Crypto Coin Market is a ‘Time-Bomb’ that is Ticking
Entrepreneurs issuing dispensable digital coins to cash in on the hype of Crypto currency are fanning a blockchain assets bubble.
Firms have raised $1.3-B this year in digital coin sales, surpassing venture capital funding of blockchain companies and up more than 6X from the total raised last year, according to Autonomous Research.
The ICO’s (initial coin offerings) helped the Ether, the digital currency linked to the ethereum blockchain, to surge from around $8 at the start of the year to just under $400 last month.
It has since fallen by about 50%.
“People say ICOs are great for Ethereum because, look at the price, but it’s a ticking time-bomb,” co-founder Charles Hoskinson said, “There’s an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains. People are blinded by fast and easy money.”
Mr. Hoskinson is part of a growing chorus of blockchain technology watchers voicing concern about the rapid surge in cryptocurrency prices and digital coin crowdsales that have collected millions of dollars in just minutes.
Regulation is the biggest risk to the sector, as it’s likely that the US Securities and Exchange Commission (SEC), which has remained on the sidelines, will step in to say that digital coins are securities, and not money. he said.
Mr. Hoskinson joined the Ethereum founding team in late Y 2013 and left in June 2014 as he advocated for a for-profit entity while others in The Team led by Vialik Buterin wanted to keep it as not-for-profit.
The SEC will eventually say cryptocurrencies are securities, he said in an interview last week.
Besides the growing concern about an ICO bubble and regulatory concerns, Ether trading outages stemming from the jump in transactions, companies cashing in on the money raised in crowdsales, Monday’s $7-M CoinDash hack and false rumors have all contributed to the tumble in the price of Ether.
Concern about Bitcoin potentially splitting in 2 is also sending shock waves throughout the Crypto currency world.
Mr. Hoskinson thinks once the currency ICO bubble deflates, Cypto currencies will continue to be an avenue for companies to raise money, but it will be done in a regulated and more constrained environment.