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đȘ Crypto has a fairness problem
And no oneâs going to play a game they think is unfair

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âPlay fair. Donât hit people. Say youâre sorry when you hurt somebody.â
â Robert Fulghum, All I Really Need to Know I Learned in Kindergarten

Crypto has a fairness problem
If you didnât happen to be trading equities in August of 1995, you probably canât appreciate the shock waves that buffeted Wall Street when shares of Netscape finished their first day of trading at $58.25 â 108% above the IPO price.
That type of first-day âpopâ soon became commonplace, but at the time it was the proverbial shot heard âround the financial world.
Before Netscape, initial public offerings were a relatively staid process in which investment banks acted as mediators to find a price for newly issued shares that both investors and the issuing company were happy with.
Usually, the shares would be a little underpriced to make sure the deal got done and shareholders had a small paper profit to feel good about.
After Netscape, IPOs became a media and financial circus â new issues made newspaper headlines, attracted breathless coverage on CNBC and induced frenzied activity on trading desks.
They also became important marketing events.
Technology companies would deliberately underprice their IPOs to create valuable buzz in the overlapping worlds of media, technology and investing â a new dotcom whose shares didnât trade up at least 50% from IPO price would be perceived as a failure, making it difficult for the company to raise additional money, attract employees or draw attention to their product.
It was pretty effective: I no longer remember what theGlobe.com did, but I do remember that its shares were up 700% on their first day of trading in 1998.
That large of a pop I think was accidental â companies would sometimes overdo the discount, leaving a lot of money on the table, or their investment bankers would misjudge demand.
In the case of theGlobe.com, probably both happened, making it the poster child for an out-of-control IPO process.
As outrageous as that seemed, however, no IPO was ever as egregiously mispriced as the new AICC crypto token, which immediately traded 100,000% higher when it started trading this weekend.
100,000%!!!
On Friday, Aiccelerate DAO, a newly formed investment company focused on crypto AI agents, raised capital in an invite-only âparty roundâ for its AICC token â effectively a pre-IPO allocation of new shares to investors.
This was a nice party to be invited to: An investment of five SOL (about $900) was worth well over $1 million just a few hours after the token began trading.
People who were not invited to the party are understandably unhappy about this.
AICC tokens seemed to be mostly issued to âkey opinion leadersâ (KOLs), which, superficially at least, has the look of being a quid pro quo: Make your token go up by gifting it to people who will promote it on social media.
This may not have been the intention â AICC tokens were sold at something like 1x NAV, so maybe itâs just the marketâs fault for wildly overpaying for it after launch.
But even with the best of intentions, a âparty roundâ full of KOLs for what was obviously going to be a hot token feels like a betrayal of cryptoâs early promise.
In 2010, anyone could mine bitcoin effectively for free; in 2014 investors had weeks to subscribe to the Ethereum ICO and everyone got as much as they wanted; and when Solana launched in 2020, we all had about three months to buy it under $1.
Now, by contrast, memecoins are launched by shadowy âcabals,â âsniperâ bots buy all the good token launches before any normal human even knows theyâre launched, VC-backed altcoins begin trading at insanely high valuations, and KOLs get gifted outrageously cheap tokens in invite-only party rounds.
Not many people are happy with this state of affairs â including many of the KOLs that were invited to the AICC party.
Thatâs partly because they were named and shamed this weekend by a dashboard that makes it easy to see who participated in the party round and what theyâve done with the tokens since.
The buyers donât appear to have done anything wrong (I havenât seen any accusations of impropriety), itâs just that a 100,000% one-day gain simply seems unfair.
Buyers who realized that gain by selling on the first day have received the harshest criticism, although I donât think thatâs fair, either â someone has to sell on the first day or else there wouldnât be a market.
But itâs not a good look for crypto.
This, I think, is another reason many of the KOLs that benefited from the AICC mispricing appear to regret it: They recognize that the perception of unfairness will discourage people from investing in crypto.
Wall Street learned this same lesson in the dotcom boom and bust that followed Netscapeâs IPO.
In 2003, a joint NYSE/Nasdaq commission found that investment banksâ practice of allocating underpriced new issues to a âfew, favored investorsâ had led to âthe loss of confidence in our IPO process.â
The most egregious example was known as âspinningâ â the allocation of underpriced IPO shares to customers who tacitly agreed to return some of the profits to banks via trading commissions.
In 2002, CSFB agreed to pay a $100 million fine after an SEC investigation found that the bank had been allocating IPO shares to customers âwho, in return, were forced to funnel between 33 percent and 65% of their profits back to CSFB by paying excessive brokerage commissions on other transactions.â
This was a problem for the business of Wall Street because, as the SEC chair at the time told the Senate Committee on Banking, âSpinning increases the public perception that IPO allocations are an insiders' game.â
Investment banks recognized that this public perception was a threat to their businesses and quickly enacted rules to correct it, as theyâve been doing for decades.
The primary purpose of the SEC, stock market regulations and laws against insider trading is to create a perception of fairness that will encourage people to invest.
As Robert R. Glauber, then chair and CEO of NASD, said, âCleaning up research and IPO practices is not just good ethics, it's good business.â
No oneâs going to play a game they think is unfair â we learn this in kindergarten.
And now weâre seeing it in crypto prices: The social-media uproar over AICCâs underpriced party round accelerated a selloff in AI-related tokens over the weekend, possibly crippling cryptoâs hottest sector.
I think that's an important lesson to learn.
If retail investors feel like theyâre not being invited to the party, the party wonât last much longer.
â Byron Gilliam
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đš HUGE RULING AGAINST SEC IN FEDERAL COURT
the third circuit just ruled that the SEC violated the administrative procedures act (APA) in denying coinbase's petition for rulemaking on crypto & securities laws
"The SEC repeatedly sues crypto companies for not complying with the⊠x.com/i/web/status/1âŠ
â Alex Thorn (@intangiblecoins)
6:22 PM âą Jan 13, 2025
Friendly reminder: anyone who owns Bitcoin or Gold should have read this 1967 essay by Alan Greenspan. It's short.
It is the original orange-pill.
Wild that he became Fed chair a couple decades later.
math.snu.ac.kr/~hichoi/finmatâŠ
â Erik Voorhees (@ErikVoorhees)
8:40 PM âą Jan 13, 2025