Trading is often alluring, especially when prices go up quickly, but it’s a zero sum game. Your gain is usually another’s losses. Plus, on top, there are exchange’s trading fees, making it negative sum.
Usually, therefore, the exercise is left to professionals whose job is to beat the competition. In the wider finance world, these are called indexes, funds, hedge funds, etc., and they may be coming to this space too.
TaaS, which stands for Token as a Service, has attracted an $8 million investment through a token sale to do nothing more than trade digital currencies like bitcoin and ethereum and benefit from their up and down movement.
Their whitepaper is just 17 pages and doesn’t really say a great deal because all they’ll be doing is buying and selling, but it would have been useful to have some sort of track record.
Their website lists many individuals who look the part, but there are no hard numbers here at all. As far as we can see from what material they’ve put forward, this team could make a lot of money or lose it all.
There is hardly a way we can tell, because they do not say whether they have been trading and what their performance has been so far and if they haven’t been trading then what makes them think they can beat the market?
If we had taken the time to ask them they would have probably told us they have this cool new data-driven approach called Kepler which does market research, analytics, etc, plus a nice buzzword of ambitious aim for it to become the Bloomberg terminal of crypto.
Maybe, but it’s just words, and all traders do research, analytics, etc., so we didn’t bother to ask. Nor seemingly did the almost 4,000 investors who sent them money, probably slightly blinded by a seemingly incredible offer.
They are to give back to the token holders through an ethereum based smart contract 50% of the profits, 25% to be re-invested and 25% presumably kept by the team. A pretty hefty fee for just buying and selling, especially when they have no track record. Index funds usually just ask for 1% or 2%.
The investors, however, might have been blinded by a nice dreamy example given on their whitepaper which we can’t even copy-paste because they have compiled the PDF through images. It’s fine, we’ll copy hand-type:
“Assume that Taas collected 1,000 BTC during ICO and constituted a 100 BTC (10%) Reserve Fund. Next, TaaS reported a 100 BTC Quarter-on-Quarter profit. In this scenario, TaaS token owners get to collect 50 BTC, with 25 BTC reinvested back into portfolio as a part of a Reserve Fund.”
Ignoring for a moment here the 25 BTC that just disappeared, we’d all like to double our bitcoins in just three months, but if these geniuses can do so, one has to wonder why they’re bothering with keeping just 25% of the profits instead of putting up their own money and keeping, nay, doubling quarter on quarter 100% of their own profits.
The reason may be because, as we all know, trading is a risky game and, as eth traders found out only last week, you can lose 80% of the funds in just one day. We wonder what would happen to that Reserve Fund in such scenario.
A Reserve Fund which is meant to be as a safe backstop in case of great losses in their other 90% of assets, a safety backstop ensured by holding no less than 10% and no more than 30% on the rock solid bitcoin, which yoyos like crazy, down 50%, up 30%, but, somehow, the TaaS team considers it a safe hedge asset – sure.
Now, maybe we’re being a bit harsh, but someone has to. Best of luck to the team and the investors, but losing 25% of your profits, in a zero sum game, on top of fees, and still managing to come ahead?
Maybe, until the next fund offers to do the same hopefully with some trading data to give us confidence and is “nice” to offer say just 10% or maybe even just 5% fees. Why not, after all they’re just buying and selling with no liability if they lose even all the funds.