We assign the LHCrypto project a "Stable+" rating. We recommend participation in the LHCrypto ICO primarily to speculative investors who are aware of the risks we have identified.
The LHCrypto project comes from a company with a long history and successful business experience. This company has a complete technical base, as well as experienced professionals in its team and an impressive number of customers. The project is entering a dynamic market with the provision of a service that is ready to go, and which will further expand the client base. The project team has enough experience to scale the current business.
The attractiveness of #LHCoin tokens is in the mechanism for receiving income by holders as a percentage of the project’s operational activity, and based on the results of the first year of operation a guaranteed income of 20% of the nominal will be paid unless the tokens rise in price.
At the same time, we note that the project has a legal risk: The project tokens have security features. Given the team's experience, as well as the company's 13 years of operation in financial markets, it can be assumed that its specialists have sufficient knowledge to resolve possible disputes in different jurisdictions. At this point the risk is present nonetheless.
It is also worth taking into account that competition will increase and many traditional brokers will provide access to the cryptocurrency market, and some will pursue similar directions with their business to LHCrypto’s parent, Larson & Holz.
General information about the Project and ICO
LHCrypto is a branch of an existing international broker in the Forex and the Binary options markets, Larson & Holz, in which all operations will be carried out in cryptocurrency. The platform will enable trade on the basis of margin lending.
The creation of this branch is due to the rapid growth of this segment of the financial market, as well as the possibility of addressing a number of issues for a large number of customers, using blockchain technology:
- No restrictions on the deposit and withdrawal of funds
- Full transaction security
- Independence from regulators
The LHCrypto project will allow Larson & Holz to offer the following:
- To make settlements with clients in countries whose foreign exchange laws have always prevented the transfer of funds to foreign companies
- To expand a client base through an audience familiar with the crypto economy and with free funds in cryptocurrency
- Reduction of transaction costs from 6% to 1%.
The total number of tokens to be issued is 100,000,000, and they will be distributed in the following manner:
Smart contract platform: Blockchain Ethereum Contract Type: ERC-20
Token: #LHCoin, #LHCoin_b Soft Cap: US$1,000,000 Hard cap: US$50,000,000
Accepted currencies: ETH, BTC Number of tokens per person: unlimited.
Maximum amount of one transaction: unlimited.
Minimum amount of one transaction: 0.1 ETH or 0.01 BTC. The ICO is divided into three stages:
Duration: from October 30, 2017 to December 02, 2017
20,000,000 #LHCoin tokens will be allocated for the entire Pre-ICO period.
The Pre-ICO results will determine the value of the #LHCoin by the following principle: The sum of all funds raised during the pre-ICO period is divided by 20,000,000 #LHCoin. However, the minimum price of one #LHCoin token cannot be less than US$0.1.
The start date is 04 December 2017. ICO End Date: December 31, 2017.
50,000,000 #LHCoin tokens will be allocated to the ICO.
Token Price: The initial price will be set at the PRE-ICO, but it will be at least $0.1.
The price of the token will increase during the ICO:
- 1st week (04/12/2017-10/12/2017)- value of #LHCoin will increase by 5%
- 2nd week (11/12/2017-17/12/2017)- value of #LHCoin will increase by 10%
- 3rd week (04/12/2017-10/12/2017)- value of #LHCoin will increase by 15%
- 4th week (04/12/2017-10/12/2017)- value of #LHCoin will increase by 21%
Duration: January 01, 2018 to January 31, 2018. Staged for the purpose of distributing a gift bonus:
- If more than US$1 mln was raised:
- 500,000 #LHСoin tokens will be distributed proportionally among the holders on February 01, 2017.
- 500,000 #LHСoin tokens will be distributed proportionally among the holders on October 30, 2019.
- If more than US$10 mln was raised:
- 1,000,000 #LHСoin tokens will be distributed proportionally among the holders on February 01, 2017.
- 1,000,000 #LHСoin tokens will be distributed proportionally among the holders on October 30, 2019.
In the course of the ICO early investors are provided with bonuses (this information is discussed in detail in the chapter "Investment attractiveness of the token”).
#LHCoin_b tokens (making up 30% of total issuance) are issued as payment for the team working on the project and will be reserved as an Employee Reward Fund after the ICO is complete. The #LHCoin_b allocated as rewards to the team will be available to them within 12 months of the Pre-ICO date.
All unsold #LHCoin tokens will be destroyed.
During the pre-ICO tokens will be transferred to investors within 48 hours of the end of the ICO. During the ICO the tokens will be transferred to investors 48 hours after they have been deposited to the personal account.
Description of the services and scope of the project
For each client investing in the ICO, the Larson & Holz broker opens a personal account.
One of the purposes of this personal account will be to display the number of tokens purchased and the movement of items associated with #LHCoin. It also shows all deposits for the following programs: Early Bird Bonus, Referral program and CASHBACK program.
In order to fill the balance, the customer will need to access their personal account and deposit BTC or ETH to the broker's wallet.
Also in the future, a real trade account will be registered on a well-known MetaTrader program available to all versions of Windows, as well as mobile versions for Android and iOS.
Later, when contracts with major exchanges are concluded, the #LHCoin token will also be available as a financial instrument and will be accepted as a source for the margin security of an account (i.e. as a internal payment).
Apart from the fact that the Larson & Holz broker allows transactions to be carried out in cryptocurrency, the service aspect does not boast anything conceptually new - everything is otherwise as for a regular Forex broker.
Engineering features of the project
The smart contract repository is available on the Github site:
#LHCoin is a cryptographic token based on Ethereum blockchain, of ERC20 standard, and available for storage in various wallets compatible with this standard.
As part of the bounty program for rewarding the founders and employees of the project, there are #LHCoin_b tokens which have the same value as #LHCoin, but do not participate in the referral program and cashback program during the ICO.
48 hours prior to the Larson & Holz token floatation, #LHCoin and #LHCoin_b will merge, and bounty tokens will also begin to participate in the cashback program, and they will no longer be different from #LHCoin tokens.
The cumulative capitalization of all cryptocurrency represented on the popular analytical service Coinmarketcap is currently $199.2 bln.
The overall growth of the market is largely due to the recent sudden rise of Bitcoin’s price above the $7000 mark; capitalization of Bitcoin has already surpassed $120 bln. However, the index of dominance of this first cryptocurrency has returned to its April values of 2017, and is currently 61.2%. In other words, demand for Bitcoin is higher than for all other cryptocurrencies.
The price of ETH at the beginning of 2017 was only $8, which has risen to around $300, an increase of 3750% over ten months. Not so long ago, it was thought that projections of $400 or $500 were too bold. At the end of July, analysts from StandPoint Research spoke of the target price of ETH at $400 — with the current price of $200, anticipating 100% growth in six months. But a month later, the price of ETH was only a few dollars from the target. Now many cryptocurrency experts say that ETH is still one of the most profitable investments.
At the beginning of 2017, the capitalization of the cryptocurrency market barely exceeded $18 bln. So, in less than a year the cryptocurrency market has grown more than tenfold, and the average total per diem value of cryptocurrencies has reached the record value of US$9.4 bln.
A few months ago, the co-founder of Breadwallet (Bread) Aaron Lasher expressed the opinion that within ten years the capitalization of BTC would reach $5 trln.
The largest financial market in fiat currencies is the Forex market. The financial structure Bank for International Settlements established by the central banks of different countries has been conducting a thorough analysis of daily turnover in the Forex market every three years since 1989.
In 2000, daily turnover in Forex was $1.5 trln. In 10 years, in 2010, it was already $4 trln. To compare the turnover of Forex with other markets, for example stocks that were $300 bln in 2010, the former is clearly a giant source of cash infusion.
Another financial market research company (UBS AG) is predicting that the average daily turnover of Forex will be $10 trln by the end of 2020. This growth will be affected by the diversification of portfolio investment by banks, insurance companies, hedge funds and even pension funds.
Thus, the LHCrypto project plans to develop its activities in a very promising and constantly growing market, which certainly increases the chances of its successful launch and subsequent expansion. All of this will allow Larson & Holz to scale their business more rapidly.
Competitors and competitive advantages of the project
At present, there are no brokers on world currency markets that have launched services to operate in cryptocurrency. Therefore, there are no direct competitors of LHCrypto in this segment of the market as yet.
However, as Blockchain technologies are being widely disseminated and are likely to be introduced by other market players, the main competitors for LHCrypto are among the traditional top 10 Forex brokers and others such as the following:
SaxoBank - a leading brokerage company founded in 1992 in Denmark. The specialization of SaxoBank is internet trading on the international capital markets. Customers can use a large number of financial tools, such as currency, CFD, options, futures, and other derivatives. In addition, the broker provides professional trading services for investors. Trade through SaxoBank intermediary is done through the SaxoTrader platform. SaxoTrader offers a variety of tools to optimize the trade process. The head office of SaxoBank is located in Copenhagen. The company has branches in the world's largest megalopoli, including: London, Paris, Istanbul, Geneva, Singapore, Sydney, Johannesburg, Tokyo, Madrid, Abu Dhabi, Prague, Milan, and others. The company's services are used by traders and investors from over 100 countries in the world.
Regulated: Finanstilsynet (Danish Financial Services Office)
Payment methods: Bank transfer, credit cards.
Minimum account size: US$10,000.
Minimum transaction size: 0.1 lot.
Leverage: From 1:50 to 1:400.
Spreads: 1.2 Pips per EUR/USD.
OANDA — Founded in 1995 in the United States, OANDA offers its customers innovative technologies for trade in the Forex market. By opening an account using the Oanda broker, a trader not only has access to currency and CFD transactions, but also the possibility of using progressive instruments to increase profitability of trade. One such tool is Oanda’s platform, with functions for in-depth technical analysis, construction of detailed but understandable diagrams, and access to data on the currency market and contract market. Clients of Oanda’s brokers include private traders and investors, as well as large companies and corporations.
Oanda is a licensed member of the Forex market. The company has access to the world's largest archive of quotations, which is regularly updated with reliable information.
Regulated: Commodity Futures Trading Commission (CFTC), is a member of National Futures Association (NFA ID #0325821).
Payment methods: Bank transfer, checks, PayPal.
Minimum account size: US$1.
Minimum transaction size: 0.00001 lot. Leverage: 1:50.
Spreads: 1.2 Pips per EUR/USD.
FXCM – founded in 1999 in the USA. One of the largest brokerage
companies in the world. Its offices are located in all major financial centres. FXCM gives its customers, who are residents of over 150 countries around the world, quality services and effective support. Traders have the benefit of a mobile application. The broker provides free Forex news and training programs to their customers.
Regulated: NFA, FSA.
Payment methods: Bank transfer, credit cards, paper and online checks.
Minimum account size: US$2000.
Minimum transaction size: 1 lot.
Leverage: 1:100 and 1:200.
Spreads: - 3 points per EUR/USD.
The LHCrypto project plans to work in a highly competitive market. The Forex brokers above and brokers from the top 10 have been operating for several years and interact with big businesses and a large number of traders, taking up a significant share of the market and would not want to lose it by making attempts to give access to cryptocurrencies among other things.
It should be noted, however, that problems associated with traditional brokers include:
- Necessity of opening accounts primarily in EUR/USD, which creates obstacles for Arab and Asian customers with strict currency laws
- Restrictions imposed by the financial regulators of various countries, which impede the development of business in many regions
- Problems with internet users using cryptocurrency
- High transaction costs
The advantages of LHCrypto over its competitors are as follows:
- Development of a crypto version of a trading platform developed by the Forex broker Larson & Holz.
- A working economic model that allows investors to receive clear financial guidance.
- Enabling traders to use any financial tools, including cryptocurrency with its low transaction costs.
- The possibility of margin lending in cryptocurrency — opening transactions for sums larger than a customer's deposit.
- Creation of a special fund from which project investors will receive a monthly refund from incoming flow of client funds.
LHCrypto could be a pioneer in providing services for transactions in cryptocurrency, which would certainly help it take precedence over competitors and help Larson&Holz business to increase its market share.
Larson & Holz has operated as a broker in the Forex market for more than 13 years. Because the project does not involve the creation of a new company, but will be implemented on the basis of the business that is already running, the risks inherent in startups are significantly lower in this case.
We will note only the possibility of serious legal risks, namely those related to the #LHCoin token’s function. #LHCoin token is a security token that gives owners the right to realize investment interests. That is, #LHCoin tokens partly involve the function of shares in the broker's profit distribution.
Even if we restrict the participation of investors from the United States and other countries where this is prohibited by law, this will involve a problem in entering the top exchanges, which generally refuse to accept security tokens for listing.
This is probably the only risk to focus on, but it's worth mentioning that Larson & Holz is a broker with a lot of experience and established connections with many leading exchanges, which leads to the conclusion that the company has a specific plan to minimize this risk.
The LHCrypto team is represented by 21 professionals, including professionals in all important areas: developers, marketers, lawyers, support specialists, financiers.
John Larson. Key Investor and Founder. (FACEBOOK)
John Larson heads the Larson & Holz company which is one of the leading international "Forex" brokers.
Georgy Pavloff. Chief Operation Officer. (LINKEDIN)
Since 2015, he has been the executive director of Larson & Holz and is a member of its Board of Directors.
Alexandr Smirnoff. Chief audit executive. (FACEBOOK)
Alexander Smirnov is the head of the Department of Trade Operations and audit at Larson & Holz. Since 2013, he has been the founder and director of the Power Trade Group, a leading center for remote customer service. Power Trade Group is a service that allows all traders to be combined into a single social network.
The management team consists of 12 people; from these the following experts are noteworthy:
Nikita Baishev. Chief innovation officer. (LINKEDIN)
Since 2017 he has been the chief innovation officer at Larson & Holz.
Romany Sedhom. Blockchain integrator. (LINKEDIN)
Since 2017 Romany has been employed as Blockchain integrator at Larson & Holz. In 2015-2017, he was head of the sales department of Divatek Trading Company.
Alena Narinyani. Chief marketing officer. (LINKEDIN)
The chief marketing officer at Larson & Holz since 2017. She is currently the CEO of the Independent Journalism Agency.
- In 2008, she ranked second in the Russian Student Social advertising festival in the category "Social publication" with the publication series "Gazprom for children"
- In 2009, she received a diploma in an all-Russian journalism competition
- In 2013, she was nominated for the "Media Manager of the Year" National Prize;
- In 2013, the winner of the "Growth Foundation" journalism competition in the category "Best publication in the federal Internet media"
- In 2013 in the "Foundation of growth" journalism competition she received a prize in the category "best journalistic work on youth entrepreneurship"
- In 2017, recipient of a Moscow Government Award for contribution to the development of capital business
The team has 6 financial consulting advisors. Among these advisors we should note Yan Art — vice president of the Association of Russian Banks.
To summarize, the team has assembled experienced marketers who can play a key role in the development of LHCrypto. The presence of specialists in Blockchain technology and in smart contract programming is also key.
Development strategy and roadmap
The main tasks for the project are clearly stated:
- As a result of the pre-ICO, the nominal cost of #LHCoin will be generated and the initial capital for the startup project will raised.
- The ICO stage.
- The POST ICO stage (January 1, 2018), where the financial results will be drawn up, and preparations will begin for the workflow process.
- February–April 2018 — Technical development:
- Organization of the automated receipt and disbursement of funds from the broker's accounts in cryptocurrency.
- Customization and configuration of broker software for cryptocurrencies.
- Requalification of the broker staff.
- Signing a contract with exchanges for listing of #LHCoin tokens.
- May–October 2018 — commencement of receiving customer payments:
- Start of receipt of payment from customers in cryptocurrency. Activation of the monthly dividend income distribution scheme.
- Debugging the crypto broker system as necessary.
- Start of advertising campaign.
- November 2018 — Doubling coin value:
- Doubling the exchange value of #LHCoin tokens.
- Doubling the client base.
- Opening additional sales offices.
- December 2018–October 2019 — Further growth of capitalization:
- Connecting the most liquid tokens of other companies under the terms of margin trading.
- Preparing to receive your own tokens, as payment and currency deposits of traders.
- November 2019 — Accepting #LHCoin tokens in broker account as payment:
- Accepting company tokens as payment.
- Activation of #LHCoin Token Rate Insurance System.
Thus the Larson&Holz project, a crypto version of its current online business, begins with a pre-ICO and is intended to last for two years. At the end of this period, developers expect to have created a crypto broker with trading volumes comparable to traditional Forex brokers. "We have every reason to believe that a new broker unit within 1-2 years will take on a significant portion of the existing business and yield significant profits to its investors and founders," the founders comment.
Currently the product is being promoted by bounty hunters. 4% of total token issuance, which is 4 mln #LHCoin_b is allocated to the bounty marketing strategy.
Their distribution is as follows:
In addition, a referral program has been developed to promote the product, in which one can earn 3% of the sum of attracted investments. The reward is paid in ETH or bounty tokens in a ratio of 1 to 10 (for every 100 investor-purchased tokens a referral receives 10 bounty tokens #LHCoin_b).
In addition, there is an Early-Bird Bonus program for attracting investors during the ICO period, allowing early investors not only to purchase tokens for a lower price, but also to earn on later sales by a token broker.
References to the project are found on many internet resources, most of which have a fairly wide audience — Coinspeaker, 52ico, Cryptopotato, Coinspot, Go Dubai, Coinfox, the Financial, Coin Journal and others. A total of 17 internet resources in which information on the project can be found are available on the site.
Larson & Holz has its own channel on YouTube, as well as a page on Wikipedia. The documentation is translated into several languages, which also allows for the expansion of the audience for the ICO.
With regard to the global strategy for the promotion of the product, the company plans to intensively increase the marketing budget based on the amount of funds raised — up to 80%. It is easy to calculate the amount that the company will be able to allocate to marketing based on the target volume of investments specified in the white paper:
Since Larson&Holz has been operational for many years, the company already has a customer base — over a million clients from around the world. One of the aspects of the global marketing strategy is to attract cryptoinvestors to the Forex market, where they will be able to trade cryptocurrencies along with the main financial tools.
The combination of factors described indicates that the company has a strategy for the future promotion of the product and that it has all necessary tools to implement it both for the period of the ICO and the long term period.
Economy of the Project
The financial plan of the LHCrypto Project, presented in the white paper, is simple. The future economic strategy is directly dependent on the results of the upcoming ICO. The founders have worked through various development scenarios and present their calculations in the table shown below:
For the ICO the team sets fairly realistic goals. The ICO is considered successful and sufficient for the intensive development and implementation of the objectives; the founders are declaring a bar at $10 mln. With this achieved, the launch date of the project will be significantly accelerated and the advertising budget will be increased.
The broker will invest in the project and invest from its own funds if investment does not exceed the "Optimal" plan by more than 20%, i.e. if the total amount of funds raised are less than $12 mln.
The project team has developed 3 payment mechanisms for #LHCoin token holders:
- Early Bird Bonus
- Token Rate Insurance System
These mechanisms are discussed in detail in the "Token investment attractiveness" chapter.
Token investment attractiveness
#LHСoin is an investment token, allowing holders to receive a monthly profit from operating activity. In this case, the profit will represent a percentage of incoming client flow to the broker accounts.
The mechanism is named Cashback and is described in the documentation as follows:
- During any month, the broker's accounts receive customer funds for trading (to date the monthly income for these accounts is more than $3 mln).
- The company will tranfer 5% from each customer payment from its own funds to a specifically created fund. The company has such an opportunity due to the economic benefits of a transition to payments in cryptocurrencies.
- At the end of the month, the amount accumulated in the fund will be distributed among all #LHcoin token holders.
In the diagram, this looks as follows:
The transfer will occur automatically. The logic of payment reflected in the smart contract is guaranteed and not subject to change.
In order to reduce the risks for token holders during the first year after the ICO, the company has developed a "Token Rate Insurance System" mechanism which guarantees a minimum return of 20% for investors.
So, according to the documentation, if in one year after the start of the listing of #LHCoin on exchanges, its value is less than the denomination + 20 percent, the broker will reimburse the holder with the missing amount. This guaranteed profitability system is as follows:
According to the estimates of LHCrypto analysts, moving to the cryptocurrency model will help expand the client base at least threefold, and increase the monthly cash flow to accounts by up to $10 mln. Thus, monthly deposits to the accounts of token holders can be up to $500 ths. If the entire volume of tokens is successfully distributed in the ICO (70% of the issuance), and given that #LHCoin_b tokens do not participate in the Cashback program, the 1-token payment for the year's total can be up to $0.085.
Since the nominal price of the token will be determined according to the amount of funds raised during the pre-ICO, for early investors (assuming that less than $2 mln will be raised), the economic benefits may be between 20 and 85 percent, which indicates a re-evaluation rate of the token. The founders expect the value of the token to increase in the first year of token flow by two times, which in our view is a reasonable target level. However, with increase in the amount of funds raised during the pre-ICO above $2 mln, this effect may decrease as the minimum value of the token set at $0.1 begins to grow when this amount of funds raised is reached.
In addition, in order to increase the investment attractiveness of the token during the ICO stage, the project team has developed a bonus system, the essence of which is that early participants will benefit from the inclusion of later participants in the game: the sooner an investor acquires tokens, the more profit he will receive.
Schematically, this mechanism is displayed below:
In addition, all investors, regardless of the stage of the investment, qualify for the distribution of the bonus during the post ICO.
We take note of the fact that the project team has been very thorough in creating token investment attractiveness as a tool for all types of investors:
- For long-term holders of #LHСoin the increase in price will be directly dependent on the growth of the company's business.
- For medium-term #LHСoin investors a Token Rate Insurance System is available in the first year of the flow.
- For short-term investors there are pre-ICO and ICO bonus systems that can cover risks for the earliest participants.
The information contained in the document is for informational purposes only. The views expressed in this document are solely personal stance of the ICOrating Team, based on data from open access and information that developers provided to the team through Skype, email or other means of communication.
Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud.
We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.