Posted in Cryptos on December 31st, 2017
Recently the founder of litecoin, Charlie Lee, announced that he sold all of his litecoin. As expected, people reacted quickly – some defending his move with others questioning his move. At the time, litecoin’s price was performing well relative to its historical prices. Charlie Lee explained his reasoning on Twitter and while his explanation didn’t affect some people from venting. As far as his view, you can follow Charlie Lee on Twitter and assess his arguments on your own. We’ll start off by reminding our readers of two pertinent posts that we know most of you have not read (but should, even though you still won’t):
Along with our disclosure, these are required readings.
We’d like to point out an observation about any founder selling regardless of this particular situation: founders have every right to sell their entire holdings, though some people may look at this suspiciously. People have the right to be suspicious, just like founders have the right to sell. Also, how the founder sells may matter for some people and in some situations:
Some have made their thoughts on this matter clear; an example of an outspoken crypto-token advocate, Naval Ravikant:
“Fourteen tweets to deny the obvious. Every professional investor knows what a founder selling their entire stake means.” Source
In general, we defer to these experts, as they’re heavily followed and respected by the community, so if they express concerns, they’ve proven their concerns come from their own thoughts. You should consider these experts view and decide for yourself as to whether these have merit or not. Outside of crypto-experts, the popular YouTube icon Philip Defranco discussed Charlie Lee’s action and a few of the comments were interesting, just like some of the observations on social media.
We’re bound to see more questionable actions, such as the ones we saw with Zcash and its release. Litecoin provided Charlie a way in which he could liquidate his holdings without people knowing until he was ready to disclose his actions. Consider that Ned of SteemIt could not do this with his Ned account – everyone can see when he powers down that account (though he may have more accounts). For an example, at the time of this post, Ned has not powered down his Ned account and he currently holds 3,583,913 in Steem Power. This is somewhat ironic considering people claim that the blockchain technology opens the door to more accountability and litecoin, like bitcoin, uses blockchain as one of its technologies.
What we will state is that a founder may sell an entire stake and this risk is always present with any project. If you can’t stomach this risk at all, do not even consider one token in the cryptosphere. Not only can founders sell, they can choose to sell at any time without warning you of what they’re planning to do. You may be the last one holding the bag. If you approach the cryptosphere with an expectation that you’ve lost everything you’ve started with, I do not know why you are complaining about this behavior. What is becoming clear is that many people are treating the cryptosphere like it’s not an experiment and they are in for an ugly surprise.
From the founder’s perspective, a founder can choose to identify his address and state that he won’t buy or sell any token in addition to what he currently holds (in other words, the address amount is permanent unless hacked). Charlie could have done this. He chose a different route, which some may find acceptable. In the above case with Ned, at least with his Ned account, we can see what Ned is doing – this is a feature of SteemIt. Unfortunately, we cannot see this with litecoin, unless we had been told of Charlie’s addresses ahead of time. Even then, founders can have more addresses than they admit. This is a ubiquitous risk in the cryptosphere.
Finally, there is some irony in criticisms of crypto-projects pumping their project’s prices before an announcement and then dumping the token after the announcement (generally, founders are criticized here, but why only founders?). Without calling anyone specific out, it’s ironic that this criticism is made, but then Charlie Lee is criticized by some making this complaint. Pick the problem – either the problem is founders pumping-and-dumping before and after announcements, or the problem is founders without any buy-in for their projects’ futures. As long as you’re investing in other people’s ideas, this will be true. Even if a founder didn’t own a project token, before an announcement, the founder could buy tokens, then sell.
At this time, it does not matter as the entire cryptosphere is in a bubble. Bubbles always pop, even if the bubble takes time to pop. There is an incredibly high probability that the price of litecoin goes much lower than when Charlie sold his stash in the same manner that there’s a high probability that litecoin drops lower than its current price. Be warned: our price predictions tend to be very accurate, even if some think they’re wrong at the time. Bulls make money and bears make money, but pigs get slaughtered.
The following article covers a token or element in the cryptosphere. The cryptosphere is new and exciting, but changes rapidly and often in ways that do not benefit users. By the time this article is published, changes may have already occurred. Most tokens in the cryptosphere are complete scams that are get-rich-quick-schemes for insiders. Often, we cannot know this beforehand and only later discover this. A person should only trade with money that they’re willing to lose because losses are guaranteed. If you choose to participate in purchasing a token in the cryptosphere, you should do so with the full expectation of a loss and you should also expect it to change in a manner that does not benefit you.There are very few good ideas in the cryptosphere. Finally, by reading this post, you agree that you’ve read our disclosure. This article reflects the opinions of the author and is for entertainment purposes only. It is not intended to be investment advice and FinTekNeeks are not registered investment advisers. Please consult a professional financial adviser when investing.