Ethereum co-founder Vitalik Buterin says initial coin offerings (ICO) are in a bubble and are “growing at a rate that is hard to control.”
Buterin made the remarks to Israeli financial newspaper TheMarker during a trip to the country to talk with cryptocurrency and blockchain entrepreneurs.
“I think that there is complexity in technology and sometimes there are conflicts,” Buterin said. “Blockchain is a decentralizing project and everyone is very excited. I think that one of the reasons for this is that it is a social revolution wrapped in something speculative that can make people rich. Sometimes a conflict is created between people that want to change the world and people that see this technology as an investment instrument.”
He said that “it would be a mistake to under-estimate the value of ICOs or say they are a bad thing.” However, “What we are seeing lately is that people are taking this idea too far, and there are projects that issue a coin not because it makes sense to issue a coin, but because they have a product they can sell and raise money. Without a coin, there is no business model. This creates the imbalance of incentives in the community at the moment.”
Buterin said that he “indeed think that we are in a bubble because all the cryptocurrencies are rising and people have a feeling that they will always continue to rise.” He added that there is a disconnect between the usefulness of a project and its ability to raise money, and that investors still can’t identify good projects from bad. “This thing is growing at a rate that makes it hard to control. I, for example, don’t participate in most ICOs because I think they are done at too-high valuations.”
Investors should look at the background of the teams in charge of ICO companies, but warned there is no real way to judge the worthiness of a project. “It is not clear how things will look in a year or two,” he said. “In the end, the market will need to cool down. A lot of projects will fail and people will lose money.”
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