When the tZERO’s $250 million crypto security token offering closes on August 6, 2018, it will become the de facto leader of the global crypto infrastructure industry.  The price of its tokens will multiply in 2019. The share price of Overstock.com (OSTK), who owns 80% of its shares will multiply by 2021. Investors should aggressively purchase the tZERO token now at $10.00 per token since after August 6, 2018, they will no longer be available.  Overstock.com shares should be core position in every investor’s portfolio.

The massive upside that tZERO token holders and Overstock.com shareholders will soon have is not a function of luck.  This is because Overstock.com and tZERO had the vision to anticipate the need for regulated crypto infrastructure. tZERO began in October 2017 to build an alternative trading system (ATS) that is dedicated to crypto security tokens.  The following are my predictions for tZERO:

• The tZERO Preferred Equity token will be recognized as “The Bitcoin” of crypto security tokens by 2019.     
• tZERO, Inc. will become “The NYSE” for the trading of crypto security tokens.   
• The company will be recognized as a unicorn company and valued for more than $1 billion within 12 months.  
• The price of a token will increase from $10 to a minimum of $100 in 2019.  
• By 2025, the aggregate value of tZERO and its outstanding tokens will be $50 billion and by 2030, $100 billion.

My predictions are based on the following:

1. tZERO is first mover:  tZERO is a first mover in crypto infrastructure which will become the world’s biggest digital industry by 2030.  For more about first movers view video about them at the bottom of report.
2. Crypto security tokens:  The aggregate market cap of crypto security tokens will be substantially higher than the aggregate market cap of the cryptocurrencies by 2020.   More than 90% of the 1,300 initial coin offerings (ICOs) from inception through the end of 2017 were actually, “crypto security tokens in disguise”.  In August or September, tZERO will be the first and only regulated exchange wherein all these crypto security tokens can be legally traded.US based Coinbase is considered to be the leading US cryptocurrencies exchange.  However, it does not have a license to transact crypto security tokens and it supports only four of the existing cryptocurrencies.  tZERO does not plan to support cryptocurrencies.
3. Existing ecosystem antiquated:  The aggregate market cap of crypto token security will exceed the aggregate market cap of all global equities by 2030.  Blockchain will replace the antiquated ecosystem of paper shares and transfer agents, a system which has been in place since the beginning of time.
4. Desperate need for crypto infrastructure: The crypto community desperately needs regulated infrastructure.  From 2009 through 2016, crypto was able to capture innovators. This accomplishment met the first requirement for any new product or technology to gain acceptance vis-à-vis the product adoption cycle.  See chart below.  In 2017, crypto began to gain acceptance with early adopters.  However, the acceptance has now reached a chasm. This challenge was caused by the need for regulation born of crypto fraud and hacking of the unregulated crypto exchanges.  With tZERO’s ATS becoming operational subsequent to the close of its token offering, crypto will cross the chasm. tZERO will put crypto and blockchain back on the path to become ubiquitous.  It is recommended that you watch the video found at the end of this report entitled, “Crypto’s Wild West”.  Read my report entitled, “Cryptocurrency Community In Desperate Need Of Regulated Infrastructure”.  

• Secular Bear market on horizon:  Both the economic expansion and secular bull market which began in 2009 are long in the tooth.  Equities, by most standards, are near their highest relative valuations.  The likely outcome will be a minimum decline of 50% and an eight to fifteen-year secular bear market.  For more information about secular bull and bear markets go to www.bullsnbears.com.  During a long secular bear market the public will become increasingly frustrated with stocks.  Crypto security tokens will become the preference for investors to invest in emerging growth companies and technologies.   Additionally, by the time the secular bear market ends, presumably around 2030, crypto security tokens will be the preference for investors looking to invest in dividend paying companies.
• Crypto infrastructure larger than brick and mortar:  The aggregate value of world’s existing infrastructure providers for the financial markets ecosystem depicted in the table below was most recently $605.7 billion.  My prediction is the aggregate value of the crypto infrastructure providers will exceed the brick and mortar providers by 2025. The erosion of the aggregate value for the existing financial markets infrastructure providers will happen similarly to erosion of the value of the world’s transportation industry which was caused by UBER, etc.  Eventually, those existing brick and mortar financial markets’ infrastructure providers who do not transform to the crypto and blockchain will cease to exist. Since tZERO is the leader of the crypto infrastructure industry, the aggregate valuation of it and its tokens should be at least $100 billion by 2025.

The key questions are:  what will the valuation be for tZERO, Inc., and what will be the price of its security token.  According to tZERO’s token offering prospectus, it’s going to pay its token holders 10% of its adjusted gross revenue.  To determine the effect of the 10% payment on tZERO, I examined the financial statements for the Intercontinental Exchange.  The Intercontinental Exchange (ICE) is the owner of the NYSE, the world’s largest stock-exchange. ICE is the ideal comparison for tZERO since it includes adjusted revenue in its Financial Statements.  For 2017, ICE also paid a dividend which represented approximately 10% of its adjusted gross revenue. The first table below depicts the net post dividend payments profits for ICE in 2017. The second table is an example of what tZERO’s net post token payments profits would be assuming that its generates revenue comparable to ICE.

Should tZERO, in the future, produce revenue that is comparable to ICE’s 2017 revenue; its valuation could potentially be equivalent to ICE’s most recent market valuation of $44 Billion.  Additionally, the argument could be made that tZERO would fetch a higher relative valuation than ICE. Given tZERO utilizes blockchain, it should be much more profitable than ICE.

Here are the reasons why tZERO, Inc., will be valued for $1 billion by 2019, and for $10 billion by 2021:

• First mover advantage:  tZERO has a solid first mover advantage becoming the world’s largest token security exchange.   Watch the video at end of this report entitled, “Why companies qualifying as a “First Mover” have the potential to get to $1 billion valuations almost instantly”.  

• 1,000+ crypto security token issuers:   There are more than 1,000 crypto security that have been issued which presently do not have an SEC approved exchange or platform to trade on.  All of these orphaned security tokens need a regulated ATS or exchange to affiliate with quickly. To put this into perspective, the NYSE presently has 2800 listings.

• Significant paid in equity capital:  tZERO, by August 6, 2018, will have between $250 million and $300 million of paid in equity capital.   Given the capital along with the huge and immediate need to be filled, tZERO very quickly will rank among the fastest growing companies in the world.   

What gets interesting is the potential pricing for tZERO token.  The tokens will receive income that is equivalent to 1/10th of tZERO’s gross revenue.  With the prospects for tZERO to grow in excess of 100% annually for the foreseeable future, I predict that when tZERO reaches scale, its tokens will trade at 100 times or more relative to their annual payments.  The security token payments have a huge advantage over dividends. They are not subject to double taxation since they are not paid from a corporation’s net income. Based on ICE’s current dividend yield of 1.3%, it shares are trading at more than 71 times its dividend payment.   

The next question is what will the tokens be valued for until tZERO makes the first payments?  My prediction is that aggregate valuation of the tokens should be at $1 billion by 2019 and $10 billion by 2021.  With between 30 million and 35 million tokens outstanding tZERO tokens which are available for purchase until August 6, 2018, could potentially be valued for between $285 and $330 by 2021.

Since Overstock.com is the 80% owner of tZERO, its valuation will increase to a valuation that is relevant to tZERO’s.  Based on its current shares outstanding, Overstock.com shares could potentially be above $300; equivalent to an eight-fold increase from their most recent price of $38 by 2021.

Finally, the tZERO Preferred equity token and its offering will soon be recognized as the textbook case for utilizing crypto security tokens to raise capital.  The revenue sharing tokens provide corporations and investors with significant advantages over the antiquated shares which pay doubly taxed dividends.

View video below: “Crypto’s Wild West” (4 min 10 sec)

View video below: “Why companies qualifying as a “First Mover” have the potential to get to $1 billion valuations almost instantly” (3 min 52 sec)

Based on a new development, I am reiterating my recommendation to purchase StartEngine’s shares.   The shares were originally recommended in November of 2017. StartEngine’s shares should now be purchased aggressively for two reasons:

• Has emerged as a first mover provider of the regulated infrastructure that is desperately needed by the cryptocurrency community.   

• Only $225,000 remaining available from its $5 million Regulation A+ offering which has been underway since October 2017.

From my researching the issues that the cryptocurrency community is now facing, I discovered that there is a huge need for regulated infrastructure providers.  Because of scams and illicit activities including price manipulation the governments of the world are now cracking down on cryptocurrencies and the crypto exchanges.   All of the crypto exchanges domiciled in the US or conducting transactions for US citizens are operating illegally. The shuttering of exchanges has reduced the liquidity and the prices for all cryptocurrencies throughout 2018.  

The issues that the crypto community is facing due to the complete void of regulated infrastructure to prevent fraud and manipulation are very serious.   To understand why I recommend that you watch CNBC’s June 6th interview of the SEC’s Director of crypto which is entitled “Here’s what the SEC’s Trading and Markets Division Director had to say about the crypto market”.   My recommendation is that my article “Crypto Desperately Needs Regulated Infrastructure Providers” dated June 7, 2018 be read or Trophy Investing’s 4-minute “Crypto’s Wild West” video be viewed.  Both the video and article explain why those who become the providers of crypto’s infrastructure and their shareholders are going to make a fortune.

A good analogy for crypto was the striking of gold in California in 1849.   It resulted in 15% of the US population traveling to California to mine for gold.  Now imagine that there were no picks and shovels for the miners to buy when they arrived.  Crypto has this dilemma since it has been able to grow exponentially without any regulated providers.    

Infrastructure providers operating under government rules and regulations would reduce cryptocurrency scams and increase liquidity.  The regulated infrastructure providers that are needed to emerge as soon as possible are similar to the providers of the infrastructure for the world’s publicly traded stock and bond markets.   They are as follows:

• Exchanges which are in compliance with US’ Securities Exchange Act of 1934 are needed to list and make markets in all of the cryptocurrencies.  There is presently not one crypto exchange that lists all of the 1,325 cryptocurrencies.  The “NYSE” of crypto must emerge. The term “crypto exchange” is a misnomer.  The more than 200 existing crypto exchanges operate similarly to an unlicensed broker dealer.          

• Investment banks which are in compliance with the US’s Securities & Exchange Commission’s regulations to raise capital for initial coin offerings (ICOs) and secondary coin offerings.  The “Goldman Sachs” of crypto must emerge.

• Licensed brokers and, more specifically, online brokers are needed to introduce the cryptocurrency asset class to investors.  The clients of the brokers will provide the capital for the ICOs and secondary offerings that are launched by the crypto investment banks.  The clients will also provide the secondary market liquidity for the crypto currencies which are listed on the regulated crypto exchanges. The “Ameritrade” of crypto must emerge.

The table below depicts the valuations for the existing global ecosystem for the public markets consisting of exchanges, investment banks and online brokers.  The companies who emerge provides crypto’s infrastructure and their investors could potentially make a fortune.

StartEngine which has been a SEC regulated funding platform for the last several years is in the position to become the “Goldman Sachs” of crypto.  The company has leveraged its position as the second largest US regulated crowdfunding platform to become the dominant funding platform (investment bank) for cryptocurrency issuers.  StartEngine accounts for 20 of the 26 Regulation CF coin and token offerings that are now listed on US Regulated CF platforms. It also has two cryptocurrency exchanges, tZERO and the Miami Crypto Exchange which are listed on its platform.   The two are raising an aggregate of more than $100 million under Regulation 506C.

With StartEngine’s emergence as a first mover in the cryptocurrency investment banking/funding platform space the probability has increased considerably that its valuation will reach $1 billion by 2020.  That happens and its share price could potentially multiply by 14 times and from $5.00 to over $70.00.

My November 17, 2017 articles entitled “StartEngine’s New Secondary Market Extremely Disruptive to Capital Markets” and “Shares of StartEngine Poised to Multiply in 2018”, explained why StartEngine had significant upside as an investment opportunity.  StartEngine at the time was only listing equity offerings on its platform. With its becoming the leading cryptocurrency investment bank StartEngine’s shares are even more desirable.  The 5 minute, 37 second video below which was produced in November 2017 and prior to StartEngine’s becoming involved with cryptocurrencies is highly recommended.

The last and probably the most important reason to aggressively purchase shares at $5.00 from StartEngine’s ongoing offering is because the shares are not restricted and thus can be immediately listed and sold for a profit.  Since StartEngine is becoming visible as a key cryptocurrency infrastructure provider the probability is high that the demand and price for its shares will increase will increase significantly by the end of 2018. Also, due to StartEngine’s first mover crypto position and the cryptocurrency community being in desperate need of regulated infrastructure, the probability is very high that it will attract savvy and also strategic investors who will be amiable to invest an amount much larger than $5 million in the company.   When that happens the shares that are currently available through StartEngine’s current offering at $5.00 shares will become very liquid and at much higher prices.

Finally, StartEngine recently released its preliminary financials for its first quarter ended March 31, 2018.   It reported revenue of $850,000 which was 70% higher than its annualized revenue for 2017.   

Information on how to purchase a minimum of 100 shares of StartEngine @$5.00 is available at www.TrophyInvesting.com.  Trophy Investing is a member-based investing community that excels at identifying startups and early stage investment opportunities for its members which have the potential to multiply in five years or less.

The global cryptocurrency community is now in desperate need of regulated infrastructure.  Cryptocurrency scams and illicit activities have provoked the ire of the world’s governments.  The US’ Securities & Exchange Commission has recently become aggressive in cracking down on illegal crypto currencies and illegal exchanges.  Video entitled “Here’s what the SEC’s Trading and Markets Division Director had to say about the crypto market”, CNBC, June 6, 2018, is highly recommended.     

As of the end of 2017, the growth of cryptocurrencies had rivaled the exponential growth rates for the web’s 1995 to 2000 period.  Bitcoin’s successes (noted below) had enabled it to burn its brand and also cryptocurrencies as an asset class into the minds of consumers:

• Price of a Bitcoin went from $.008 in May 2010 to its all-time high of $19,783.06 in December 2017

• Futures contracts for Bitcoin began to trade on a regulated exchange in December 2017

• Bitcoin became a viable alternative to fiat currencies as seen with the growing availability of Bitcoin ATMs (see chart)

Nine years after Bitcoin was launched in 2009, cryptocurrencies went viral in 2017.  The aggregate market capitalizations of all cryptocurrencies increased exponentially from $18 billion to $600 billion.

As of the end of 2017, the cryptocurrency community had grown to 193 cryptocurrency exchanges and 1,325 crypto currencies. Coinbase, the US’ largest crypto exchange had more clients than Charles Schwab and predicted that based on its user growth rate of 2.38% per day that it would have 187 million clients by 2020.

Unfortunately for the crypto user community; along with the sensational growth in cryptocurrencies, came fraud.   In early 2018, Vietnam banned cryptocurrencies after its citizens were scammed for $660 million. See “Unpacking the 5 Biggest Cryptocurrency Scams”, CoinTelegraph.com, April 18, 2018.  The US recently began an investigation into the illegal price manipulation of cryptocurrencies.  See “US Justice Department reportedly opens criminal investigation into bitcoin price manipulation”, CNBC, May 24, 2018.   

The world’s governments and the US’ Securities & Exchange Commission (SEC) have become increasingly concerned about cryptocurrencies.  The world’s economic leaders who attended a G-20 Summit in April 2018, concluded that the regulating of cryptocurrencies by governments was long overdue.  See “World Governments Target Summer 2018 To Regulate Cryptocurrencies”, TheMerkle.com May 9, 2018.  See also, “Cryptocurrency Regulation: New Laws, Big Changes Coming”, LiveTradingNews.com, May 12, 2018.  

Governments have also been cracking down on the crypto exchanges.  None in the US are operating legally. Those who are operating outside of the US and are conducting transactions for US citizens are also operating illegally.  Coinbase, the largest US cryptocurrency exchange, is in danger of being shut down since it is operating without a license. Since the SEC charged a former bitcoin exchange and its founder in February 2018 with fraud, more and more crypto exchanges have voluntarily shuttered.  The countries listed below have shut down cryptocurrency exchanges over the last 12 months:

Switzerland

Bulgaria

China

Vietnam

Japan

Venezuela

Romania

South Korea

United States.   

The shuttering of exchanges has had and continues to have a lasting negative impact on cryptocurrencies’ liquidity and prices.  See Ethereum and bitcoin plummet as South Korea decides on shutdown, Express January 16, 2018.  See also “Bitcoin falls by 10 percent after regulators signal crackdown on exchanges”, Arstechnica.com, March 7, 2018.

While many in the cryptocurrency community are reluctant to admit it, cryptocurrencies and their holders are in desperate need of regulated infrastructure.  The cryptocurrency movement is at a crossroads. Cryptocurrencies gained acceptance with innovators and then gained a foothold with the early adopters in 2017.  According to the new technologies and products acceptance chart below, cryptocurrencies must gain additional traction with the early adopters before they can cross the chasm to gain mass market acceptance.  To cross the chasm, this will require that regulated crypto infrastructure providers emerge to provide the liquidity for cryptocurrencies as well as the safety for buyers and sellers to enter into transactions.

Each of the world’s cryptocurrencies is going to be regulated.  All existing and future cryptocurrencies are members of one of the following two groups: 

• Currencies
• Securities

In the United States, there are two regulatory bodies which regulate currencies and securities.  Currencies are regulated by the Commodities Futures Trading Commission (CFTC).  Securities are regulated by the Securities & Exchange Commission (SEC).  Based on my preliminary analysis, my rough guess is that 90% of the existing cryptocurrencies are securities and 10% are currencies.              

Many have been anxiously awaiting the SEC’s establishment of a specific set of new rules and regulations for the issuance and trading of cryptocurrencies.  Based on interviews the Chairman of the SEC gave to Bloomberg and CNBC, there will be no new rules for crypto. Instead, the SEC will continue to rely on the rules and regulations of Securities Acts of 1933 and 1934 to regulate crypto.   

The regulations for the issuance and the trading of cryptocurrencies are the same as the regulations which pertain to the issuances and trading of publicly held stocks and bonds.  Therefore, the three primary and fundamental categories of regulated infrastructure providers that are needed to support the ecosystem of the cryptocurrency community are as follows:

Exchanges

• Exchanges which are in compliance with US’ Securities Exchange Act of 1934 are needed to list and make markets in all of the crypto currencies.  There is presently not one crypto exchange that lists all of the 1,325 cryptocurrencies.  The “NYSE” of crypto must emerge. The term “crypto exchange” is a misnomer.  The more than 200 existing crypto exchanges operate similarly to an unlicensed broker dealer.          

Investment Banks

• Investment banks which are in compliance with the US’s Securities & Exchange Commission’s regulations to raise capital for initial coin offerings (ICOs) and secondary coin offerings.  The “Goldman Sachs” of crypto must emerge.

Brokers

• Licensed brokers and, more specifically, online brokers are needed to introduce the cryptocurrency asset class to investors.  The clients of the brokers will provide the capital for the ICOs and secondary offerings that are launched by the crypto investment banks.  The clients will also provide the secondary market liquidity for the crypto currencies which are listed on the regulated crypto exchanges. The “Ameritrade” of crypto must emerge.

Similar to a security the life cycle of a cryptocurrency begins with the:

• investment bankers structuring the ICOs

• clients of the online brokers purchasing the offerings

• exchanges listing the cryptocurrencies and conducting the market making activities to provide liquidity  

The table below depicts the valuations for the existing global ecosystem for the public markets consisting of exchanges, investment banks and online brokers.

While some including, Warren Buffet, believe that cryptocurrencies will go away; they are here to stay for the following reasons:

a) More efficient than current system

The system for the issuing, tracking and transferring paper securities which has been in place from the very beginning is archaic, costly and more susceptible to fraud.

b) Safer way to speculate

Due to Dodd Frank the risk for the trading of speculative securities has increased exponentially.  See my article ​“Dodd Frank: Boon for Large Caps, Bust for Micro-caps” Equities.com, December 12, 2017.  Cryptocurrencies will eventually replace shares for all speculative investment opportunities since they will eliminate naked shorting, etc.

c) Bitcoin futures now traded on CFTC regulated Chicago Mercantile Exchange

This has resulted in institutions being able to invest, in turn legitimizing cryptocurrencies as an asset class.  

As soon as the regulated infrastructure emerges to support the ecosystem for the crypto community, the adoption of cryptocurrencies by the masses will resume its growth.  The chart below illustrates that, for its first five years, the growth of crypto’s users has been comparable to the web’s user growth for the similar period of its evolution.

This chart below which depicts the web’s growth from 1990 through 2017 illustrates just how big the potential for the cryptocurrency user base could be.

The table below includes the performance of the IPOs for some of the web’s key infrastructure providers from their IPO prices to their 1999 highs.    

Dynasty Wealth has identified investment opportunities for all three of the categories of regulated cryptocurrency infrastructure providers.  All of them are first movers who are crucial to the establishment of the infrastructure that is needed by the global cryptocurrency community.  Given the $605.7 billion valuation of the sector which provides the regulated infrastructure to the world’s public markets each of the three that have been identified have the potential to be valued for $10 billion by the end of 2020.  Below are the market caps and the projected multiple returns on investment for the three opportunities assuming that they reach $10 billion valuations.

The three crypto infrastructure companies in the above table are first movers.  Thus, the 3 minute, 52 second video below entitled “Why companies qualifying as a ‘First Mover’ have the potential to get to $1 billion valuations almost instantly” (3:52sec) is highly recommended.  

The 4 minute, 10 second video below entitled “Crypto’s Wild West” summarizes the content in this report.

Information about the four cryptocurrency infrastructure investment opportunities are available to Trophy Investing’s members.  Membership information is available at www.trophyinvesting.com.  Trophy Investing is a member-based investing community that excels at identifying startups and early stage investment opportunities for its members which have the potential to multiply in five years or less.