We reviewed the failed launch of Bitcoin Gold previously and will continue to caution readers on this coin. Yesterday it debuted at #5 on CoinmarketCap rankings of the top crypto coins placing it ahead of more established coins like Litecoin and Dash. The only issue is this is not a true measure of the market cap in this coin.
Pre-Mined Coins make up the bulk of BTG price
The total pre-mine by the dev team and supporters already sent 16.6 million coins into wallets before the coin went public. Coinmarket cap lists the coin at 16.774 million coins meaning in the week since opening approximately 174k coins have been mined by miners. With a per coin price of $365 the market cap is calculated based on the entirety of the holdings and comes it at a robust $6 billion dollars. But is this accurate?
Bitcoin Gold came out with a statement claiming that only 5000 BTG were marked for the 6 member dev team to split at launch. The remaining 95% of coins were locked into time locked wallets with 65% becoming available in 3 years and were market for network development. At today’s $6 billion market value that is $3.9 billion dollars for development. For reference, Slack, a business-to-business communications platform used by many of the top crypto currencies which has real revenue is worth just over $4 billion.
A week ago we learned about an embedded virus in the first release of the official wallet that led to the theft of $3 million in Bitcoin Gold from early adopters. This theft may sound small compared to $6 billion but the actual mined portion of the coin represents only $6 million which makes the theft half of the mined value stolen. Imagine any other coin announcing half of the trading value stolen within a week of launch. This comes on the heals of the Tether hack and theft of $30 million in USDt.
Yet despite the large pre-mine and the theft of half the mined value of coins, Bitcoin Gold has recovered some of the early losses it experienced just after launch. Looking at the volume tells a very compelling story of pre-miners selling coins at launch and controlling selling as the price declines. The attached chart shows increases of transactions associated with decrease in price and then decrease in transactions with leveling of the price and appreciation only to repeat again. Once is chance but twice is starting to establish a pattern. The volume again hit the bottom overnight and slowly started to increase so it will be interesting to follow the next 24-48 hours for another decrease in price with sudden increase in volume.
The official wallet recommended by the dev team suffered the virus theft only 1 day after mining began. The virus was not detected until the 14th of November despite many miners making complaints of disappearing BTG but by that time the damage was done. The dev team suddenly removed the recommendation for the official wallet and placed a warning at the top of the website. The official wallet was not fixed until 21 November.
The combination of stolen coins ($3 million) and 5000 released immediate coins for the dev team ($1.85 million) now makes up near the entire circulating supply. Despite that still the volume yesterday was listed at $152 million in transactions. I will admit, I am not great at math but without taking off my shoes and counting my toes even I can see something does not add up.
In the end this may be a perfectly legitimate coin. Prior to any investing understand the risk and do not simply add this coin to a portfolio because it is now a “top 10” coin. Bitcoin Gold did make an official announcement here which you can read and make your own interpretation. Invest with caution.