Substratum, the cryptocurrency startup that aims to create a decentralized web browsing experience, is day-trading ICO funds in an attempt to boost their finances, the founder revealed in a video yesterday. In a post that was intended to focus on the upcoming token swap, what grabbed the attention was the activities of Substratum’s full-time trader.
Substratum founder Justin Tabb raised the topic of trading ICO funds in response to the selling of 1,000 ETH by the team in mid-October when the price was sitting around the $200 mark. In the video he says the liquidation was carried out on the advice of a trader employed on the project, who believed the price was going to go down, which it did, and this seems to have given Tabb confidence to let the trader trade more of the ICO funds.
The primary bet, according to Tabb, is that Ethereum is going to test $60, and Tabb has given the trader “a portion” of the ICO funds to trade with.
A Varied Reaction
The response to Tabb’s admission has been, predictably, mixed. Responses on social media ranged from “…not sure this is considered legal in the business world” to “…they are trading 1% of their portfolio, how is that a bad thing…”, with debate raging of the merits of the action, and plenty poking fun at the move. Some questioned whether the trader was able to short the SUB token, which would raise an important ethical question.
Substratum is currently running a second ICO to raise additional funds, and it remains to be seen whether this revelation of how they are treating portions of the portfolio will make a difference in the minds of potential investors.
Make or Break for Substratum?
Of course, it is up to a project leader to do what they like with their funds, but they do have a responsibility to the investors to balance risk with opportunity. On one hand it could be argued that a skilled trader could generate much needed funds in a market where developers are beginning to run out of cash, and that in fact it shows creative thinking and a willingness to take risks in order to survive rather than just selling up or holding to the ground. On the other hand, the fact that Substratum is engaging in high risk strategies, such as day trading, in order to raise funds could be indicative of a wider financial issue within the camp.
The wisdom of this move will only become evident down the line when the numbers roll in. It’s high risk, certainly, and it’s not something that all investors agree with, but if they can stave off the bear market long enough to come out the other side then all will be forgiven. The flip side, for Tabb, is unthinkable.