Perhaps ICO investments are not yet large enough to matter, but one would wonder if that is drawing away some of the money that would have otherwise been invested in the more traditional way measured by the article.
Probably ICO's as a stable 'investment' vehicle in it's current form, as the market will eventually correct itself to match the real underlying value.
That doesn't mean there isn't a ton of real value being generated here or that it doesn't have the potential to be at the scale it is now. It just might be too much, far too soon.
Building companies and innovating is hard, flooding capital to it will boost the value generated but you can't simply manufacture it artificially by throwing money at it unless there is real talent and business models underneath.
Just look at that Circle startup that raised a record seed round based on a nice sounding team and a half-baked idea. Too much money can actually hurt some companies chances.
I don’t disagree with your characterization of many ICOs.
But... is there anything wrong with that? It’s a junk investment, but aren’t junk investments just as valid as strong investments? If my gift card for an unreleased product trades for pennies on the dollar... isn’t that still a valid investment?
Why do they? There's nothing special about an ICO, other than it's "on a computer". When it comes to the concept of investing, they're not doing anything new.
My feeling is that the success of ICOs is a side effect of the meteoric rise in value of Bitcoin and Ethereum.
There are many people who have become virtual currency millionaires. At that point anyone would be looking to diversify. Purchasing traditional assets would mean paying taxes on the coins. Purchasing ICOs just diversifies your coin holdings into an even more speculative asset class.
> if you raise lets say 10million during an ico (typical amount raised 6m ago), there isnt much you can do with 20M (i.e you keep the crypto and it doubles) that you cant do with “just” 10M.
Yeah that's the most perplexing thing with those ICOs IMO. We could argue all day whether this and that idea has some merit or not, but many of those start ups end up raising orders of magnitude more money than they should ever need to build their thing. Many of these projects could be completed by a modest team in a few months. That's just absurd and a complete waste of resources.
Participating in ICOs are not the same as investing in the company and receiving equity in return. The vast majority of tokens are not backed by equity in the company that created them.
Sure, that's true if you are raising from a few, relatively speaking, large investors, and also only if you care about fundraising as a one time event, instead of funds management as an ongoing process. The entire point of ICOs seems to be to raise from many small investors at once, perhaps skirting, among other things, accredited investor laws.
Even for large companies: say we want to do my crazy invest at the team level idea: I don't really agree it would be simple to operationalize all of that money flow, and I do actually think having a blockchain could help if that is your goal, which is a big if.
I'm not here to hard sell anyone on crypto, but I also am not comfortable with the wholesale dismissal of it either, so I'm definitely hoping a lot of people disagree with me and we can tease some of this stuff out.
I'd wonder how much of that is new money poured into the ICOs. Selling something in the crypto-world usually means trading it for BTC. So I'd imagine all crypto money finds it's way into bitcoin eventually.
Sure, and they'll hold their value even in this scenario. But (other than the hedge funds) I suspect many people investing in these ICOs aren't big investors in those, and even among those that are, I doubt they'd like to see their checking account become worthless.
How about analyzing whether the projects funded by ICOs make any sense? With the current mania the token sales model hardly matters. Also after the mania is over, probably no matter what the model, people won't be investing, since the stupid money will run out at some point.
My feeling is that most people are investing profits from another virtual currency. So it's not "real money" (in the sense of doing a deposit of USD and sending that to the ICO), but an existing paper profit that they want to try multiply further by putting it into another speculative asset.
Not necessarily true at all. ICOs can offer revenue pegged tokens against company future revenue - which is then used to buy back the tokens from the investors.
I don't think it is a lack of funding from project from the ICO side. There are great funds out there which had success after an ICO (like C20, ICONOMI).
The quoted comment is addressing traditional investors who possible already manage funds with "real-world" assets and would like to invest at least partly in cryptocurrency as well. I am hoping that these smart contracts might make it easier for them to join and consequently increase adaption of cryptocurrency investments overall.
ICOs are a perfectly valid way to raise money. In fact, as long as you don't raise more than the cap specified by Reg CF ($1,070,000), it's no different than crowdfunding.
I predict that future startups will probably have a small ICO that is covered under Reg CF, and then a bigger token sale under Reg A.
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