Learn the difference in an Equity Token vs an Asset Token. Van Tharp explains crypto coin types.
#872 January 10, 2018
  • Feature: Types of Crypto-Tokens, by Van K. Tharp, Ph.D.
  • Workshops: Blueprint for Trading Success in Feb in the US and Oct in London
  • Tips: A Hated Bull — Or at Least a Mistrusted One, by D.R. Barton, Jr.
  • FREE BOOK!: Trading Beyond the Matrix
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Workshop Objectives

Students will learn and begin to understand each of these objectives after attending Peak Performance 101:
How great traders approach their craft and learn a daily procedure that resembles what they do.
  • How you create your own experience in the market and how you are responsible for the results that you get.
  • Become more aware of some of your own psychological issues that affect your performance as a trader/investor.
  • Learn about expectancy, position sizing strategies and the power of big R-multiples through a simulation game. This game is also designed to help you observe your emotions in a setting in which only a small amount is at stake compared with what you will face in the market.
  • Learn some of the variables that affect your emotions and how you can gain control over them.
  • Learn to overcome self-sabotage through exercises done in the class.
  • Students will get guidance on how to develop an ongoing program to work on themselves using the Super Trader Program as a model.
  • Students will leave with a plan to make the maximum use of the workshop.
  • Participants in this course will get to meet and network with some really great people who a lot in common with each other.

Feature Article

Types of Crypto-Tokens
by Van K. Tharp, Ph.D.
Van Tharp
Not all cryptocurrencies are equal. They are not equal and in fact, they are not honestly represented. In addition, very few companies selling tokens are clear about what their token really is.

The first type of token is a currency token. These types of tokens are used as a medium of exchange and Bitcoin is the prime example. For all of those who say Bitcoin is not real money, try buying any other cryptocurrency on a typical exchange without having any Bitcoin. You can’t - because Bitcoin is the medium of exchange in the crypto world.

In essence, there is no real money. Currencies like the US Dollar, the Euro, the British Pound, the Australian Dollar, and the Canadian Dollar are called fiat currencies. This is because there is no commodity backing them up. They only way you know it’s money is because the government of each country declares it to be real currency and says that if you try to produce it yourself, you will have committed a crime by counterfeiting.

But the US Dollar is actually printed by a privately-owned company called the Federal Reserve. Banks are allowed to lend as much as ten times the money they have on deposit. Let’s suppose you have $10,000,000 in your account at Bank of America and someone wants to borrow $100,000,000. Bank of America can lend them that much money and the Federal Reserve just prints up $90,000,000 in new currency to make it official. So, as a result, “real” money was just created out of thin air.

Also, suppose the US government is in debt by a trillion dollars, (since that’s pretty much the norm each year for our government). The government issues bonds to borrow the money and other people buy up the bonds. Foreign governments buy some of the bonds but the Social Security Administration buys lots of bonds too. This is important to understand; the US government creates a trillion dollars in debt and the Social Security Administration (SSA) buys up much of that debt. Then, the SSA lists those bonds as an asset to show it owns something.

Under the Qualitative Easing Programs, the Federal Reserve actually bought up US government debt and held it, however, it didn’t pay money to buy the debt. Instead it printed money to buy the debt. This is a third example of how a fiat currency is not real money. The Fed just created it out of thin air.

Bitcoin has a little more backing that a typical national currency. It’s getting harder and harder to create Bitcoins. Currently, Bitcoin mining by large computer networks consumes about 0.15% of the worlds supply of electricity each year. That could become something like 10% of the world’s supply of electricity by the time the final bitcoin is created in 2041.

Also, most fiat currencies tend to be inflationary. This means that the currency buys less and less over time. Why? Because the government continues to print more and more money to finance its debts. I remember when the USPS stamp was 3 cents, a hamburger cost 15 cents, and I could see a double feature movie for 50 cents. Not anymore. That’s inflation.

On the other hand, most cryptocurrencies are deflationary. This means that the currency is worth more and more over time because of scarcity. Supposedly, only 21 million bitcoins will ever be created. 16 million of them have been created to date, but of those, an estimated 5 million coins have been lost forever. People lost their secret keys or had their bitcoin information on a hard drive that got thrown into the dump, etc. Demand goes up for the coin (i.e., to buy other cryptocurrencies and simply because people want what is going up). But there is a smaller and smaller supply to meet the demand so prices skyrocket.

What’s interesting is that some countries are now talking about issuing their own cryptocurrencies. The bank of England has suggested it will. Russia has suggested that it will too. I think Estonia is already well on its way to having one.

So could I create money out of thin are by issuing a token? Yes. How? First, we could mint 1,000,000 VTI tokens and cap the quantity at a million tokens. No more will ever be issued. Next we make it a utility token (discussed below) in that it allows you to attend one workshop and when you use it, it ceases to exist. Let’s say the average workshop costs $3,000 and a using a token would allow you to attend one. It would have some value but how much? I own them all but say I would be willing to sell 5 tokens. Instead of paying cash for our workshops, let’s say that you could buy the 5 tokens in an auction in exchange for attending 5 workshops. Let's say the highest bidder paid $2,500 each for the five tokens. That establishes a value but remember that I have 999,995 more tokens. Have I now created an equity base that is worth $2,489,875,000? We have suddenly gone from a company with an annual revenue of several million to a billion-dollar company.

Let’s look at the Utility Token. It allows you to do things. Ether is the first major utility token. And Ether is required as payment to execute “smart contracts” on the Ethereum blockchain. There are more than 100 ERC tokens created on the Ethereum blockchain. In fact, as an experiment, I created a dummy VTI token in the Ethereum blockchain just to see what was involved.

As an example, let’s say I had a token that represented my Tesla P85D. That token might represent the car itself and in that case, it would be an asset token. Instead, the token could represent the right to drive my car one mile. In the second case, it would be a utility token.

Asset tokens are another type of token where the token represents some sort of asset or product. In the future, the blockchain might be used to identify the ownership of some asset, say a particular piece of gold. Right now GLD, the gold ETF theoretically allows you to hold a small share of their gold. But they sell rights to their gold on deposit in a bank and that bank might have leased the gold to someone else. As a result, owning GLD seems like owning gold but really, it isn’t. A gold token, however, would be tracked to a particular block of gold in a vault or to a particular gold coin. And, you would actually own that piece of gold through a cryptocurrency with no question about the ownership. That’s a real asset token. And in the near future, all assets might be stored the blockchain in this way.

Another type of token is the Equity Token. At one time it was thought that this might be a new way for forming companies. You could get the necessary funding quickly through an Initial Coin Offering (ICO) and that would be big. The SEC says, however, that if you act like an “equity” then you have to behave like one and follow the SEC rules on equity. In 2018, I expect that the SEC will come down hard on some well-known token claiming it to be an equity token. Their action will probably drive that token out of existence and have a very damaging effect on the entire cryptomarket.

I’ve noticed recently that most of the interesting ICOs are opening their doors to anyone in the world except US investors and that’s because they are afraid of US (really the SEC). The Ethereum based DAO coin was the first major token that was offered explicitly an equity token. The owners of the DAO tokens had control over the organization’s behavior so it was clear cut case, however, the rules are quite complex about token types. If your are thinking about creating a token, consult a lawyer. Does your token get you a reward of the actions of others with you as a distant owner? Does the token involve making money exclusively off the actions of others?

It can be very hard to tell if a new coin offering has any value whatsoever. 80% of new coins are probably scams so be careful and maybe just stick with coins that are already traded on an exchange. That’s much safer.

We’ll be doing our 1st cryptocurrency webinar at 5PM Eastern time (US) on January 12th. Click here if you’d like to sign up. I’ve been researching this area for months now and look forward to sharing what I have found across a wide range of crypto topics.
Cryptocurrencies Webinar January 12th!
I am only opening this webinar to our newsletter subscribers — not the general public. This material requires the adoption of a certain level of market psychology, and even if you have thus far only read my weekly newsletter, Tharp’s Thoughts, the concepts we share here are enough to engage in the call. For example, as a newsletter reader you likely have a basic understanding of concepts like:

  • You don’t trade the markets, you trade your beliefs about the markets.
  • Or, how YOU are the most important factor in your trading and that taking personal responsibility for all of the things that happen in life.

These concepts, and the other Tharp Think principles that I have shared over the years, lead you to be empowered in the markets. This collection of articles, distributed weekly, arms you with more knowledge than the general public has about their own beliefs. Understanding and adopting these types of beliefs are crucial before you consider stepping into the virtual currency markets. Most people will lose their shirts in this area because as many as 70-80% of the coins and tokens out there could be scams. One of the top performers in 2017 has risen $0.12 to over $400 but it is an obvious scam and we’ll discuss that one in particular. You have to be able to avoid the scams.

In this webinar, I will cover how cryptocurrencies line up with my teachings about infinite wealth. I’ve heard that many people are saying that cryptocurrencies are not real, they’re just something other people made up. To that end, no money is real. It’s all something someone made up! Almost all currencies in the world today are flat currencies. That means nothing backs them up, not gold or any other physical commodity. A piece of paper we call a dollar bill is worth something only because the government says it’s legal tender and we all agree. Ideas like this are part of understanding infinite wealth. It’s all about playing a game. The games are all made up and if you get that, then you can make your own game with your own rules and win! This is the basic psychology of infinite wealth.

This is your chance to participate in something exciting with like-minded traders, including many of our Super Traders! I hope you will be able to join us for this opportunity!

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Trading Tip

A Hated Bull — Or at Least a Mistrusted One
by D.R. Barton, Jr.
D.R. Barton
I’ve heard it too many times over the years and I continue to hear it today, “This market just has to go down.” Who says this? Folks in the media, people stuck in pre-1980 valuations traps, quantitative analysts counting the days — weeks — months — years we’ve been on this uptrend. And of course I hear the perma-bears who, like a broken clock, are right twice a decade…

Quick — without looking the answer up — in how many calendar years has the S&P 500 been down in the last fifteen years?

The answer is… One.

If you’re like many people, your mind will race to the 2007 – 2009 housing and debt bubble implosion and you may think — how can that be? During that time, however, the only calendar year with a loss was 2008.

Now just to be clear, I’m not a perma-bull — not by any means. I too, believe this market has to go down. Yes, the day will come when the U.S. stock markets will have a 3% pullback, then a 5% pullback, then a 10% correction. Just not yet. And anticipating when that top will be put in hasn’t made anyone any money in many years.

At the risk of repeating myself, markets don’t do swan dives from all-time highs. Large stock indexes have a long history of forming rounded tops. Said another way, they give us fair warning when bigger moves are coming.

Here are a few related facts about this bull run that should inform us moving forward:

  • In four more trading days, we will have the longest streak EVER in the S&P 500 without a 5% pullback
  • October, 2017 established the longest streak ever the S&P 500 has had without a 3% pullback. That streak still continues.

The probability for this unceasingly low volatility to continue for long, however, is not very good. For example, the Dow had up years greater than 25% on ten different occasions since 1950. In the year following that much of a run up:

  • The market experienced a max pullback of 11.1% on average with the smallest pullback at 7.5% in 1996.
  • The market closed higher for the year in 8 of 10 times with six of those annual gains up double digits

So — we can reasonably expect the bull to survive another year in 2018, but don't expect the historically unprecedented smooth ride we saw in 2017…

What could lead to the continued bull push?

  • The reach of corporate and personal tax reform will continue to expand.
  • The White House and Congress will dial into passing a trillion dollar infrastructure spending plan.
  • Global economies and markets continue to support the growth here in the U.S

To support that last point, here’s a table of country ETF returns for 2017:
DR Chart 1
Look at that table for a minute. What do you notice? Not a red number on the entire list. Again, we don’t typically see global markets all swoon at once. In past major market drops, we first saw a few countries head south and then a few more before we saw weakness on a global basis.

I firmly believe that the market will give us some decent clues when it’s ready to give us a bigger pullback. Until that time, why fight the rising tide?

Let’s put a finer point on this — until we see a 3% pullback and then a 5% pullback, why would you even consider moving money to the sideline? More importantly, a 3% pullback or a 5% pullback would mean almost nothing, that’s just normal market “breathing”.

Finally, when we do get a 3-5% pullback, watch how the market reacts next. The reaction will be much more important than the pullbacks themselves.

And until that time, I’ll continue to concentrate on buying even modest pullbacks.

Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com

Great Trading,
D. R.

Workshop Schedule

January 2018 - US
If you can attend in Australia in March, register now before it is sold out as well.
"Finally finding a purpose! I have been rushing through my daily life and never had the time to think and focus. To have someone guiding you on the way to find your own path was incredible. Much less frustration than before. An extra plus was that there were more 'professional' traders in this course." —Fredrick Bodecker

"Glad I came! Too many areas of enlightenment [to write in] this space. Overall, I am walking away with a new look at my thought process." —Michael Herlehy, CO

Note: Peak Performance 101 is a prerequisite to Peak 202. If you have not taken Peak 101 register for the US event in February or the Australian even in March. Then you will be qualified to attend the advanced peak performance workshops.
February 2018 - US
Peak Performance 101 is Dr. Tharp's core psychological workshop, and his most transformative course for over 25 years. If you want to know how great traders think, behave and act so you can achieve consistent and profitable results, without stress, then this workshop is for you. Plus, this is a qualifying workshop for traders to apply for the Super Trader Program.
In just three days you’ll see how all of Van Tharp ’s strategic trading concepts fit into one seamless design for more predictable trading results. Your trading will never be the same.
This course illustrates the relationships among the steps so that the process is logical and reasonable. Moreover, you will learn how to take each step experientially, so you really get it. Dr. Tharp is an expert in delivering elicitation questions to bring forth each person’s most important issues.
March 2018 - Sydney, Australia
Do you want bigger and more consistent profits from the market?

If you want consistency and would like to make profits from the market, you'll want to attend this three-day workshop. We'll show you little-known, closely guarded secrets that you're not likely to find unless you accidentally stumble upon them yourself.

Are you a low-risk investor who just wants to make small, consistent profits each month with only an occasional loss? We can show you how to develop a system that will allow you to develop a unique methodology that will give you that kind of consistency!

Are you a gutsy trader who'd like to make yearly profits of 100%, 200% or even 1,000% per year? Although risky, it is possible, and we can show you how to do it! The interesting thing is that you can do it in such a way that the only money you're risking is the money you've already made from the market. That's real leverage!
What You Will Get In This Course

Beginning on Day 1, you’ll learn what the real Wealth Game is and, more importantly, what it isn’t. You will discover:

  • Who decides the rules in the wealth game
  • What money really is and why it doesn’t even matter
  • What is holding you back from creating infinite wealth in your own life
  • How different people think about money and why it matters
  • The single greatest method for infusing positive beliefs about wealth into your being
  • How to achieve infinite wealth in 7 simple steps

We’ll finish the day by playing that’s designed to get you thinking about the game of wealth in a much different way and to look at your patterns of behavior when it comes to money. You’ll learn more about yourself…your beliefs about money, and what’s possible (or not) just by playing this game

On Day 2, we’ll start with a quick review before I share with you the exact same steps I took to create infinite wealth for my family and myself. You will learn how to model my success and achieve real freedom for yourself. We begin by discovering how to:

  • Become debt-free in less than 7 years, including your home, cars, credit card debt, student loan debt and more, all on your current income
  • “See yourself” infinitely wealthy with the same visualization techniques my Super Traders use
  • Invest in yourself to increase your income by 1000%
  • Use tax expectancy to your advantage as a trader and investor
  • Create inner wealth to achieve the freedom you seek

At the end of the day, we’ll again play the game to reinforce new wealth-building concepts while continuing to think of infinite wealth as a game to be played.

Day 3 begins with a review of the previous day’s notes and discoveries before we cover more in- depth inner work. Before you leave the workshop, you will know how to:

  • Overcome your weaknesses while fostering your strengths with SWOT analysis
  • Come back from a set-back, all with a unique mental resilience tool
  • Begin each day with a clear intention, simply by removing your limiting money beliefs
  • Use the matrix model to achieve infinite wealth
  • Get your life purpose in alignment with your financial goals
April 2018 - US
May 2018 - US

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