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We've all heard it a hundred times: if you bought one Bitcoin for yourself for a December 2012 Christmas present, thinking, "Why not, the Mayan calendar ends and we are all going to die," you would have forked over a meaningless $13. And for that measly $13, your single Bitcoin would be worth around $8,000 today. That's just Bitcoin. What about all these other cryptocurrencies? How rich would you be today if you sunk $10,000 in one of these start-ups issuing new digital coins out of nowhere? There are literally hundreds of them. Coinmarketcap lists 1,510 to be exact. Most are tied to new tech start-ups issuing their own coins.
In 2013, a blockchain company focused on fintech called RippleNet did an initial coin offering (ICO) and sold their coin (XRP) at a discounted rate. It was worth less than half a penny. On January 4, at its peak, it was worth $3.65. Let's say you put $10,000 to work in XRP when it launched its ICO; you would be the proud owner of roughly two million ripples. If you forgot you even had those coins, and surely never had any use for them on their Ripple Network, a service only for financial institutions, you'd be happy to discover that your two million ripple was worth $7.3 million at their peak last month. Those coins are worth just $0.75 cents now, but your two million ripple is still valued at $1.5 million. You're a millionaire in cold hard cash in five years time. Good luck doing that in the stock market.
Whenever a mutual fund company wants to show the growth of an investment in their fund, the standard value they use is $10,000. No mutual fund can say they turned a $10,000 investment into $1.5 million in five years. Ripple did.
This week, Forbes put out its first-ever cryptocurrency billionaire list. Some became billionaires in less than five years. Most of that worth is on paper.
Changpeng Zao, best known by his initials, is not some plumber by day, day trader by night. He didn't just gamble a few grand on an unknown coin. CZ was one of the many computer geeks that built the high-frequency trading systems used by Wall Street investment firms. He took that know-how and built Binance, a cryptocurrency exchange. Speculators use Binance to trade 120 different coins a day, generating $200 million in profits for CZ's exchange last quarter. They did an ICO last summer. The BNB coin is a so-called utility token that gives holders a 50% discount on Binance trading fees. It now has a market cap of $840.8 million, according to Coinmarketcap. His stake in Binance and BNB coin holdings have made him a billionaire in less than two years. He is 41.
A $10,000 investment in BNB at ICO would have gotten you about 100,000 Binance coins. They were worth a dime back in July 2017. Today they sell for $8.49. You'd be roughly $150,000 short of being a millionaire in less than 12 months. Worth noting, those coins were worth over $20 just four weeks ago.
"It's not too late to make a fortune in ICOs," says Sheffield Clark, CEO of Coinsource. Coinsource actually owns Bitcoin ATM machines. They have 10 in Manhattan, including one at the Whitehall Terminal of the Staten Island Ferry where you can buy or sell Bitcoin. California has dozens of them, mostly in mini-marts and liquor stores.
Last year is when the ICO came into its own. Start-up companies use it instead of giving up equity to venture capital firms. They issue two types of cryptocurrencies in an ICO: a utility token — which acts like a discount coupon for the purchase of its goods or services — or a security token, which is sort of like buying shares. Utility tokens are the most common. Once issued, these coins are traded on cryptocurrency exchanges around the world.
"Some see it as the new magic funding elixir," says Clark. "But there are tons of examples of ICO projects that are inculcating positive change for a community, with the personal financial gain (of the founders) not really of major significance. These guys are tech geniuses...they want to build something that people will remember and use forever," he says. "People that have come up with brilliant ideas...will typically be rewarded."
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