So is this a gigantic ponzi scheme or am I being cynical and simplistic?

A quarter of a billion bucks isn't bad for a crowdfunding:

Blockchain data storage network Filecoin has officially completed its initial coin offering (ICO), raising more than $257 million over a month of activity.  Filecoin's ICO, which began on August 10, quickly garnered millions in investment via CoinList, a joint project between Filecoin developer Protocol Labs and startup investment platform AngelList. That launch day was notable both for the large influx of purchases of Simple Agreements for Future Tokens, or SAFTs (effectively claims on tokens once the Filecoin network goes live).

As I understand it, an ICO is where people pledge actual money and established cryptocurrencies like bitcoins for new, non-established cryptocurrencies or 'tokens' as they are sometimes called.  I'm told bitcoins can still actually be exchanged for cash, but I've never knowingly met anyone who has successfully done so.  One can buy and sell (but not sell short) these cryptocurrencies on unregulated exchanges like Bittrex, here's a screenshot:

There are about a couple of hundred cryptocurrencies / tokens one can trade / swap with likeminded counterparties now.  All the little ones can be traded like an fx pair against the more established bitcoin or ethereum.  If you would rather trade against the dollar you can, well kind of.  You see you can trade against the US Dollar Tether, here's the screen shot:

Tether is a cryptocurrency that is pegged to the US dollar, except the peg isn't actually guaranteed.  Tether Limited (based in Hong Kong) do guarantee that 'tethers' will be backed by an equal amount of US dollars, but they don't guarantee to exchange them for you should you want to 'cash out'.  Presumably the Hong Kong regulators keep a close eye on the activities of this unregulated firm trading predominately in the USA.  Bittrex appear to insist you play their markets using only cryptocurrencies, including the tether.

So it's kind of like a computer game then?  Users deposit their dollars or euros or yen, change it into their chosen token, then try to swap their tokens with other users with the aim of increasing the number of dollars (or tethers or bitcoins) in their account.  You can even remove your tokens and buy into an ICO with them.  As nobody can go short (and a few people who invented these cryptocurrencies or got in early have the bulk of chips) there really is no limit on how high the prices can get.  Even if a bitcoin is worth a million dollars, grotty students in their pjs can still buy in for ten bucks and receive 0.00001BTC.  It's just numbers on a screen that the players are bidding higher and higher.  Online Texas Hold-em is so last decade!

I think the price of a bitcoin - or any of these other cryptocurrencies - could very well go to a million dollars.  After all, it's just a closed system of folk (and 97% men apparently) trading imaginary tokens with one other and they all want the reference prices to increase.  I reckon as long as more actual money is flowing into cryptospace (and into that bank account in Hong Kong and into these ICO's) than out, the prices of bitcoin and other cryptocurrencies will continue to rise and increasingly the participants will become paper rich.  But what happens when a significant proportion of them become millionaires and can retire aged 24 or just rich enough to want to cash out some and buy a car or a house?  

Is this is an over-simplistic analysis?  Is it really cynical of me to suspect that the people on the other side of this trade (the people swapping the tokens for actual dollars and euros and yen) will decide they'd rather hang onto the cold hard cash thank you very much and switch off their exchanges?  The only alternative explanation I can see is that a massive revolution really is happening where so many people will change all their cash into bitcoins and refuse to take part in the consumer economy until the politicians, bankers and shops have no choice but to start accepting them?  Have I missed something?

Safe as (securitised) houses...

FT Alphaville's Kadhim Shubber, has been questioning the sanity of investors in property crowdfunding schemes:

"The flat’s market value in January 2015 was £525,000; Property Partner grabbed it at a discount for £435,000; and in July another independent valuation put the price at £611,000. But in the past three months investors on the website have given the property an implied valuation as low at £520,000 and as high as £4m."

It's less common for financial hacks to question the market valuations of property companies in general.  Take institutional landlord Grainger plc for instance.  At close of play today the company was valued at £906 billion, whereas on 31/09/2015 (when they were valued at more like a cool billion) their accounts showed net assets of £565 billion.

There's perhaps a big difference between buying a company at more than the value of its assets in the hope management grow the business and buying a share in one flat.  But nevertheless, whereas the big commercial property companies trade at thereabouts or even discounts to book value, those plc's holding residential property (landlords and householders) are changing frequently hands at double their intrinsic value.  The market likes UK residential property so much, it's prepared to pay double the going rate for the convenience of owning it in the form of ready-leveraged, hassle-free shares.

And the nations financial regulators appear to be quite happy for residential property to effectively be securitised and flogged as illiquid penny shares on the basis "Bricks and mortar make a solid investment" and "No one ever said ‘safe as the stock market" and even "Earn a current estimated return of 10%* per year, after fees."  

Alongside this sales spiel, Property Partners boast that over 8,000 punters have invested over £35 million in 234 properties so far.  Small fry in housing or stock market terms, but one to watch and something that just might take off during the next phase of the land price cycle.  How long it will be before the leveraged products are released?  And will they be allowed to advertise in the same manner?

"Executives who masterminded £1 trillion deception of young and vulnerable people jailed for land banking fraud"

From The Daily Mail:

The directors of Britain's largest home building companies have become the first in Britain to be jailed for land banking fraud today after being convicted of conspiring with mortgage lenders to trick young and vulnerable people out of up to £1 trillion over the past twenty years.

They masterminded the deception, conning people into buying badly built homes on plots of land that were either worthless or massively over-priced. Investors were promised a stream of future capital gains that failed to materialise.

The Office of Fair Trading is also looking into claims that the companies control up to half a million plots of land with planning permission but are deliberately withholding these from the market in order to ramp up prices.

Following a separate investigation, the Financial Services Authority has set up an enquiry to establish whether senior figures in the City of London were aware of the scheme, as they also stood to benefit if the victims could be persuaded to borrow money secured on the over-priced land.

A source close to the investigation added: "The LIBOR-fixing scandal was nothing compared to this."

The Tory party treasurer confirmed that all donations the party had received from home builders or the financial services sector in the past ten years would be forfeited and paid over to the Electoral Commission, but denied any knowledge of the sleazy practices of their donors. A spokesman from the Serious Fraud Office refused to comment on rumours that several million NIMBYs were about to be charged with aiding and abetting.

Stop the Ponzi* scheme! I want to get off!

From The Metro:

Thousands of people are falling behind on their rent as prices rocket and salaries stay the same.

More than 10,000 tenants contacted the Consumer Credit Counselling Service in the last 12 months – a rise of 27 per cent on the previous year. On average, tenants were £760 in arrears and regularly left with a disposable income of just £35 a month after paying all their bills.

Many were also being kept off the property ladder after rising rents ate into their take-home pay. People in London and the south east were worst affected, according to property website Rightmove. They shell out about 40 per cent of their take-home pay on rent, compared to about 35 per cent in Scotland and the North East**.

Over the past few years, there has been pretty much a first-time-buyers' strike, if you're not up for saddling yourself with a crippling mortgage, you can refuse to play by not buying.

So far so bad.

But everybody has to live somewhere, and if you're not paying vast amounts of mortgage interest, you're paying vast amounts of rent instead, so you're still propping up the Ponzi* scheme. There is no way out - it's like being charged for breathing instead of everybody getting precisely enough air they need to breathe every day for free. Land is the ultimate monopoly.

* Or are house prices a Pyramid Scheme? One or the other.

** Other research said that the gradient was much steeper than that, from 29% in North West or Yorkshire up to 42% in the South East (London off the scale as usual, at 71%).