The crypto space is in the midst of change as the institutional world entertains the idea of a new asset class and looks ahead for ways to gain exposure. As these markets evolve, there will be the development of new products to solve the needs of investors and speculators. The iterations of development so far have been BTC futures that have been limited in term structure and volume, a small amount of highly collateralized options and a few basket or index type funds.
So what can we look for in the development of cryptos as an asset class and which products will aid in the development. A forward contract on alt coins is the most likely progression which will help develop a new distinct asset class. These forwards, also called contract for difference or non delivered forwards, allow the investor, entrepreneurs and speculators the ability to fix a price in the future against the actual price at time of expiration. One would be buying or selling at a fixed price with the floating price to be determined at expiration with a cash or even physical (delivered) settlement on the difference. A forward contract is similar to a future with the main difference of being an over the counter rather than an exchange listed instrument.
So why is this important to the development of this asset? If we consider that some of these alt coins to be something akin to currencies or commodities, being able to lock in a price can alter the risk of a portfolio. Futures or forwards don't tell us what the price of something is in the future, but indicates what one is willing to transact in the any given time period. It gives the market a term structure which provides the ability to calculate the cost of carry and whether if it's positive or negative. This not only allows for risk mitigation but brings more liquidity to the market by allowing a broader group of investor or traders exposure while not having to worry about wallets. A forward curve would also facilitate lending which would also be a boost to the market's liquidity as traders would be able to take short positions.
I believe a forward market will be a tremendous lift to this burgeoning asset class allowing for a diversity of players in the market, while helping mitigate risk and providing liquidity. One thing any student of markets can tell you, where there is liquidity and volatility- there will be interest.
The Bill:
AMENDING SECTION 43-505, ARIZONA REVISED STATUTES; RELATING TO INCOME TAX PAYMENTS.
B. A TAXPAYER MAY PAY THEIR INCOME TAX LIABILITY USING A PAYMENT GATEWAY, SUCH AS BITCOIN, LITECOIN OR ANY OTHER CRYPTOCURRENCY RECOGNIZED BY THE DEPARTMENT, USING ELECTRONIC PEER-TO-PEER SYSTEMS. THE DEPARTMENT SHALL CONVERT CRYPTOCURRENCY PAYMENTS TO UNITED STATES DOLLARS AT THE PREVAILING RATE AFTER RECEIPT AND SHALL CREDIT THE TAXPAYER'S ACCOUNT WITH THE CONVERTED DOLLAR AMOUNT ACTUALLY RECEIVED LESS ANY FEES OR COSTS INCURRED BY THE DEPARTMENT FOR CONVERSION.
The Motivation:
Certainly Arizona recognizes the commercial aspect of blockchain and digital currencies and is looking to be in the forefront. Representative Jeff Weninger is quoted “Arizona is sending a signal to everyone in the United States and possibly throughout the world that Arizona is going to be the place to be for blockchain and digital currency technology in the future.”
The Impact to the Crypto Space:
The short term affect will be be negligible for bitcoin, however it is another bullish sign for the industry as a whole. It is worth noting that litecoin was singled out among other cryptocurrencies "recognized by the department". Litecoin, which is on the most visited sight Coinbase (along with Bitcoin,Ethereum and Bitcoin Cash), may see a short term lift because of it's price point especially if other states follow suit. The volume of transactions during tax season will certainly be worth noting but the bigger picture is that another government institution is recognizing this burgeoning asset class.
10 questions ICO investors should ask themselves.
So how do you know if an Initial Coin Offering (ICO) is a good investment? Using traditional methods of free cash analysis, the tools investment professionals use to evaluate IPOs, aren’t of much use. This is mainly because most ICOs aren’t fully formed businesses yet and most are still projects without a product. In many cases, you’re investing in an embryo of an idea. Therefore, there’s not much in the way of historical precedent to help you make a decision. On the other hand, the crowdfunding nature of ICOs presents ample opportunity for the investor who’s able to both spot a good idea and identify the likelihood of that idea coming to fruition. The ICO has allowed everyone to become venture capitalists. Until the ICO, the average investor only saw a good idea in the rearview mirror, once it was launched by VCs with deep pockets, and was taking the world by storm. So in order to better arm the ICO investor with the tools to evaluate an investment, here’s a list questions venture capitalists will usually ask themselves before considering getting behind a company:
1- Does the technology solve a problem?
2- If the solution relies on blockchain technology, does it NEED blockchain technology to be successful?
3- What sort of experience do the founders have?
4- Who’s on the advisory board? Do people you trust believe in the project?
5 - What is the total amount of tokens issued and how much of a float is there? How much are the owners keeping?
6- What is the competition for the same idea?
7- How big is the possible ecosystem that could be built, and if it’s a platform, what sort of businesses can be built on it?
8- How big is the community and how much support do they have on social networks?
9 - How many tokens are being held in reserve and for what purpose?
10- What kind of token is being issued and do you understand the economics of that token?
Oh, and one more thing- Caveat Emptor!
