One of the hottest ICO recently is EOS (aka Epic Operating System or... as some would say Ethereum on Steroids). I bought into this ICO during the first five days and it has been shocking to say the least on how much and how fast it has shot up.

EOS started trading on Bitfinex on July 1, 2017 between $0.50 and $1.40. Over the next two days, it have exploded to the $5.50+ area on Kraken where it peaked at $6.90 per EOS. Even at $5.41 per EOS, its market cap is well over $2.7 Billion USD which put it above Litecoin which is only sitting at $2.34 Billion.

Source: Bitfinex

Brace yourself, the CRASH is coming... or is it...?

Now, some would wonder out loud... "Is this sustainable?!?! It's going to crash back down to earth any seconds now!!"

Fair point..., but I think what a lot of people don't realized about this ICO is that it's going to last 350 days with many different periods of token distribution (daily except the first five days). What does this all mean? It means that every single day, the EOS team have access to all the ETH that was deposited from the day before. That's a bad thing isn't it? Maybe... but the dev team can also do a lot with it....

If the dev team truly believe in their own project, they can literally buy back their own tokens to increase the foundation's share of the project. This is just like in the stock market where a public company uses their funds to buy back their shares to increase the stock price. (This is slightly different in the sense that I doubt they will just burn the token, but rather they will reap more of the benefits later on when the project is successful) Bancor token is doing the same thing with their token where they have allocated the extra funds to support a floor price for their token.

EOS has been moving ETH to Bitfinexe in pretty big quantity:

Source: https://etherscan.io/address/0x9937dbb2128b55c44d8af7bf36fd76796a814cf4#internaltx

Specifically two 20k and one 40k transactions.

Are they using it to dump or support the coin purchase. You can make your own decision on that. The price action has been crazy though so... when there is smoke, there is fire.

Seeing the action of the last 3 periods, we can clearly see the trend in price is upward, but what about the next few days or even the rest of the ICO?

Source: http://eosscan.io/#

One word: "Arbitrage"

Two scenarios at play:

Exchange price is lower than ICO token price: people buy from exchange and less people contribute to the ICO period for that day (which leads to... driving the exchange price up and... scenario 2...)
Exchange price is higher than ICO cost: people sell on the exchange thinking they can get it cheaper from the ICO contribution period that day (which leads to... lowering the exchange price and... see scenario 1...)

So... in conclusion, I think the price will definitely fluctuate over the next 348 days... but with the arbitrage in play, there will be a floor price.

You can clearly see this in play above in the graph where near or after the period close (the dashed vertical line), the price of the exchange comes crashing down. Why? Because people have hope that the next day price will be better through the IPO. If it's not, you will see the price on exchange go back up again tomorrow.

What about August 1?

August 1, 2017. The day that Bitcoin may or may not fork their blockchain. Will that have an effect on EOS?

Everything is affected by BTC pricing action, so EOS is not immune from this fateful day at all. Will people want to get out of crypto all together by then or will they use EOS as one of the escape vehicle? I would say it's definitely a possiblity. I did it myself. I was really beginning to see the prices of ETH and BTC crashing and I used EOS to invest my coins, since I didn't want to completely cash out. I am leaning toward the possibility that it will benefit slightly from the upcoming turmoil.

Until next time, Profit mode: ON!