ICOs: Healthy speculation or blistering?

With over five million US dollars, Humaniq has made speeches about his ICO. That was on April 19, 2017 and was eclipsed as a gigantic ICO, just a week later by the gigantic ICO of Gnosis. It took just a quarter of an hour for the tokens to be sold to investors for 12 million US dollars.

But these are just two examples: If you compare the amount of money that projects received through ICOs with what VC companies provided as funding, the ratio between these funding strategies is almost 50/50.
What can worry you, however, is that more than 75% of investors are not looking for long-term investments, but are speculating on strong increases in value.

There is nothing against investments with high risk and high reward opportunities. But the lack of structure, the novelty of the ICOs and the opacity of many initial coin offerings should remind you to be prudent.

The next hot currency for the Bitcoin trader

A big problem with speculation is that ultimately weak projects are highly speculated about their actual value by a lot of capital like this: https://www.geldplus.net/en/bitcoin-trader-review/.

Unlike applications from classic Web 1.0 or Web 2.0 like Facebook, Pinterest or Google, blockchain applications have a rather thin, minimalistic application layer on an extensive Bitcoin trader blockchain layer. In the case of classic webapps, this is rather the other way around: on a minimalist HTTP or TCP/IP protocol there is an extensive application layer.

This means that applications can move from one blockchain to another – depending on the success of the blockchain. For example, there have been applications that have migrated to the Ethereum blockchain – one example is Storj.
However, this also means that an enormous number of often thin applications are started on existing blockchains.

„The boom in ICOs can be traced back to the app explosion of the early 2010s,“ says Brad Hines of the e-commerce website NerdPlaythings.com, „As you search for interesting ICOs, you have to dig through hundreds of crypto currencies that often don’t really differ.“

Hines added that not all ICO tokens were successful and many were quickly thrown back by Exchanges.

The experience with Bitcoin has made many crypto trader greedy

„Oh. If I had invested in 2012, I would have been a multimillionaire now“ – that’s how many crypto trader read a review. Accordingly, it is not surprising that many crypto trader people sense an opportunity within the framework of the ICOs.

In such an environment it is important to make conscientious, well-founded investment decisions. Unfortunately, the initiators of the ICOs do not make this easy, since there is no standard with regard to the presentation of possible risks. As the project The DAO showed, additional significant risks can occur that were not previously clear.

The search for an ICO standard
To be fair, many people think that the ICO model is currently in an optimization process, so there is hope that this process will become more standardized and thus risk-free.

„There is currently no set of best practices for these initial coin offerings,“ said William Mougayar, founder of Startup Management and author of The Business Blockchain.

Ultimately, however, this is not surprising: a big advantage of the ICOs is the fast access to capital. As Gnosis shows, an ICO can implement seed funding in extreme cases in just a few minutes.

This of course makes speculation dangerous as well, since the true and hypothetical value of an investment is indistinguishable and therefore signs representing the health and future position of an asset can be overlooked.

Liquidity is the trump card
That being said, it’s too easy to call all speculation evil. Speculation is ultimately even necessary to improve the liquidity of an asset. This is necessary for assets that would otherwise not be sufficiently visible. Speculation increases the trading volume of an asset, which preserves the liquidity of the investment.

To illustrate this, let’s look at an example beyond the crypto world: Let’s say someone has an eye on a fancy car that is to be sold for 30,000 euros. The potential buyer has however only 12,000 euro – however a collection at original-packed Comicbücher in the value of 20.000 euro. Currently the collection is not liquid, since he cannot use these in the purchase for the car.

The buyer must find someone who buys the collection – if necessary with a discount, it should go fast – and wait accordingly, until the sale of the comic books is completed.

But the car lover is faced with a problem: even if he can sell his collection quickly at ComicCon – it is not now. Au