Ethereum (ETH), Polymath (POLY), Overstock (OSTK): Tracking the Uphill Climb for STOs

January 29, 2019 / by Bill Noble

With the launch of Overstock’s (OSTK) T-zero product, it is a great time to check the technical status of what we call “the STO trade.”

STO (Securities Token Offerings) are said to form the backbone of the digital securities universe. STOs may trade on Overstock’s (OSTK) t-Zero platform.

STO’s will presumably be better than ICO’s because the know your customer (KYC) and anti-money laundering (AML) work will be a part of launching credible tokens that will be considered kosher by the SEC. Also, STO’s will allow companies to raise funds for around $25,000 creating huge savings over the $250,000 in Wall Street and stock exchange fees to do an IPO versus launching on the stock market.

One of the first charts to check for the STO trade might be Ethereum (ETH). The reason Ethereum could be relevant is that STO issuers will likely receive Ethereum (ETH) in exchange for the new tokens.

Right now, Ethereum (ETH) is hanging on above the last material Fibonacci retracement level of the recent rally. That level is the 76 percent retracement, and the price is $103 (Figure 1). If Ethereum can hold that level, it would be positive. If Ethereum (ETH) falls below that level, it would be quite worrisome.

 class= Figure 1

Polymath (POLY) is another token to keep an eye on. Polymath (POLY) has a platform that allows potential issuers of STOs to find a list of vendors to help them with everything from marketing to KYC-AML. The Polymath (POLY) token also allows for funds to be raised using that token as an alternative to raising funds in Ethereum (ETH).

Technically, Polymath (POLY) is sitting on horizontal support that dates back to Fidelity’s announcement of a digital asset custody solution for institutions. The level is 2,626 Satoshis. It is important for that level to hold (Figure 2) if the STO trade is to remain healthy.

 class= Figure 2

Looking at Overstock (OSTK), it seems that the t-Zero uptrade may be overdone. Overstock (OSTK) is failing at the bottom of an expanding triangle formation near $19.84 (Figure 3). Overstock (OSTK) has to get above that point in order to eliminate risk of a post t-Zero disappointment trade.

 class= Figure 3

Bottom Line: With the launch of t-Zero and related STO instruments near key technical levels, a breakdown or break higher in this sector has the power to lead other instruments like Bitcoin (BTC).

The STO trade is a big theme and the Crypto.IQ Trading Desk is keeping a close eye for signs that this theme will help or hurt the crypto market.

Join me there as we figure out whether STOs are a trade for now or later.