In the name of the Father (Bitcoin)
The Son (Ether)
And the Holy Ghost (DAO)
— The gospel according to Satoshi
The trading dynamics between Bitcoin, Ether, and DAO dominated the trading landscape over the past month. This Thursday the DAO Initial Coin Offering (ICO) ends. Subsequently, DAO will be available to trade on the secondary market.
Since the beginning of May, ETH is up 95% in Bitcoin terms and 91% USD terms. Bitcoin is down 2% in USD terms. Each DAO token holds 0.01 ETH. DAO could be a colossal flop, but by virtue of its ETH holdings, holders have already doubled their money.
The hard decision is when to sell. The longer one holds DAO after the ICO, the greater the chance a portion of the ETH in the fund will be sequestered towards an approved project. A bird in the hand is worth two in the bush. The fact that 90% of startups fail will weigh on DAO holders’ willingness to take a chance by holding DAO for a long period of time.
The are two ways to cash in DAO for a “harder” currency. When DAO/XBT lists on spot exchanges, holders can dump their DAO for Bitcoin. Or the more technically savvy can use the inbuilt code to burn DAO for ETH.
Crypto traders are lazy folk. If I could sell it now for Bitcoin with minimal hassle, I won’t try to do it via the DAO code. There might even be bugs in the implementation that makes it impossible to burn DAO tokens, without a major upgrade. At the very least, it will take 7 weeks after launch.
Once holders obtain Bitcoin, will they sell Bitcoin for USD or hold Bitcoin? Given that the average DAO holder is already comfortable with holding a portion of their assets in a crypto currency, I doubt they will convert their Bitcoin into USD. This will lead to upward pressure on the Bitcoin price.
I expect Bitcoin to sag and ETH to pump during the last days of the DAO ICO. Buy the rumor, sell the fact. I predict that once DAO lists, holders will opt for the easy 2x return rather than risk their gains on a bunch of startups that may be scams. That means Bitcoin up, ETH and DAO down.