A lot of money is being invested into ICO events these days as new blockchain based initiatives are prompting more and more followers to invest in a portion. Hence it is legitimate to think that it might go the way the dot-com bubble did or the real estate bubble. Here we take a look at the symptoms of a bubble and the way it went between the years 1997 to 2002.
About the IPO Bubble
1997 was the year when the internet showed huge growth and tech companies started to emerge across the world. More and more investors started to put in their money as well as made large sums out of their investments. As everyone saw that they should also not miss out on this investment opportunity many companies were invested in without much thought as to how the businesses would work out. At such a time Warren Buffet stated that a bubble market leads to the development of companies that often want to take money off investors and not for them. This is often the goal of many companies at IPOs.
When the bubble finally burst in the year 2002 companies crashed, lost out millions in a year but there were some that did survive, stayed on and helped to shape the future of technology as we see around us today. Amazon stocks did fall from $100/share to $7/share but it did go up to about $600/share.
Parallels Between the IPO and ICO Bubble
It is hard to ignore the parallels that lie between this bubble and that of the ICO. If investors do not learn from history it would keep repeating itself. ICOs in recent times are attracting many investors who do not want to miss out not having put in their money in a potential gold rush. Here again much investing is being done on speculative grounds. The companies that are asking for ICO investments have only bare-bone structure ready for functioning. Many projects have not even reached the end result of the alpha version and most speculations are about potentials of what a platform can offer in the future. Though several offer different conveniences such as My Vanilla as a mode of payment, exchanges between different currencies and so forth, these aspects need to be executed and should be functioning right.
Many projects are likely to not work out as intended. Ethereum ICO is one of the successes that had a driven and dedicated team of professionals who worked behind it to make it a success. ICOs are also being plagued by developers who are only looking at lucrative ICO events and they probably will not be dedicated to carry out the project execution plans as intended and create the wealth that they promise to investors.
For those who are developers, it is necessary that they understand what a project is aiming to accomplish. The purpose of the project and the future that is envisioned should be stated clearly. The owner of a platform must choose the right advertiser for the ICO event such as iconomi or waves, as well as design the tokens right.
The owner of a blockchain based initiative needs to get legal backing for their platform and ensure that the white paper that they create has been run by legal experts. The timing and date of the event needs to be planned accordingly. The timing should be such that it should not involve holidays or weeks when most people would be offline. As hype is important for an ICO event to be successful, it should not be planned during a spring break or during a holiday weekend.
There should be a time cap on ICOs which should be planned with proper estimation. Ethereum ICO took place over a time period of 42 days and that is also because the ICO became popular for several reasons. Hence as per the amount of interest you generate among followers and enthusiasts as well as potential investors you need to plan the time duration accordingly.
Pros and Cons of ICOs
ICOs offer opportunities to invest in upcoming projects that hold potential. Cryptocurrencies are helping to share platforms of the future and these start at the ICO events. The other advantage of investing in ICOs is the absence of extensive paperwork. Projects are not caught up in red tape and in most cases, they have a white paper that includes all necessary information after which investors can choose to invest if they wish to. Cons involve the aspect of investing based on speculation and what is being said about a project; in certain cases, one might miss out on a potentially good ICO if the timing is missed out which is often on for a limited period of time.