Sharpe Capital (SHP) is betting that it can capitalize upon investment geeks’ proclivity to predict market outcomes. Sharpe is building an AI-driven prediction market based on hundreds of know-it-alls’ opinions about the market.
The British Ethereum blockchain platform has collected over 1.84 million market predictions from 831 users and run them through its artificial intelligence Centuri. The plan is to sell the predictions to the public and reward the most accurate seers with Sharpe’s Sharpe Platform Token (SHP) ERC20 cryptocurrency.
The secret ingredient in Sharpe’s plan is reputation scores. Predictors with a good reputation will supposedly get more SHP. Those with a bad reputation will make less money. Centuri and not a human will compile the reputation scores which is supposed to make them more accurate.
A New Way of Measuring Market Analysts
The idea is to provide a more accurate means of evaluating market analysts. Sharpe’s measure for analysts is real world results and not marketing or internet chatter.
If it works as advertised Centuri will be a boon to investors because anybody can call himself or herself a market analyst. From my experience, the words market analyst usually mean; “I read The Wall Street Journal or The Financial Times on the way to work today.”
The initial plan at Sharpe Capital is to give all investors access to cutting-edge AI and prediction markets. The platform is reportedly generating some profit Sharpe’s website claims it paid out $105,000 in January 2018.
Algorithmic Trading Based on Prediction Markets
The next step at Sharpe is to implement algorithmic trading based on the predictions gathered by Centuri. The idea is to harvest the ideas from the best analysts, then create trading algorithms based on them.
The algorithmic trading was scheduled to begin last month in July 2018. Sharpe plans to roll out an iOS app for Apple devices this month (August 2018). Unfortunately, the Android App is scheduled for roll out until November 2018.
An arbitrage bot is scheduled for unveiling in September 2018. By October Sharpe hopes to unveil a trustless open source ledger based on Ethereum Smart Contracts. The ledger is an open source solution intended to be “a new ‘gold standard’ for fund management and transparency.”
An Index Based on Market Sentiment
Sharpe plans to take prediction markets and behavior based investment to the next level with a “Global Sentiment Index” in December. The idea is to create indexes of stocks, cryptocurrencies, commodities and other investments based on market sentiment.
This might be profitable because stocks and cryptocurrencies Mr. Market likes often have higher valuations. Examples of such equities include Amazon (NASDAQ: AMZN), Berkshire Hathaway (NYSE: BRK.B), and Alphabet (NASDAQ: GOOG). Market sentiment is why questionable stocks like Chipotle (NYSE: CMC), Tesla (NASDAQ: TSLA), and Netflix (NASDAQ: NFLX).
Conversely, there are very good stocks with low prices because the market dislikes them. A great example of such a stock is Ford (NYSE: F), another is Kroger (NYSE: KR).
Sharpe’s sentiment index is potentially worth a lot of money because investors would be able to use it to predict market movements. For example, a person might know which stocks to short or which to buy and hold. Speculators would use the index to determine what currencies or commodities to bet against.
Sharpe plans to cash in on that by licensing its Global Sentiment Index to hedge funds, investment bankers, and other institutional investors. A logical use for might be to create Exchange-Traded Funds (ETFs) based on market sentiment.
A Token that pays a Dividend
A crowd sale of a second Sharpe token the SCD is planned for March 2019. Interestingly, the SCD is designed to pay its holder a dividend.
That makes it more like a stock or a bond than a cryptocurrency. All money raised from the crowd sale of SCD will go into a fund designed to leverage Sharpe’s intellectual property (IP). The SCD owners will receive a quarterly dividend payment based on the fund’s performance.
One has to wonder if regulators will allow that. Many cynics will claim that Sharpe is trying to do an end run around the laws and regulations governing stocks.
A Next Generation Fund Driven by AI and Cryptocurrency
If they do Sharpe might make a lot of money because it has figured out how to create a next-generation hedge fund or mutual fund driven by AI and cryptocurrency. More importantly, everybody not just the rich would theoretically be able to participate in that fund.
This would democratize investing and spread the benefits around. It would open the benefits of such trading to everybody.
Unfortunately, the fund will also expose everybody to the risks of the market. That is sure to give a lot of central bankers some serious nightmares.
An intriguing and logical use for the Global Sentiment Index would be to run a sovereign wealth fund. A sovereign wealth fund is basically a government-administered hedge fund designed to increase the wealth of a region or nation.
Prime examples of sovereign wealth funds include the Public Investment Fund of Saudi Araba, the Government Pension Fund of Norway, the China Investment Corporation, and Malaysia’s Khazanah National. An obvious question here is will people tolerate their tax money being administered by AI?
Is the SHP a Good Cryptocurrency?
Okay so Sharpe has the potential to disrupt the entire financial service industries and put a lot of MBAs out of work. That still avoids the obvious question: is Sharpe a good cryptocurrency?
The answer is sort of: the SHP token achieved a Market Price of 12.5¢ which is good for a basic Ethereum token on August 6, 2018. The Sharpe also had a Market Capitalization of $2.15 million and a 24-Hour Market Volume of $1,067 on the same day. That was achieved on a Circulating Supply of 17.18 million SHP coins and a Total Supply of 32 million SHP tokens, Coinmarket Cap data indicates.
These numbers point to a good basic cryptocurrency that has not been overhyped. More importantly, it appears that Sharpe plans to make money the old fashioned way – by creating new products and selling them rather than marketing coins.
Importantly, the SHP token is part of Bancor’s (BNT) liquidity network. The liquidity network is designed to guarantee the buying power of cryptocurrencies by making it easier to exchange one ER20 token for another. That will make it easier to buy and sell SHP.
So yes, SHP is a pretty good deal for a basic utility token. Its creators appear to have a platform that works and a product people might pay money for. If you are looking to make a speculative play in an ERC20 cryptocurrency, Sharpe Capital is worth a cursory look.
Can Blockchain Prediction Markets Make Money?
Sharpe is certainly the best of the cryptocurrencies based on prediction markets out there. There’s a bunch of these around including Gnosis (GNO), Stox (STX), and Augur (REP).
An inherent advantage that Sharpe is avoiding gaming and gambling. That means Sharpe is not violating anti-gambling laws like America’s Wire Act.
It also avoids controversies unlike Augur. Augur has been criticized for taking bets on President Donald J. Trump’s (R-New York) assassination, Forbes reported. Augur has also taken wagers on the odds of Warren Buffett and Jeff Bezos’ murders.
Those who want to invest in a blockchain prediction market should definitely check out Sharpe. My prediction is Sharpe might be the only blockchain prediction market to survive and make money.