With over 300 ICOs to-date of Ethereum tokens and crypto assets, this largely unregulated market is becoming a breeding ground for disruptive biz models and scams alike.
With many well known VCs and visionary leaders in the crypto space as founders and advisors leading the charge, we are seeing many ICOs copying each others' models and taking in millions of dollars in investor funds.
Many have been launched on a disruptive idea, a simple whitepaper, team members profile curated with real or fake social networks and advisors name dropping with the likes of Vitalik Buterin, Roger Ver, Brock Pierce, etc.
It is almost impossible for newbies and noobs to differentiate and make the right investment decisions. Unlike IPOs which are highly regulated and pre -IPOs which are only open to accredited investors, anyone can send bitcoins and Ethereum and receive tokens which then list at crypto exchanges at a valuation of 10X or even 100X the initial investment. These valuations easily surpass the recent opening market valuations of Facebook and Snapchat, companies who are already running real businesses with real customers.
It's no wonder that millions of seasoned investors and noobs are alike are chasing the ICOs expecting returns of 100X their initial investments. Newly listed ICOs are already seeing bubbly valuations many of which have yet to launch a working product or service or have any real customers months after listing.
In the last few months, we have seen the ICO and launch of debit card products from Xapo, Wirex, TenX, Monaco, to name a few. For example, the recent hype of Monaco's phone App with VISA https://blog.ethereumwisdom.com/2017/06/16/monaco-ethereum-bitcoin-debit-card/. When investors found that the App didn't have the VISA logo, they dumped Monaco tokens causing a 40% fall in price at one point. Sharing similar product concepts, they all hope to capture a slice of the trillion dollar credit card market dominated by VISA and Mastercard.
Will they succeed? Only time will tell. The fact that Mastercard and VISA are the dominant players in this space means that not all will make it.
This has caught the attention of the SEC https://cointelegraph.com/news/sec-is-still-eyeing-to-regulate-the-ico-market and Chinese regulators https://news.bitcoin.com/chinese-regulators-consider-crackdown-on-icos are looking to regulate ICOs given that millions of innocent citizens could be hurt by a market collapse like the dotcom bust of 2000s.
So how should we evaluate if an ICO is worth its salt? If you do not have a technology background, it is almost impossible to tell if the business model is viable.
Stay tuned.