Are ICOs a Bubble?

· December 16, 2017 · 7:00 pm
ico, ICOs

Commentators are usually happy to apply sweeping statements when discussing the ICO phenomenon, referring to an “ICO mania” and ICOs generally being out of control.

Others see it as a revolutionary, disruptive, even democratic new start-up model. The truth, of course, is that we have a little bit of both.

The Three W’s

In the first instance, when you consider what an ICO is in practice, you see that, in theory, you need nothing more than a website, a white-paper and a wallet address to set up one.

If you make the first sleek and the second intellectually appealing, the chances are that – regardless of whether your business model is legitimate or not – you will attract a lot of interest and, consequently, a lot of Ether. An ICO founder can become an overnight millionaire simply by selling a concept – and can in theory just walk off since he has no formal responsibility towards his investors.

The second problem is that the media is awash with stories of people who have made a mint off of Bitcoin’s meteoric rise and those of other cryptocurrencies. There are an awful lot of people out there who feel like they have missed out on an easy opportunity to make big returns – and many of them are now hopping into YouTube channels where so-called Crypto gurus are handing out advice on how to identify the next ‘moon’.

So, in that sense, ICOs, from a general perspective, can most certainly be considered a bubble.

Wisdom of the Crowds

On the other hand, having myself personally now invested in a range of ICOs – and having done so on the back of my own research – it is clear to me that there is a solid body of ICOs out there that do have legitimate propositions. Datum, ClearPoll and WePower look to me to be ICOs that fit into this category – although I will point out that you should always make that judgement for yourself.

You must go looking for them, of course, and you should do your due diligence – read the white-paper and speak to the project team in question; on a side note, I spent 10 years working in Fintech for a company whose name I won’t mention – and I don’t recall ever entering a conversation once with the CEO. On the other hand, I have spoken to probably three dozen ICO project leads now – this is a new way of doing things, and even the Big Cheese-type figures have understood that acting like a Big Cheese no longer cuts it in this emerging age where the Blockchain is flattening everything including, it seems, social relations.

One problem, of course, is that you may not feel that you are qualified to perform the research necessary to arrive at a grounded calculation of the potential risk vs. the potential rewards of a given ICO proposition.

That is likely very true – but this is an entirely new phenomenon and even long-serving professional investors are still getting to grips with the various, at times unorthodox context of the ICO model.

This is where the wisdom of the crowds may play a role and it may help to join in with an ICO forum, Reddit groups, and so forth. By entering discussions with peers who are also asking the right kinds of questions and who are perhaps asking questions that you yourself may have not covered, you are at least making sure that you stand a greater chance of covering all the angles.

YouTube videos, on the other hand, whilst useful in many cases, remain a more passive form of research. You are simply being presented with someone’s opinion without the ability to engage with it, seek elaboration or challenge it.

Direct Line

Finally, no ICO worth its salt refuses to engage with the public – a Slack channel or Telegram channel is usually in place to allow potential investors to speak with representatives of the project. If you find that you are not getting reactive responses or are simply being ignored, I would advise walking away. Whilst anecdotal, I have observed that the best ICOs are those that demonstrate a genuine enthusiasm in making themselves available to engage with the general public.

If investors choose to be more diligent, more discerning and more questioning, and leverage each other and the wealth of information (both general and ICO-specific) that exists within forums and elsewhere, then the ICO bubble will indeed burst but for the right reasons.


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