Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Feb 09, 2021
SEC Issues Crypto-Warning: Here’s What You Need to Know

SEC Issues Crypto-Warning: Here’s What You Need to Know

The Chairman of the Securities and Exchange Commission, Jay Clayton, made a public statement on the SEC’s website that leveled some cautionary words for the cryptocurrency markets. His warnings mainly focused on initial coin offerings (ICOs) and “tales of fortunes” that are luring investors into the market, with his concern particularly on those who cannot necessarily afford to take speculative risks.

Mr. Clayton balanced some of his warnings with concessions that the technology driving cryptocurrencies could someday be very valuable to the world. Indeed, there is no denying that blockchain technology could revolutionize the way businesses and governments operate. But that does not guarantee that all investors will profit proportionately, and in fact just the opposite could be true. Mr. Clayton warns that cryptocurrency investors would be wise to expect a wild ride.

 

 

There were two main warnings Clayton issued when it comes to cryptocurrencies.

First, while there are cryptocurrencies that do not appear to be securities, simply calling something a “currency” or a currency-based product does not make it a security.  Before launching a cryptocurrency or a product with value tied to cryptocurrency, its promoters must either (1) demonstrate that the currency or product is not a security or (2) comply with applicable registration and other requirements under the SEC’s securities laws.

Second, brokers, dealers and other market participants who allow for payments in cryptocurrencies; allow customers to purchase cryptocurrencies on margin; or who use cryptocurrencies to facilitate securities transactions should exercise particular caution, including ensuring that their cryptocurrency activities are not undermining their anti-money laundering and ‘know-your-customer’ obligations. The SEC insists that vendors/merchants/businesses treat cryptocurrency as if it were cash being handed from one party to the other.

Finally, there is a matter of cryptocurrency exchanges and where a person is transacting business. Mr. Clayton sought to remind investors that these markets sand exchanges span national borders and have trading that may occur on systems and platforms outside the United States. That means that a person’s invested funds may quickly travel overseas unbeknownst to the investor, which in and of itself can amplify risk. It also means that the SEC may not be able to effectively pursue bad actors or recover funds.

The SEC also has not to date approved any exchange-traded products (such as ETFs) for listing and trading holding cryptocurrencies or other assets related to cryptocurrencies. In Mr. Clayton’s own words: “If any person today tells you otherwise, be especially wary”. 

 

 

A Cautious View of ICOs

Mr. Clayton makes it clear that while ICOs could be wonderful mechanisms for entrepreneurs and new companies to raise funding, they must also be analyzed and considered with caution. What investors must understand is that, to date, no initial coin offerings have been registered with the SEC.

Certain ICO sellers have attempted to highlight ‘utility’ characteristics of their proposed initial coin offerings, in an effort to claim that their proposed tokens or coins are not securities. But Mr. Clayton warns that these assertions appear to elevate form over substance. “Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security,” he says. That means that investors should treat tokens as they would securities, where securities lawyers, accountants, and consultants, need to offer process and disclosure requirements for the sake investor protection.

Mr. Clayton also cautions market participants against promoting or touting the offer and sale of coins, without first determining whether the securities laws apply to those actions. Since selling securities generally requires a license, and experience shows that excessive selling of a security in a thinly traded and volatile market can be an indicator of “scalping,” “pump and dump” and other manipulations and frauds, investors and issuers should be aware that they may be operating unregistered exchanges or broker-dealers that are in violation of the Securities Exchange Act of 1934.

The SEC’s Bottom Line

Investors need to note that there is substantially less investor protection than in the SEC’s traditional securities markets, with correspondingly greater opportunities for fraud and manipulation. For investors interested in investing in cryptocurrency markets, Mr. Clayton says it is critical to ask questions and demand clear answers.

Mr. Clayton’s strongest words, which investors should remember not only about cryptocurrency but any security that bears risk: “As with any other type of potential investment, if a promoter guarantee returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost”.

Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 07, 2021
4 Tricks Hedge Funds Use to Get Ahead

4 Tricks Hedge Funds Use to Get Ahead

If the stock market were Major League Baseball, hedge funds and institutional investors would be the pros on championship teams while everyday self-directed investors (SDIs) are the benchwarmers in the minors.It’s how they get ahead, and it’s why 90% of SDIs lose money trying to play (invest and trade) in the major leagues. The 4 tricks we discuss below are rooted in one common theme: they all use Artificial Intelligence and algorithms to generate data and ideas.
John Jacques's Avatar
John Jacques
published in Blogs
Mar 22, 2018
A.I. Stock Market Predictions: Head & Shoulders

A.I. Stock Market Predictions: Head & Shoulders

Statistics for the Head-and-Shoulders Bottom Pattern The days where only hedge funds used algorithms to trade stocks are officially over. Now retail investors can use Artificial Intelligence (A.I.  Here’s an example of the algorithm in action: Late last year, Tickeron’s A.I.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Jul 10, 2020
3 Stocks to Buy if Coronavirus Second Wave Hits

3 Stocks to Buy if Coronavirus Second Wave Hits

By analyzing market trends from the first wave, you can predict behavior for the second. Technology stocks have performed at historic levels this year, but the market is severely overbought.To compensate for that, look at performance during Q1 and Q2, the height of global Covid shutdowns.
Edward Flores's Avatar
Edward Flores
published in Blogs
Feb 06, 2021
How to Become the Millionaire Next Door

How to Become the Millionaire Next Door

The Golden Gate Bridge is always a fixture of these walks too, one of man's most beautiful creations.  As we were walking, at one point she turned to me and said, "Man, I'll never have a million dollars."" My girlfriend is 27 years old and works as a graphic designer, making about $75,000 a year.
Alla Petriaieva's Avatar
Alla Petriaieva
published in Blogs
Feb 23, 2021
Is Ethereum’s Bomb about to Explode?

Is Ethereum’s Bomb about to Explode?

Ethereum’s software is set for an update in October.Until it is finished, participants in the Ethereum blockchain must determine how to delay the difficulty bomb – code that necessitates a steadily increasing amount of computer power to mine blocks and unlock rewards – that is already in place.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Aug 07, 2018
When Is the Next Recession Coming?

When Is the Next Recession Coming?

However, we also know that economists predicted 22 recessions out of 11 that took place since 1945. Are there real recession signs we should watch for?Indeed, the answer is yes, and here are a few very important ones: The first one is almost obvious and known to everyone – it is the Fed.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 22, 2020
Central banks have been buying $2.4 billion in assets every hour for the past two months

Central banks have been buying $2.4 billion in assets every hour for the past two months

Some $17.8 billion has been poured into  bond markets over the past week, the biggest move in more than three months.Around $3.5 billion has been invested into gold, the second largest on record. 
Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Feb 07, 2021
Mid-January Short Interest Report Shows 8 Stocks with Good Fundamentals and High Short Interest
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 10, 2021
How to Start Trading Penny Stocks

How to Start Trading Penny Stocks

Penny stocks have long been marginalized within the professional investment community, oftentimes being painted with a broad brush of simply being “too risky.” Leonardo DiCaprio’s depiction of the penny stock peddling conman, Jordan Belfort, in the Wolf of Wall Street certainly didn’t help.Here are four reasons to start trading them now. Reason #1: Let’s State the Obvious -- Penny Stocks are Cheap A single share of Apple Inc. costs over $350.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 08, 2020
US unemployment rate jumps to 14.7%, the highest in series history

US unemployment rate jumps to 14.7%, the highest in series history

The U.S. economy’s employment fell by -20.5 million in April. The coronavirus crisis led to unemployment rate soaring to 14.7% in the U.S, the highest rate in the Bureau of Labor Statistics-tracked series history that goes back to 1948. However, the figures were better compared to several economists'/analysts' forecasts of 22 million job losses and 16% unemployment rate.  Another unemployment measure that includes those who have stopped looking for work as well as those holding part-time jobs for economic reasons also touched an all-time high of 22.8%.