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With the sheer amount of cryptocurrency ICOs in the ecosystem, it is obvious that many of them will not be nearly as successful as they say. While this new way of raising money is appealing, it will not automatically turn an idea into a successful product or service. Ethereum co-founder Vitalik Buterin recently confirmed how the ICO market is in a major bubble. He also claims most projects will fail in the end. That is not a positive outlook, albeit it only confirms what level-headed individuals knew several months ago.
MOST ICO PROJECTS WILL FAIL MISERABLY
As is the case with any nascent industry, the chances of success and failure are not evenly balanced by any means. Just because projects and teams raise enough money to work on their idea does not mean they will be able to create a viable product or service. Even if they get that far, the venture may eventually fail and investors will still lose their money in the end. This is not a popular opinion when it comes to ICOs, but it is the unfortunate truth we will all have to deal with sooner or later.
In the world of cryptocurrency ICOs, there is a clear and present bubble forming. Dozens of new projects launch every single week, all of which try to cater to investors with their groundbreaking ideas. One thing nearly nine in ten projects have in common is how they have yet to provide a demo of a working product. Just writing up a white paper has absolutely no value, even though it provides a more technical explanation of what the team aims to achieve in the future.
Ethereum co-founder Vitalik Buterin recently stated how the ICO market is in a bubble. That statement caught a lot of people by surprise, although it is good to see such respected individuals say what most people already knew. His word of advice to investors revolves around how “the current trend of large token sales is not sustainable.” It is certainly true there are hundreds of new ICO tokens every month, most of which are only funded due to hype and excitement rather than any technological value.
Things have gotten a bit out of hand when it comes to cryptocurrency ICOs. These token sales have caused issues for the Ethereum network on more than one occasion as well. Things need to be contained before things go from bad to worse. At the same time, Buterin states how no one should underestimate the value of ICOs. There will be successful projects in this industry as well, although they will be a significant minority compared to the concepts that will eventually fail.
Vitalik Buterin summarized the ICO bubble as follows:
“What we are seeing lately is that people are taking this idea too far, and there are projects that issue a coin not because it makes sense to issue a coin but because they have a product they can sell and raise money. Without a coin there is no business model. This creates the imbalance of incentives in the community at the moment.”
Assuming the ICO market collapses entirely – partially thanks to China’s regulatory measures – things can play out in many different ways. There will be a period during which the ICO market needs to cool down. People will lose good money if they invest in the wrong projects. It is up to investors to conduct their due diligence and not just invest in everything that has the ICO tag on its back. Some projects are also valued way too high, which only creates more expectations and market pressure. It is an unsustainable model in its current form.