Substratum Decides To Trade Their Ethereum To Increase Funding, Using Investor Funds
In the world of cryptocurrency, there are very few mutually agreed upon rules. However, one of the biggest ways to get some attention from investors is to tell them that you’ll be using their digital assets in a gambling that may or may not bring more capital to the company. However, it seems like Substratum is doing exactly that.
In a video posted to YouTube on the official Substratum account, Justin Tabb addresses this new development close to the 7-minute mark. He says,
“We’re taking full advantage of the trader that we have, uh, in full time and we are going to be actively trading a portion of the Ethereum, uh, so that we can trade up basically. So that we can sell at the top of the bands and buy at the bottom of the bands. And actually, we’re not doing anything any different than what’s in our whitepaper because we’re not, uh, doing anything but trading it off to USDT Tether.”
That statement is enough to make any user do a double-take. Basically, Substratum is not at the same place it was during their initial coin offering (ICO) and will be using the open market to bring back their capital. While some people will watch the video without concern, this could be a dangerous move for the platform.
First of all, the ability to even pull off the plan in the first place is going to require extensive knowledge as a trader. Considering the lackluster profits in the crypto market lately, holding or withdrawing coins at the wrong time is a major cause for concern. Also, since they are using a trader, wouldn’t it be typical for the company to release more information about their “full time” choice. There’s no way to gauge whether the person that literally has someone else’s money in their hand is making good decisions. The Zerononcense Blog casts additional doubt, commenting how a trader with this kind of expertise wouldn’t likely be just providing services for companies, but using it for themselves.
Another issue is the way that Tether has been a major subject of investigation lately, especially within the United States. Considering their lack of ability to provide documentation of their own holdings, there’s a chance that investor funds could be at risk by just being tied to Tether in the first place. To add to that worry, Tether doesn’t always maintain a 1:1 ratio, which means there could still be substantial losses.
Forgetting those factors for a moment, there’s another big problem – even though Tabb comments that they are not doing anything other than what’s in the whitepaper, that’s not a fact. When bringing up a concern about investor funds, the documentation says,
“To ensure the development fund is not subject to big market fluctuations, we’re hedging it four ways. By doing this we ensure we have the capital needed to finish each phase of the project budgeted for the Initial Coin Offering (ICO). The capital is divided equally in Ethereum, Bitcoin, USDT, and USD Fiat.”
That being said, what Tabb is essentially describing is active trading between Tether and Ethereum, which is bad considering the lack of trading experience on the Substratum team. Furthermore, with their inability to properly manage ICO funds, and the lack of choice on the investor side, the company is basically going back on their whitepaper with no proof that they have the ability to succeed.
As far as anyone can tell, Substratum reached about $13.8 million in their first ICO, but no details are available on what they raised during the second ICO. The lack of transparency and the seeming lack of sustainability is enough to make any of their investors worry. In the meantime, investors need to consider what this means for their personal future with Substratum.