is pretty typical in the “throw red meat” category — the headlines and intro to the presentation are all about how Hillary Clinton is being “cheated on” by Bill again, this time as Bill joins Donald Trump in backing a new cryptocurrency called “USACoin” … but we’ll skip over all that, the main point is that Andrew Snyder is teasing this “USACoin” as the patriotic answer to bitcoin and ethereum, both of which are primarily mined outside the US, and he thinks it has the chance to deliver 1,000% gains.
So what is the ad really pitching? Well, in the interest of not getting sucked into the hype too much, we’ll try to figure it out for ourselves instead of ponying up $79 for the Manward Letter subscription they’re selling.
Samuel Johnson was almost certainly referring to false patriotism when he told Boswell that “Patriotism is the last refuge of a scoundrel,” and I have no idea how much of Andrew Snyder’s red-white-and-blue is real and how much is being shoveled on with a trowel to appeal to patriotic possible subscribers… but certainly the “if you love America like I do” language is a red flag for any investment (and, of course, the order form reminds of you of this with the headline “USA! USA! USA!” — which I’ll happily shout at a sporting match, but not when pressing the “buy” button in my brokerage account).
That’s right up there with photos of the sports cars and yachts you’ll be buying with your millions, really… neither appeals to patriotism nor greed-soaked images of Porsches and villas will help you figure out whether or not an investment is a good match for your needs, they’re all just ways of trying to appeal to animal instincts instead of giving you time and space to think.
But now that I’ve got that out of the way, what’s the actual “USACoin” investment being touted here? Snyder drops some clues along the way…
“USACoin is a revolutionary technology.
“It’s completely changing the way the global payments system works.
“I believe the mainstream reports indicate that the Trump White House wants to help it become the No. 1 blockchain investment in America.
“Bill Clinton is backing it too. His director of the National Economic Council is on the board, and Clinton believes the opportunity is “staggeringly great.”
“Google helped USACoin raise $55 million, and one of its best developers joined the team.
“Venture capital firms like CME and Venture51 are backing it.
“And banks all over the world are using its technology. From UBS… to American Express… and dozens of others.”
The Clinton/Trump connection is mostly just a silly distraction, he throws in lots of photos of Bill and Donald together, which is no big surprise — they certainly traveled in the same circles before Trump became a political figure, but he uses that to point at the connection both of those people have to this “USACoin” (and, more likely, to get your attention — political tribalism is hugely profitable for promoters who know that almost everyone will have a reaction to either Hillary Clinton or Donald Trump’s connection to a story… they don’t care if your reaction is positive or negative, the key is getting your attention long enough to spur a “greed” response with the rest of the story).
Here’s a little sum-up of that:
“Donald Trump and Bill Clinton are both championing a promising new way to make money in America.
“In fact, reports by Forbes and The Independent Republic have convinced us that the Trump White House is backing the next No. 1 investment in America.
“And leaked footage of Clinton… appearing at a private, closed-door meeting of wealthy tech investors in San Francisco… showed him saying that the technology behind this investment spans ‘across national borders and income groups.’
“He said the opportunity is ‘staggeringly great.’
“And here’s the thing…
So… what is this “USACoin” that trades for less than a dollar?
What Snyder is talking about here is Ripple, which uses the crypto abbreviation XRP. Ripple runs a blockchain-based transaction network that does not involve mining and is much more centrally controlled than most cryptocurrencies, and that means it is also more secure and faster and not reliant on the blockchain mining server farms that are mostly in Asia… though that also means it’s not really a “decentralized currency” alternative to the dollar or the yuan, and it’s not run by consensus or powerful anonymous developers like bitcoin or ethereum.
RippleNet is really aiming to be a competitor to the SWIFT Network and, maybe someday in the future, to other relatively high-cost, low-speed networks like those run by Visa and Mastercard. The first goal is just to speed up and clean up international settlement as trillions of dollars moves around the world, getting rid of the cumbersome settlement process or expensive “bank wires” that slow everything down and require regular human intervention. The network, which they call xCurrent, is used to transmit money (along with back-and-forth messages as needed) between institutions, and it gets rid of the slow settlement process and most of the cost of the SWIFT network.
What these first use cases for RippleNet and xCurrent have not done, though, is created a huge demand for the actual Ripple currency… they seem to be hoping that the next iteration, xRapid, will do that — mostly because it offers up XRP tokens as a source of liquidity in the network, and therefore creates at least some demand for that cryptocurrency (most of which is still owned by Ripple the company at this point).
Here’s how Ripple puts it:
“Ripple provides one frictionless experience to send money globally using the power of blockchain. By joining Ripple’s growing, global network, financial institutions can process their customers’ payments anywhere in the world instantly, reliably and cost-effectively. Banks and payment providers can use the digital asset XRP to further reduce their costs and access new markets.”
I’m not a cryptocurrency or blockchain expert, but this again comes up against what I think of as the biggest challenge in evaluating or speculating on cryptocurrencies: This is a great use case, and it seems that Ripple’s blockchain network is indeed getting some traction (and therefore network effects… the more institutions who use it, the more will want to use it), but I don’t understand quite how this is going to increase the value of XRP. Owners of those XRP tokens don’t own the network, it seems kind of like you’re just betting that it will rise in value because it will get more widely used… which it might, but it also might not. The US dollar rose in value in part because it was the most accepted currency around the world and people were willing to hold it (or forced to use it, if they wanted to buy oil or sell to Americans), but I don’t see as obvious a case for building up institutional willingness to hold meaningful reserves in XRP.
Maybe I just don’t see the value in the “source of liquidity” that the pool of XRP tokens out there, and maybe I just don’t “get it” when it comes to the value of the actual XRP “currency” — clearly RippleNet has some potential, like any network that can get to critical mass and perform a service better than the incumbent, but it’s not as clear to me that owning XRP tokens necessarily means you would benefit from that potential. Maybe you will if people decide to use XRP for their RippleNet transactions (they don’t have to, apparently), or if they demand more than is being released (they release some each month, on a predetermined schedule), maybe not if they just use RippleNet for those transactions but don’t hold use XRP tokens or, if they do use XRP, if they don’t hold them beyond the four seconds it takes to complete the transmission. You can make your own call.
To some degree, the value of other tokens can be inferred from the act of mining itself — since mining is what makes other cryptocurrencies work, performing validation of transactions in a distributed consensus network, the miners are rewarded for performing that work (and compete for the right, which is what the race to solve those math problems is — and what sucks up so much electricity)… and since they’re rewarded with more coins, that, in a somewhat backwards way, indicates that the value of those tokens is partially created by the foundational act of mining within the network. The miners make it possible, and harvest some of the value.
With RippleNet, since there is no mining and the coins and the blockchain are controlled by Ripple and the network participants are all trusted and non-anonymous players, like banks, the coins are strictly valued based on supply and demand — how many are needed for the network to work (which depends on how many are held by the participants as a pool of liquidity, somewhat like banks hold foreign currency reserves to make settlement easier — and this is largely optional, it appears, since as far as I can tell the basic RippleNet blockchain ledger does NOT require you to own any XRP to facilitate transactions).
Ripple itself would be an interesting investment, but it’s a corporation and buying XRP tokens does not grant you any ownership as far as I can tell — it is owned by venture capital investors, including some of the big banks who are interested in RippleNet, and has raised just under $100 million so far from typical venture capital rounds. I’m not sure how the finances will work out for the business, I don’t know whether their small fee will cover the cost of their management of the network or whether they’ll generate returns for their investors because of the large cache of XRP tokens that Ripple reserved for itself (as of last year they had 55 billion XRP in escrow, apparently, and were releasing a billion a month), or from some other source of revenue… but it’s at least interesting to think about. Buying XRP, however, seems more like buying the US$ because you think a lot more people are going to be using credit cards and therefore the velocity of electronic money will create more demand for dollars… though, to be fair, the supply of XRP is limited and controlled, unlike the US$.
Cool and interesting, probably worth the research, but I can’t come up with a reason why the XRP tokens would rise by 1,000% other than “because it gets popular again with speculators.” So far, XRP has moved pretty much in line with bitcoin, though with more volatility (it was the “next big thing” during the crypto craze a year ago, as you might remember)… here’s the chart of the two of them over the past year and a half:
So you can make your own call on what the future holds. XRP is supported by a lot of the major cryptocurrency exchanges, though it is not yet available on Coinbase, which is the biggest retail exchange in the US. Like other digital currencies, it will probably rise and fall on events that change sentiment — like getting traded on Coinbase, or resolving the current lawsuit over whether XRP should be regulated as a security.
Oh, and yes, there was a little flurry of chatter back in October about how the White House was “interested” in Ripple, so that’s where that Trump association comes from… though the source of this is apparently just a Ripple executive saying that the White House is thinking about foreign control of bitcoin, so what that means is anyone’s guess. You can see the interview with Ripiple CEO Brad Garlinghouse in Breaker that seems to have inspired all the chatter here, this is the key excerpt:
“When I started to meet with people in government and regulators, I had very low expectations. I have been truly amazed at the open-mindedness, number one. And number two, the smart questions, sometimes even tough questions. There’s clearly a lot of homework going on. The White House in particular seems to be thinking about what it means to have 80 percent of bitcoin mining taking place in China and a majority of Ether mining taking place in China. When you look at XRP, there is no mining, so from a foreign-control aspect or from an environmental aspect, XRP is a very different beast. And in conversations we’ve had with the administration, they seem to get that and think that might matter.”
I have seen articles that say the White House might be on the verge of actively supporting XRP and that say “Trump holds the key” for XRP’s future, but I haven’t seen that backed up with anything other than speculation from enthusiasts looking to pull out their rose-colored glasses and read between the lines.
But wait, there was one more tease!
Snyder also says he’s got an “Extra Bonus Report” that he calls, “How to Profit From USACoin in the Stock Market” … so what might that be?
Here’s the intro:
“With most crypto investments, you have to buy the coin directly for your chance to profit.
“And of course, that’s true of USACoin.
“My first report will show you how to buy those coins for under $1.
“However, there is a second way to profit from this situation directly in the stock market.”
So whatever might it be? It is, we’re told, a company that has partnered with Ripple…
“… an international online payment services company similar to PayPal that is partnering with USACoin.
“The payment company is widely used. Its annual transaction volume is about $25 billion, which is quite substantial.
“The company is growing so fast and showing so much promise that in the beginning of 2018… China tried to buy it up.”
Apparently the US Government intervened and didn’t allow China’s purchase, which sent them into the arms of USACoin. Any other clues?
“We believe shares of the company are set to soar from $2 to as high as $17.
“And experts estimate this company would need to hold up to $8.3 billion in USACoin to fund its daily transactions.”
That, dear friends, is the beaten-down international money transfer firm MoneyGram International (MGI), which is part of the old network of cross-border remittances that Ripple is trying to disrupt (though, of course, Square (SQ) and PayPal’s (PYPL) Venmo and many others are disruptors, too, and Western Union (WU) is the elephant in the room).
Yes, MoneyGram was on track to get acquired by Jack Ma’s Ant Financial (the payments platform that spawned from Alibaba), and that acquisition was rejected for national security reasons a little over a year ago. Lately, there’s been more chatter that they might put themselves up for sale again — though that hasn’t done much for the stock price (it hit about $18 in late 2017 on the Ant Financial takeover bid, but fell steadily after that, including a 50% drop when they lowered guidance last quarter and announced a fraud settlement with the government).
I don’t know that I’ve looked at MoneyGram since it was teased as a turnaround back in 2011 (at about $26), back then they were growing a little better and were on the verge of a couple years of actual profit after getting rescued by Goldman Sachs, but they never seem to have gotten any traction. Probably because, as Ripple would tell you, it’s expensive to manage big payment networks for small amounts of money, particularly if you’re always trying to fight fraud, and it doesn’t get easier when you’re competing with apps and fintech startups and traditional banks as well as the much larger Western Union.
I have no idea what the future holds for MoneyGram, but it does feel a little bit like trying to buy Blockbuster Video in 2005… they might be able to fix the business, but they might also disappear without anyone shedding a tear over their absence, and they’re not making money now or on the verge of any major change that will let them make more money, so why buy the stock?
MoneyGram is using XRP to at least some extent, and I guess you can probably argue that the Ripple connection has some small chance of making an impact… that “expert” who guessed at the amount of XRP MoneyGram would need to buy to completely switch over to Ripple’s xRapid service/system is a blogger whose analysis you can see here (from last January), I don’t know whether or not he’s right. As of November, xRapid was apparently still in internal testing at MoneyGram.
So… wanna buy some MoneyGram? Speculate on some Ripple? I’m not particularly interested in either, but both are certainly a lot cheaper than they were a year ago, and maybe I’m missing something exciting… feel free to shout out your opinion with a comment below.
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