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Comment by jklepatch | Hacker News Reader

What puzzled me is how comes blockchain startups did not sell their crypto for fiat just after their ICOs.

I recommended this to several of my blockchain customers but none of them listened. I dont know if that was motivated by greed or something else.

According to Game theory there is no benefit in not selling the crypto for fiat: if you raise lets say 10million during an ico (typical amount raised 6m ago), there isnt much you can do with 20M (i.e you keep the crypto and it doubles) that you cant do with “just” 10M.

However, if the crypto crashes, and become 5M, you are going to have a hard time explaining to stake holders that 5M just disappeared...

At worst you keep 10pct in crypto if really you want to keep some upside to crypto but thats it

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> What puzzled me is how comes blockchain startups did not sell their crypto for fiat just after their ICOs.

I'm not sure what's puzzling: The startups who base their business around crypto believe crypto will rise in price. A crypto startup selling all their crypto because they think there's a high risk crypto will crash in value is also sending out a very bad signal to potential investors.

> The startups who base their business around crypto believe crypto will rise in price

A startup may very well work on some blockchain technology while not believing that a particular cryptocurrency will rise in price.

But it is far less common to come across startups who believe this. Think of blockchain startups as the top 1% of the most optimistic investors who believed in the technology so much that they created companies around an immature infrastructure.

Selection bias explains why they held even even after a 90% correction.

What is even involved in finding a buyer for $10mm btc in usd and then getting that usd into a legal/compliant bank account? Sounds non-trivial. It's my understanding from some work I did for a crypto startup that there is approximately zero usd/btc liquidity, the apparent "usd liquidity" and "usd price" last year was actually dominated by tether-btc and tether-eth liquidity. There was not actually a functional usd/btc market at any point, at least not with liquidity necessary to justify a statement like "startup X holds $10m btc" and this whole thing is a bunch of twenty-five year old entrepreneurs learning about macroeconomics the hard way.

There's off exchange buyers and sellers of crypto who deal in orders of > 1M usd.

It's fairly trivial to go from 10M BTC to 10M of a stable coin. Can't speak on how difficult it is to do 10M stable coin/btc to us bank

The BTC/USD market on Kraken is pretty liquid. I think trading $10m wouldn't have been a problem if you spread it over a few days. They are trading $34m/day now and it would have been far more 6 months ago.

Not sure what paperwork you need - as long as you could document the source was legit it would probably be ok.

Also changing BTC/USDT would at least protected against the decline in value.

> as long as you could document the source was legit it would probably be ok.

But how many of these ICO's actually did proper KYC/AML stuff? My guess is very, very few, making getting fiat money into a legitimate bank much more difficult.

Yeah not sure about that. I went for a few ICOs. The western ones all had quite a lot of KYC stuff. A Chinese one had nothing but I presume there are some banking arrangements in China that turn a blind eye. The whole China scene seemed pretty unregulated. If you wanted to launder it would probably have been the place though they seem to have cracked down now.

Circle Trade and Cumberland do OTC trades of large amounts. Nothing is magical about this. https://www.circle.com/en/trade

Sure OTC services exist (I believe Coinbase has one) but I think the whales spending $10m on BTC might have an inkling about buy low and sell high – aka they are decidedly not buying during the period between August 2017 and today, which is exactly the period they would need to be buying at scale for all these startups to unload their disintegrating assets.

You are very wrong, OTC markets are very liquid right now.

Also $10 million in BTC isn't very much, you can trade this on the public markets without slipping very much if you really want to.

yes of course they are liquid now, and of course you can trade it in crypto-crypto markets, the question is if you can trade it for USD cash money in a real bank account, eight months ago

There may have been more slippage than your startup was comfortable with, but the OTC market has always been liquid enough for startups to liquidate ETH/BTC from ICOs, even in the middle of the bear market.

show us some evidence!

What sort of evidence are you looking for? If indeed people were having problems cashing out as you seem to think, this would have been big news. In which case you should be able to find and provide evidence of this occurring. And, if I understand you correctly, you might as well ask for evidence that investors can sell their TSLA stock for cash.

hardly anybody was even trying to cash out! As demonstrated by this headline.

That's not how OTC markets work.

Have you tried to buy or sell a big amount and did you not get a price you were looking for? Or have you ever read anyone that had this problem? I don't know anyone that has ever complained about this..

Very much so, I'm not sure why you think you couldn't. 10 million really isn't that much.

It took me a long time to realise, but these people really do believe in bitcoin/blockchains.

The easiest person to fool is yourself.

If you haven't seen the need for an apolitical currency yet you probably never will. But maybe you're just all viewing this from the perspective of traditional speculators and haven't even considered it?

It's fascinating how strongly we believe that now == how things should be. Humans have been using gold as a currency for thousands of years, and yet nowadays everyone seems to believe that nothing but state-backed paper can work as such - and anyone who wants (as you said) an apolitical currency is just weird.

State-backed paper works so much better than gold-backed currency that it's difficult to find economists who advocate returning to the gold standard without being regarded by their colleagues as quacks.

Gold currency can hardly be described as apolitical. It has been a major political issue in every country that adopted it. Political issues have included debasement and forgery of coins, bimetallism, deflation vs inflation, the legality of citizens owning bullion, the exchange rate between gold-backed paper money and actual gold, ships sinking while carrying loads of gold, countries stockpiling and transferring large amounts of gold back and forth under the Bretton Woods system, etc.

Any "apolitical" system of currency will become political as soon as it is large enough for governments to take notice of it and start trying to regulate it. Any cryptocurrency that has disputes about governance or forking also has politics.

Everything you just listed here seems to have been solved by Bitcoin, including forking politics - which leaves the users in control (albeit with some political influence from lead devs) ultimately this appears to be a fair power distribution as it is economic nodes deciding the current consensus on the rules set - not miners. (For your list - no forgery, no metal debasement, no long term inflation and infinite divisibility, why shouldn't you be able to own real money? Why shouldn't market set exchange rates? No sinking ships, country stockpiling and transferring is all fair game but custody is easy for anybody to take an maintain.

I think by "apolitical," they are referring to Bitcoin's property of being censorship resistant, not claiming that politics do not apply to it at all. I prefer to call it a "people's currency."

I personally have no issue with someone wanting "apolitical currency" but it seems silly to chastise (not saying you're doing that here, seems closer to dancing close to that line but not going over) people for preferring the status quo. Why? If someone robs the bank that holds my money, it is insured and it is recovered. If a Mt. Gox happens with crypto, anything I have in it is gone. Also, there's some comfort in a stable currency (perhaps in the long run this would be achievable by a crypto-based currency but in its current iteration, I don't feel that to be true).

So grand scheme of things, yeah, there's pros and cons to both. Personally, I'd prefer the vast majority of my currency to be state-backed vs the alternative.

Regardless, I think the whole mining thing is consuming resources for consumption's sake so if the various coins that must be mined falter to the point that that behavior goes away, I'd be fine with this.

The problem is that people adopting Bitcoin activates at least two defensive behavior triggers in other people (1. devaluation of the fiat currencies they are holding, 2. jealousy towards early adopters getting rich for doing nothing).

As such, there are few people that are really neutral on cryptocurrencies and you get the kind of scam talk we see in this thread as popular consensus.

In me it triggers loss aversion: I don't want to put my money in a uninsured security that could be stolen or lost at any moment with no recourse.

Is the cash in your wallet insured? If stolen do you have recourse? Now you might tell me you have no cash for this very reason. That’s fair, but probably similar to the amount of money you should allocate.

Can the cash in my wallet be stolen by a script kiddie in China if my security measures aren't exactly perfect? Does it fluctuate in value up to 10% every day?

Yes my homeowner's insurance policy covers theft outside my home (although the amount of cash in my wallet is usually less than the annual deductible). If it's stolen and I can identify the thief then I do have recourse through the civil courts.

Personally, I don’t carry cash on me. The only time I use it (kid’s lunches, lottery tickets for office pool (I refuse to be left behind in the unlikely event they win, otherwise wouldn’t play), and spur of the moment things requiring cash/check), I either withdraw right before needing or the night before. I also don’t do checks, really.

I’ve been able to get by with card for the vast majority of things, so it works for me.

To me the key question is whether competitive organizations can form around incentive structures based on a decentralized currency. I think doubts and debate on that question are still reasonable.

That is indeed a great question. In general, I have found out that people are extremely inventive when there are profits to be made.

There's a big difference between thinking an apolitical currency might be a nice thing and thinking current crypto offerings are a viable example of one.

Regardless of their eventual use, bitcoin fluctuates a lot, so you shouldn't trust it if you need to have the same amount of money in a year.

Libertarian silliness isn't apolitical.

> If you haven't seen the need for an apolitical currency yet you probably never will.

I do see the need for such a currency.

But if this one of the principles crypto enthusiasts believe in, why I do see so little being done to make it a viable medium of exchange? Did everyone just caught up in the gold rush and put their focus on seeing just how much fiat they could get for their BTC?

In fact, in the past year I've seen less news about BTC and more about the hordes of offshoot alt-coins that appear to have been released for the sole purpose of separating speculators from their money.

> It took me a long time to realise, but these people really do believe in bitcoin/blockchains.

Best. Comment. Of. 2018.

Especially since "these people" include some ostensibly smart cookies.

I conjecture that these people were/are trying to elevate BC to the level of adtech (Google).

Perhaps we have averted another black hole for the greatest minds of a generation.

Cynically the time to sell it is after the IPO for even larger gains with less responsibility. Since if you are behind a ICO and then start to sell yourself it is a clear pump and dump. After a company becomes big enough for an Initial Public Offering however it allows for a clean getaway without liability. You often notice start ups selling out after the growth starts to decline whether they are right or wrong about it - which at least lends some honesty to the transaction.

If it goes bigger after the IPO they either missed out or gave it to more capable hands. If it goes kaput they either got out just in time or it got ran into the ground by the new guys.

> if you raise lets say 10million during an ico (typical amount raised 6m ago), there isnt much you can do with 20M (i.e you keep the crypto and it doubles) that you cant do with “just” 10M.

By that logic, why invest in anything ever?

There’s an unstated assumption that investing 10M in crypto offers high risk of losing it all. The utility of losing 10M is worse than the utility of gaining an additional 10M- and much moreso when weighted with common sense probabilities.

In most if not all cases the answer is: they can't. The price of crypto, especially that of the ICO era, is propped up by the same individuals that would most want to sell it. It's their HODLing of the coin that keeps it illiquid enough to allow them to drive the price up to the ico target and beyond. By casing out they'd be selling largely to themselves + the thin wisp of actual rubes they've duped into believing there's any substantial buy support under the listed market price.

If you do that people will think you're exiting and your company will tank massively.

True believers make terrible investment decisions.

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