Monday, April 8, 2019

Dapp's gambling success (failure)

April 8, 2019	View in browser

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Today's top reads

Dapp's gambling success (failure)
Smart money is still short
Finally a framework
Bitcoin searches peak

This week's poll: Do you support ASIC miners? Or are you against them?
Click to answer: Yes, I support ASIC miners No, I don't support ASIC miners

Market update

COIN	PRICE	7-DAY
BTC	$5,238.05	+ 26.15%
ETH	$179.12	+ 25.79%
XRP	$0.358	+ 13.93%
BCH	$311.11	+ 81.98%
LTC	$88.73	+ 45.48%

1. Dapp's gambling success (failure)

Dapps are sweeping up gamblers. Just last week, a study concluded that out of all decentralized app (Dapp) activity on the TRON blockchain, 64% can be attributed to gambling. That comes out to over $1.6 billion in gambling in the first quarter of 2019.

And TRON isn't alone. Other smart contract platforms such as EOS and Ethereum are also plagued by the gambling problem (as evident by the lists of most active dapps). So why haven't dapps taken off for other use cases?

One Reddit user summed it up well:

User experience is worse than existing apps
Barrier to entry is higher (exchanging for tokens)
Dapps are not developed enough to match the functionality of centralized apps
The benefits offered by decentralization are not sufficiently outlined

And that's before we start talking about scaling issues or the private key management issues that are hindering the industry.

And it's evident. Even the company that raised $15 million from a handful of impressive investors to build CryptoKitties has lost traction with only around 200 to 400 daily active users.

But remember, it's early: Though users will primarily come to dapps for money (a.k.a. gambling) right now, that doesn't mean other use cases have been ruled out just yet. We just have a long way to go.

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2. Smart money is still short

Bitcoin's rally has been a sigh of relief for bulls but who is behind it? According to a report from Forbes, it's not the "smart money."

Forbes' assumption stems from a report released by the Commodity Futures Trading Commission that summarizes the open futures trading positions every week.

In that report, Forbes calculated that compared to last week, large traders including hedge funds and other big speculators, raised their short positions by almost 45% - a sizable shift in sentiment.

On the flipside, small speculators (a.k.a. Forbes' "dumb money" population) shrunk their short positions by 27% and increased their longs by 18% last week.

In the words of Forbes' contributor Brendan Coffey:

"Taken altogether, it's a sizable bearish step this week. It's a tried-and-true rule in futures that the big traders are right well more than they're wrong, while the "small specs" have a terrible tendency to be betting the wrong way. If you're a Bitcoin bull, you were hoping this week's COT would confirm the cash market rally's bullish sentiment. It doesn't."

In a nutshell: A pullback may be imminent with "smart money" players flipping sides this last week.

3. Finally a framework

Almost half a year later, the U.S. Securities and Exchange Commission (SEC) has released its long-awaited token issuer guidance.

It's the hero new ICOs need. Prior to this, the SEC was quite wishy-washy in its approach to classifying ICOs as securities. With this new "plain English" approach, regulators are hoping to help newcomers determine if their token offering qualifies as a securities sale - before regulator intervention.

The framework follows the Howey test. In a nutshell, the new guidance dives deeper on the 1946 SEC v. W.J. Howey Co. court case that set the foundation for classifying securities sales.

The Howey test has four parts:

It is an investment of money
There is an expectation of profits from the investment
The investment of money is in a common enterprise
Any profit comes from the efforts of a promoter or third party

But what about the retroactive evaluations? Well since the SEC is eyeing many ICO sales that already happened, they have introduced new set of criteria to determine a reevaluation of the project.

Reevaluation criteria is:

The tokens can be used for some function
A token has a specific use case rather than being simply speculative
"Prospects for appreciation" in the token's price is limited
A token billed as a currency actually operates as a store of value

The takeaway: The SEC's long-awaited release could be a pillar document for ICO token issuers who have either 1) held off on the ICO for regulatory reasons or 2) held off on moving forward after the ICO for fear of a clamp down.

4. Bitcoin searches peak

Bitcoin's recent break above $5,000 has had the curious, well...curious again. That's because on April 3rd, Google Trends recorded an explosion in search interest for "bitcoin" that would bring the keyword to search levels not seen since November 20th - the date Bitcoin's price free fell to the lower $4,000's from its tight, three-month trading range.

What does it mean? Well, Bitcoin's price is a tightly-correlated, lagging indicator with its Google searches. It works like this:

Bitcoin price gain
More media attention
A new pool of curious Googlers

But who cares about this? Traders. That's because Google search trends could help to decide whether the digital asset is overbought or oversold.

According to trader Willy Woo, when searches for "BTC/USD" reach a high level, it means Bitcoiners are in "party mode" as they check the price frequently - a common sign of an impending Bitcoin bubble pop. On the opposite end, when search engagement is low, buyers should be cash-ready.

Bottom line: Bitcoin's recent green streak has filled up Google's search engine. Does that mean we are in "party mode?"

5. You should also know

Ripple co-founder and executive chairman Chris Larsen has donated $25 million in XRP to San Francisco State University.
General Motors has published a patent that details a process that would help self-driving cars secure data on a distributed ledger.
A drug ring leader instructed distributors how to purchase bitcoin to keep all payments pseudonymous.

6. Lighting the way

From last week's poll, 25% of respondents answered that they have sent a lightning network payment.

Did you know? Over the last year, the lightning network's capacity has grown more than 65 times to over $5.5 million.

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