On the 2nd of February Reggie Middleton, also known as “Chief Provocateur!” has populated a text on the network that first appeared on his blog. The published article seems to be a press release of an unconventional style as among the presentation of new software the author digs deep in the problems and opportunities of cryptocurrencies combined with the naivety of common users. The offered program is based on the evaluation of risks and return that can be gathered from investments in alternative types of money.
The software carries the same name as a value calculated by the built-in algorithm - UltraCoin Cryptocurrency Composite Index. According to Mr. Middleton the idea was born observing the environment of the cryptographic currencies and their development during the past 2 years. It is the time, when the most important events in the history of virtual money took place, apart from the initial development of the main currency – the Bitcoin – in 2009. The developer or group of developers of the index is willing to dispel the charm around the leading coin and its counterparts with reasonable calculations and estimations. According to the text the return equal to hundreds of percent is desired, but volatile. As long as such profit seems to be possible the value will attract speculators and official accusations from banks and governments will have stable background to build upon. It also states:
“The problem is, and what many novice investors have a problem conceptualizing, that astute institutional “investment” funds actually have a problem dipping their toes in the wilding appreciative yet hyper-volatile world that is cryptocurrencies. “
The author also emphasizes that it is a method that funds are willing to use as they seek for big income. The question is more or less about stability and long-term risks. The term “risks” is defined as:
“Risk is the price of reward, with risk being defined as deviation from expected return.”
It seems normal to Mr. Middleton to accept a risk in case an individual plans to acquire a reward. The idea is to measure rewards taking in account the doubts met on the way of the deal or transaction. The comparison seems to be harsh, but very refreshing:
“Measuring reward without taking into consideration the risk paid to attain such reward is akin to jumping out of the top floor of a 50 story building to revel in the exhilaration of the drop without taking into consideration what happens when you reach ground level. All in all, it tends to end ugly.”
Chief Provocateur also offers to the public to observe the situation from a new deinebriating perspective. In case the risk is worth 1 dollar and the rewards is also 1 dollar then nothing was earned, the efficiency of the system is very low. He also understands how complicated it is for a person to go that deep to realize the facts:
“This is difficult for the layperson to understand since those who reaped said dollar are left holding one dollar of nominal returns which looks, smells and spends like a dollar.”
He underlines that the process is “dumb luck”, but the mathematical and economic law of the averages determines that one receives what he has paid for before. The beliefs to earn money from pure air or due to a mechanism similar to a soap bubble going to explode are wrong. The modified beta of Bitcoin approximated by the team of UltraCoin is 673. This value shows the volatility of the currency that is actually much higher than of any asset of fiat currency present. The best example considers the most recent exchange ratios – in case a person invested in the coin while its price was below a hundred and got rid of his or her electronic funds on the day, when the price has overpowered gold, the profit was enormous. In case someone purchased the virtual money when the price was above a thousand dollars, he or she might lose all investments and gain new debts as the price is around 800 dollars now. No one can provide the definite answer whether it is going to rise to the forecasted 5000-10000 dollars in 2014 or later.
Mr. Middleton advices:
“With these concepts in mind, you should always adjust for risk before attempting to measure reward. By doing that you will find that you can compare disparate assets, ventures and opportunities that have different reward propositions and even different horizons by measuring the risk (or the economic cost) of the investments and then adjusting the actual or expected reward desired to compensate for said risk commensurately.”
The UltraCoin team has performed calculations that have become the basic of the developed software and index. The preliminary results show that the capitalization of Litecoin is even higher than of the praised Bitcoin. The field of interest due to the existence of about 70 different virtual currencies was reduced up to coins with a market value over $1 million. The aggregation of the currencies allowed the formation of:
‘“UltraCoin Cryptocurrency Composite Index” - a basket of cryptocurrencies upon which our custom UltraCoin derivatives can trade, hedge, invest and speculate.”
Along with other features and calculated values this unit is the main advancements offered to the users of the client. The press release demonstrated graphics of statistics received by the team to convince the auditory without any trail or beta of the software. The regularity shows that the return is increasing together with the risks, and both values cannot be separated from each other.
The launch and presentation of the pioneer version is set to be during Berlin Bicoin conference (12.02.2014.) that is going to be held very soon. Cointelegraph is going to follow the development of the initiative and to cover the meeting, to provide You on time with the most accurate news.