IOTA NYC meetup, presentation by Clara Shikhelman 4/2/18
First off, feel free to read this link:
**6.3 billion** dollars have been posted into ICOs so far this year, which is more than the whole of 2017. Does that sound like a lot to you? Because it sure as hell does to me.
On one hand this might seem bullish – but id like to explain to you why its not, and why this ICO fad has been slowing down the rest of the market.
It seems that in these times (and especially past couple of months), everyone can establish some sort of team with a local blockchain-nerd, add some visionary promises and perhaps conjure up a whitepaper (but not necessarily), and then somehow be able to rake in millions from investors hoping for those lovely 100x trades.
What do you think happens when these guys, without any product to show for whatsoever, do when their ICO is over? They naturally cash most of it out – to secure profits (because who wouldn’t when you just earned millions from incredibly little work) and of course also to be able to fund their continued work. So in short: when you participate in an ICO, fiat money pretty much leaves the market, in exchange for another useless token entering.
So why is this a problem? Well, when the projects cash out, they’d do it through Bitcoin/Ethereum and thus push down their values, and as a result also most other alts.
*But dude*, its only 6.3 billions and market cap is above 350 billions – thats nothing? **No**, this is something that a lot of people unfortunately fail to understand. A market cap of 350 billions does in no way mean that 350 billions of dollars have entered the market, I could explain why but that would make this post a lot longer. No one knows exactly what the ratio is between fiat influx and market cap increase, but JP Morgan analysts calculated at one point that the initial rise to a marketcap of 300 billions was the result of a 6 billion dollar fiat influx. Does 6.3 billion start to sound like a lot to you now?
If all the ICOs from this year decided to cash out simultaneously at this moment, it would completely crash the market. Forget about the Mt. Gox selling – its peanuts compared to this. They wont cash out simultaneously of course, but the constant appearance of new ICOs with ridiculous caps of several millions (that are reached somehow) is providing a constant outflow of money from the market, keeping the prices of existing cryptocurrencies suppressed.
**So what should we do?**
– We should stop posting such huge amounts into ICOs, mainly ones with hard caps that are way too high for what ought to be needed. Instead we could also support projects that show actual progress and products that are not scheduled to be done in several years.
We need to ask ourselves: `”Does this project, with 20 employees fresh out of their first jobs or college, actually need 50 million dollars for their start up project, when entrepreneurs have done much more with much less for decades?
I’m not trying to say that the bear market was brought on by this, but rather that in a bear market this fad increases the downward selling pressure (by quite a lot IMO).
Investments into ICOs = money leaving the market, thus surpressing the market and prolonging these bearish times.