The Illusion of Block Chain in Crytocurrency and its Arbitrary Value Ripping Dollars out your pocket
What is a data packet worth? What is a secure connection’s value? What is encryption liquidation value? Can anything quantified by electrical charges have intrinsic value? For those that are unaware of what intrinsic value is I’ll enlighten you.
In simple terms, “Intrinsic Value is value derived from the materials itself”.
So if a house was assessed the intrinsic value would be the wood, concrete, steel, et cetera. There is a definitive value to the house. The value of these materials is consistent regardless of market demand.
Gold coins have the intrinsic value due to the fact they are gold. The element and precious metal carries a value.
Understanding this very simple concept…what is a block chain intrinsically worth? The answer to the intrinsic value will surprise you. The intrinsic value of a block chain is its electrical current. The power required to generate the current is barely a fraction of a penny.
The value of block chain, non asset based Cryptocurrency or anything that has a derivative value is effectively nothing. Derivatives by nature derive their actual value from something else. In block chain’s case it is “security”. In Cryptocurrency the value is derived from someone else “willing” to accept it.
Every single dollar of value in Cryptocurrency or block chain is actually Arbitrary Value.
The definition of Arbitrary Value is — A value not linked to an asset or liability, but created solely for accounting purposes. Arbitrary value is also called fictitious value.
(Source: Arbitrary Value. (n.d.) Farlex Financial Dictionary. (2009). Retrieved June 22 2019 from https://financial-dictionary.thefreedictionary.com/Arbitrary+Value)
I find the state of “big data” very amusing. It amuses me because the vast majority of our society is buying into a concept of fiction. To be clear, there is value application for block chain. Cryptocurrency can be worth something if there is an actual asset to back it. I am not against Cryptocurrency or Block Chain.
What I am against is someone telling me that nothing is worth something. You should too. That’s the definition of being ripped off.
Security features for companies is big business. Businesses have value for security that protects customer information, sensitive data, and trade secrets. Block chain is a technology that is very useful. Block chain in itself is an information technology product. The value of any product is as good as any product that can “sell”.
A product that does not sell has no value. If no one wants to buy my goods than my goods suck. No demand is pretty simple to understand. Many block chains are linked to Cryptocurrencies which never sold anything to anyone. The vast majority of block chains created for Cryptocurrencies are nothing more than secure methods of storing transaction records. The records these block chains store are for Arbitrary Cryptocurrencies. These are Cryptocurrencies that often have no intrinsic value.
With the SEC’s push to define Cryptocurrency as a security, as discussed in my last article “Cryptocurrency evolution to Security Status, Middle Market Emergency & the future of Initial Coin Offerings”, it is important the asset you look to acquire is worth something.
Relying upon someone to believe in nothing is dangerous. Having air back your money is the quickest way to evaporate your wealth. Guess what? There is a lot of hot air going around for new coin pitches.
Ladies and Gentlemen I am an Accredited Financial Analyst (AFA) with over 1bn in debt security valuations under my belt. I can tell you if something is worth something or not. I am also one of the most out of the box thinkers you will ever meet.
With that being said, with confidence I can tell you that the SEC’s aggressive stance is warranted on Cryptocurrency. It is one area they are getting right. Most people are invested into something that is worth nothing.
CASE STUDY OF BITCOIN
Bitcoin realized in 2018 potential fraud claims, and worthlessness would strike its core. In response to the common sense assessment of nothing being worth something Bitcoin did something very smart.
On May 21, 2019 Bitcoin decided to push an Exchange Traded Fund (ETF) that would register with the Federal Register. You can see the full announcement of the SEC here. Bitcoin is not taking any chances and has decided to form an ETF Trust pursuant to Section 19(b)(1) of the SEC Act of 1934 with the New York Stock Exchange (NYSE).
When you have a regulated open market the value is determined by simple supply and demand. A willing free market decides your value. If everyone dumps your stock the sale plummets the value of your security. You can sell securities for marketing ice cream sticks. If people want your securities they will buy it.
The market determines your value not a private person telling people what to pay.
This is the key element to making a market. Every good valuation has three categories: 1) Income, 2) Asset and 3) Market. Bitcoin has decided it’s going to let the “Market” tell them what their Bitcoin is worth. The SEC is going to approve this frame of thinking. If you want to hold a coin that will hold value…hold Bitcoin or one willing to register with the SEC. The SEC is okay with a company / entity fully reporting the facts for the market to determine what the market should pay.
If the market wants to pay $1,000 per Bitcoin that is the investors’ prerogative to do so.
A person convincing an unsophisticated person to pay $1,000 for something that has an artificial, unsupervised, no accountability market is ripe for fraud. More importantly it is the fastest way to get took down when people lose money.
ELEMENTS OF A GOOD COIN OR OFFERING
The elements of any good coin need some basic components. Let’s discuss the common sense approaches.
1. Intrinsic Value — People it pains me to lead with this but buy something that is worth something. Take the time to research and find out if the company a) has any form of asset, b) makes any money, c) owns something that can be sold to give you your money back (not other people’s coin purchases that is a definition of a Ponzi Scheme), and/or d) has block chain that people actually buy as a product.
2. Registration — I don’t know about you but I prefer someone who is accountable to oversight. I have a very simple reference for character. It starts with a question rather than a statement.
“When you are alone in your room, by yourself, and you are thinking to yourself who is that person?”
Seems simple doesn’t it? No one will ever know that person except themselves. So since I can’t get to know that person I want someone watching over their shoulder. How many people would you give access to your checking account without supervision? My guess is little to no one. Make sure the company is filing a registration statement and will be kept honest by someone designed to keep them honest.
3. Designed as Debt Security — Make sure someone owes you money. If you purchase some kind of coin whose value can hit rock bottom you’re completely exposed. If you acquire a coin that elects “debt security” status — someone owes you. I prefer to look for coins who will 1) elect bond treatment, 2) pair it to some form of security, and 3) will list the bond on an exchange.
These three elements will pretty much give you a lot of upside with little downside.
It’s important to understand the definition of a coin is evolving. There is no standard and there is no way of getting into the market without an unknown. Eventually uniformity will come and those failing to conform will get removed.
Opportunity is found in middle space markets. There is still a lot of opportunity, albeit much of it has left since 2009, for Cryptocurrency. The play here is what type of security these coins will be classified as. For me, the debt security route makes the most sense. Unless a completely new classification of security is created you can only go by what is current.
Currently you can sell notes, bonds, or stock. That’s it folks. I’m pretty sure no one holding a coin thinks they own a company. I’m pretty sure the folks back at Bitcoin don’t think they are borrowers. So what is there left? It’s obvious to me. What is left is a form of debt security (bond).
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com.