The ICO ‘industry’ is hyped, without any doubt. Many projects are being released, funded by an ICO, without sufficient value. The big issue is this: as the creators are rewarded with huge sums of crypto assets, which they potentially can convert into money, what is their incentive to go through the painful and long process of growing a startup into a mature company?
That obviously can have a negative effect, longer term, on the Ethereum price.
This is not us, but one of the most influential person in the blockchain industry reporting this during an official interview which also appeared on Forbes. We are talking about Meltem Demirors, the number 2 of Digital Currency Group, the New York-based cryptocurrency-focused company that has invested in 100-plus companies across 27 countries.
Mrs. Demirors covered several subject on Ethereum, first and foremost the ICO hype which is worth taking into account as Ethereum prices keep on rising, as well as other crypto prices.
The initial coin offering (ICO) craze, and what it means to the price of Ethereum:
“A lot of people who are buying these tokens don’t actually know what they’re buying. A lot of these projects that have gotten funded have no product. The developers walk away with millions of dollars, so what’s their incentive then to build the platform or the product? We see digital currencies worth hundreds of millions and massive market caps but there’s no product, there’s no network, there’s no protocol, there’s nothing.” She also worries that negative events in ICOs could harm the industry overall: “We already have a perception issue that we’ve been battling now for four years to overcome. I would hate to see ICOs contribute to that negative narrative.”
About blockchain applications that she expected to take off but haven’t:
The first she names is bitcoin — that a lot of people envisioned it as a global currency used by merchants and individuals, but it hasn’t been used that way by as many as people as originally anticipated.
Surprisingly, how much enterprise blockchain product is out there and how willing enterprises are to engage with it:
“It’s really amazing to see our largest institutions working on projects that actually touch their core business.” However, Demirors does concede many institutions that may feel comfortable with blockchain still feel a tension about blockchain-based digital assets.
Why has DCG thrown its considerable weight, particularly with investors, behind Ethereum Classic:
The company has created an investment vehicle similar to the Bitcoin Investment Trust offered by its subsidiary Grayscale called the Ethereum Classic Investment Trust. “I want to separate the protocol from the token,” she says. “We see a lot of value in people building on top of Ethereum, but from a financial perspective we’ve chosen to invest in Ethereum Classic because of immutability. What happened after the DAO hack was concerning. The fact that you could fork a network and make a major economic decision — as an investor, looking at this through the investor lens, I think it’s very hard as an institution to get comfortable with that idea.”
What about crypto hedge funds:
“Right now, we’re in a bubble. … Everything has been up and to the right, but there will be a correction at some point. What happens when there’s a correction?” Plus, she isn’t so sure that many of them have experience managing portfolios. “I wish people the most success in what they do, … but being a regulated financial entity is very different than buying cryptocurrencies in your spare time. I just don’t know that people who are getting into that space know what they’re signing up for. It’s not easy being an investor that manages other people’s money.”