The cryptocost of The McAfee Effect
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Ethical disclosure: I am not affiliated with John McAfee; his twitter account or Coinbase/GDAX in any way. I do own cryptocurrency, some of which are mentioned. This post isn’t written with the intention that you go out and buy any particular coin, but if you do, to you I say “to the moon!”
Disclaimer: 120% personal opinion based on my own brand of logic after reading the entire Internet. (Please keep arms and feet within the ride at all times.)
Graphs: Exported from https://coinmarketcap.com/. %age figures generally use 15–30 minute candle over the initial surge (time of tweet) based on %age increase between lowest and highest points.
You might find other exciting posts in my Medium profile.
Some background
John McAfee
According to his twitter, he is a tech pioneer; Chief Cybersecurity Visionary of MGT and trustee of “Keep This B — tard Alive” fund.
(I believe I have a similar fund.)
Verge (XVG)
This one is worth pointing out, as it caused a big stir which I’ll get onto later.
McAfee tweeted about it:
and as a result (or not, who knows) it did this:
but to be clear, he had already mentioned it before:
Coin of the Day
McAfee started doing some ‘Coin of the Day’ tweets earlier this month.
etc.
He then switched to Coin of the Week.
Each time, he tweeted the corresponding cryptocurrency rocketed in a truly lunar way.
BURST: ~182%
Digibyte (DGB): ~80%
Reddcoin (RDD): ~153%
Humaniq (HMQ): ~143%
Tron (TRX): ~50%
In many cases, reaching their all-time high after many days/weeks/months of relatively stagnant fluctuations and trading volumes.
And then…
What price did next
In most cases there was an excellent flurry of people (and bots) from all over the world scrambling to their wallets to buy the coin mentioned. In the days to follow, the prices tended not to return to whence they came, but found some equilibriums that could stem from genuine interest; creation of underlying support or continued manipulation — who knows, its crypto.
One could argue they remain inflated or undervalued… This one won’t make those arguments in this post.
Verge (XVG)
Described as a “secure and anonymous cryptocurrency, built with a focus on privacy” Verge (XVG) became the talk of the town and went through some ups and downs and got a bit of attention and set of many FUD (‘fear, uncertainty and doubt’) alarm bells.
I’m still picking this one apart, but all of the commotion should have made somebody/people very happy.
Then @officialmcafee was ‘hacked’
Oh no!
Oh no indeed.
Whoever it was, had a bit of fun, promoting a few different coins before the tweets were taken down:
They went up about 22:32 UTC (28th Dec 2017, for the avoidance of doubt) and disappeared around 23:05.
‘Just’ 33 minutes (in another post another time, I’ll talk about why 33 minutes is a very long time).
The nefarious tweets promoted a few different coins:
Siacoin (SC): ~54% — but no where near SC’s all-time high ($0.031848 v $0.038179)
NXT: ~13% — also not an all-time high. NXT is a little interesting as this was already receiving a lot of trading activity and attention prior to the NXT block snapshot and IGNIS airdrop.
Patientory (PTOY): ~24%
Basic Attention Token (BAT): ~29%
The coins didn’t quite follow the same patterns of extreme peak then equilibrium — I could argue ~15% isn’t even influence.
It would appear people caught on very quickly that it wasn’t actually McAfee tweeting.
So, why does all of this matter?
A lot of stuff is broken in crypto right now :’(
Keys to the kingdom
McAfee has had a long career in tech and has done many things. My personal view about his personality doesn’t matter or whether he is financially benefitting from promotions or not: but what I will say is that I think he’s probably trying to shine the light on some undervalued or under-appreciated coins. And thats great.
What this does show is that a single Twitter account with ~522,000 followers can influence commodity markets incredibly quickly; without oversight and without safety nets — for the better or worse — at whim.
This happens less in a regulated world (particularly in finance) as there are supervising authorities (like the SCC in the US) who can dig into who owns what shares; and being a share holder and privy to internal secrets but, for example, saying “XYZ is about to do something great, buy now!” would be illegal.
Lack of regulation
Cryptocurrency markets are not internationally regulated or controlled.
Initial Coin Offerings (ICOs) sometimes are.
Cryptocurrencies are usually classified for tax purposes though (but of course) — in the UK for example, cryptocurrencies are treated like foreign currencies and gains are taxed under Capital Gains Tax. The lucky Aussies down under don’t pay taxes on personal cryptocurrency gains (while corporations do).
As a result of this lack of meaningful regulation and control ‘anything goes’: insider trading through to good ol’ fashioned price manipulation.
The closest you can find to regulation will be an exchange incorporated in a sensible legal jurisdiction and registered for financial services and/or monetary transactions with their local supervising authorities — like Coinbase have done.
This lack of regulation can’t last forever, but in the mean time, there are no contextual protections for anyone involved.
Did you send an international wire to an exchange but they pretend they haven’t got it and close your account? Tough!
Did you mis-send your cryptocurrency transfer and now its stuck buried in the exchange? Tough! They don’t have to look let alone respond to your ticket (if you can find a way of contacting them)
(I say ‘contextual’ as usually international laws and agreements still apply on things like large scale fraud; human trafficking; drug smuggling; computer crimes etc they just don’t specifically care about cryptocurrencies.)
Loads of bots
A lack of regulation as well as growth in interest leads to the development of automatic trading. Most exchanges provide application programming interfaces (API) to actively enable this.
There is nothing wrong with automated trading. Its great.
I mention bots using a negative connotation (this time) as they can be used to pervert the balances of power and effectively take opportunities away from genuine investors.
McAfee has touched on this:
The trading volume and price jumps so soon (milliseconds!) after the ‘Coin of the Day’ and other tweets described above confirm that bots are in play.
Humans can’t react that quickly:
and it makes it unfair:
because it no longer matters what the coin is, and whether its undervalued, under-appreciated or simply need of some PR to promote its cause, bots are now competing with other bots (which is why it jumps so quickly, as they are trying to get ahead of each other) and humans don’t have a chance.
Tip:
If you’re following McAfee’s now ‘Coin of the Week’, and it immediately jumps, wait a few minutes/hours before buying in (and maybe take that time to DOYR).
Oh the saturation
In my view there is a new ICO every… too damn often.
‘Coins’ are created when they should be ‘tokens’, and blockchain is used when non-blockchain would do a better job. Blockchain is new and hip and everyone wants it (along with ‘digital’; ‘transformation’ and ‘cloud’).
As a result, there is a lot of noise, and it takes a disproportional amount of effort to find the diamonds in the rough, or ‘sleeping giants’. This isn’t too dissimilar to finding a winner on the FTSE250 but you have much more data to work with presented in compliant ways (and whatever information you receive tends to have to be accurate).
This saturation and lack of compliance is leading to an increasing number of scams — not covert ones, outright fraudulent ICOs or disingenuous whitepapers.
Much like a Kickstarter project (sorry KS folks) its very simple to create an ICO on the back of a generic whitepaper; market the heck out of it and walk away with a bunch of money and deliver none of the work.
Lack of value
A little further on from under-appreciated or undervalued and a related cousin to saturation is a lack of value.
In a world where the market is flooded, everybody and anybody can create anything (with their own variation of truth) creating genuine value can be tough (every startups challenge since the dawn of time).
Without being able to determine value (evangelising that is another problem that also suffers from saturation and untruths) there is no underlying support or “I feel like I would want to pay $10 for this, so its worth $10”.
Combine all these sub-optimal environmental characteristics and nurturing… it is not.
Without an understanding of what something is worth Twitter accounts can tweet; bots can bot and investors should just close their eyes; spin and point because ultimately purpose no longer matters.
This was a long post
Yes it was. I personally blame the tweets and pictures.
I guess I’m tired and skeptical — but not enough of either to leave.
You might find other exciting posts in my Medium profile.
