Vitalik Buterin, the Co-founder of Ethereum has warned that we are in an ICO bubble, which could lead to people losing money.
What is an ICO?
ICO’s have been used as an unregulated means of raising funds for new cryptocurrencies. ICO’s are similar to crowdfunding, however investors are drawn to buy the ICO’s in the hope that after the cryptocurrency is launched, their investment will rise.
Why the warning?
ICO’s have raised over $2 Billion over the past year, and whilst it is a good way for new companies and cryptocurrencies to raise money in order fund their projects, it is feared that some companies are taking advantage of this new opportunity in obtaining more money than the project needs.
“I indeed think that we are in a bubble because all the cryptocurrencies are rising and people have a feeling that they will always continue to rise… A lot of projects are raising more money than what they would be able to in the normal VC market, and sometimes there is no match between the necessity and usefulness of the project… Additionally, this market is still young and people still don’t know how to differentiate between projects that will exist in the long term and those that won’t… A lot of projects will fail and people will lose money.” (Vitalik Buterin)
We have already seen China take steps in banning ICO’s (see our recent post China Bans ICO). The Financial Conduct Authority in England has also issued a consumer warning in relation to ICO’s.
If you are thinking of investing into ICO’s please conduct due diligence on the company and the ICO itself, and be mindful that as things stand ICO’s are not regulated.
We are not investment or financial advisors and are here to provide news and our opinions. Please be fully informed regarding the risks and costs associated with trading the financial markets and the Cryptocurrency market, it is one of the riskiest investment forms possible.