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Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

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Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#31

Post by dmitrygr »

deadmetheny wrote: post #23
pm90 wrote: post #15

Earlier quoted context omitted.

I don't think they forgot the lessons. Its just that the allure of quick money is just too great for many people. I think this might be why a lot of people get addicted to gambling, for instance. In this case, I think most people are aware its a bubble/ponzi scheme and are trying to "beat it" by making the most profit and getting out ASAP before the bust.

It's a shame that cryptocurrency/tokens are being abused in this way - they're an interesting technology with a lot of good use cases, but after enough ICO instances where people get burned I'm concerned there's gonna be a huge aversion to them by the general public.

I keep hearing this. Can you give an example of a non-contrived use case that the world currently (1) needs and (2) lacks adequate solutions for as is?

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#32

Post by QAPereo »

psyc wrote: post #18
empath75 wrote: post #8

> Startups often need access to capital to promote ICOs. This should be a huge red flag. If a business is spending the majority of the money from early investors to find more investors, rather than actually developing and marketing their product, that's pretty much a text book pyramid scheme.

A huge proportion of the ICOs I investigate turn out to be pure facade. It's amazing to me just how quickly this con was honed and formalized, but I guess people have always been good at aping when it comes to get-rich-quick bandwagons. The standard ICO consists solely of: 1) A slick website. 2) A well-produced video. 3) A whitepaper that discusses trivially standard blockchain features and goals. No differentiation…

It’s a reflection of the growing understanding that this country is now a pump and dump scheme. See: infrastructure spending.

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#33

Post by cocktailpeanuts »

sna1l wrote: post #5

Aren't they taking on somewhat more risk by contributing large sums of money earlier on? I kind of think the discount is acceptable, but there should be stronger terms around the ability to flip it immediately.

You're right to some degree but not entirely, because of how early cryptoeconomics are in their stage.

When people pump money into a currency, they're not just "taking risks", but also using their authority in the community to generate hype, which brings in uneducated and uninformed people into the equation.

If you look around the Internet you quickly realize how "uneducated and uninformed" most of these investors are.

This is different from traditional family/friends => Angel => VC => public model because the public is protected from making any foolish investments until the org shows tangible traction.

So TLDR: they're taking risks, so at the same time they try to minimize their risks. This is why they exit very quickly. This isn't possible with traditional investment model where your money is locked in until an IPO or an M&A, which is why it is unfair to say these people are "taking risks". They have the ability to manipulate their risk and that makes a lot of difference.

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#34

Post by kobeya »

QAPereo wrote: post #32
psyc wrote: post #18

Earlier quoted context omitted.

A huge proportion of the ICOs I investigate turn out to be pure facade. It's amazing to me just how quickly this con was honed and formalized, but I guess people have always been good at aping when it comes to get-rich-quick bandwagons. The standard ICO consists solely of: 1) A slick website. 2) A well-produced video. 3) A whitepaper that discusses trivially standard blockchain features and goals. No differentiation…

It’s a reflection of the growing understanding that this country is now a pump and dump scheme. See: infrastructure spending.

Was this ever not the case?

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#36

Post by dmichulke »

dmitrygr wrote: post #31
deadmetheny wrote: post #23

Earlier quoted context omitted.

It's a shame that cryptocurrency/tokens are being abused in this way - they're an interesting technology with a lot of good use cases, but after enough ICO instances where people get burned I'm concerned there's gonna be a huge aversion to them by the general public.

I keep hearing this. Can you give an example of a non-contrived use case that the world currently (1) needs and (2) lacks adequate solutions for as is?

Was an iPhone ever needed as an adequate solution to some problem?

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#37

Post by whataretensors »

dmitrygr wrote: post #31
deadmetheny wrote: post #23

Earlier quoted context omitted.

It's a shame that cryptocurrency/tokens are being abused in this way - they're an interesting technology with a lot of good use cases, but after enough ICO instances where people get burned I'm concerned there's gonna be a huge aversion to them by the general public.

I keep hearing this. Can you give an example of a non-contrived use case that the world currently (1) needs and (2) lacks adequate solutions for as is?

Anonymous currencies. Dash, monero, zcash.

Feeless transactions. IOTA

Fog/Mist computing. SNM, Golem

Decentralized marketplaces. Many, syscoin is my favorite.

Identity tracking for IOT. Centralized solutions might exist, but WTC and the like are interesting.

Decentralized governance. DASH, Lisk, more

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#38

Post by vkou »

dmichulke wrote: post #36
dmitrygr wrote: post #31

Earlier quoted context omitted.

I keep hearing this. Can you give an example of a non-contrived use case that the world currently (1) needs and (2) lacks adequate solutions for as is?

Was an iPhone ever needed as an adequate solution to some problem?

BlackBerries not being all that good was a problem in search for a solution.

You know, the BlackBerry? That smartphone that did everything that an iPhone could do, just a bit worse?

Steve Jobs didn't exactly envision the iPhone wholesale, on the seventh day of Genesis.

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#39

Post by egypturnash »

Cryptocurrency is now to the point where Wall Street is noticing that it is a thing people are willing to assign a value to, despite it generally not having any obvious inherent value.

Be careful: Wall Street is really good at extracting this value, and leaving everyone else involved with empty pockets.

How can a cryptocurrency defend against this? Should it? Should it embrace this instead, in hopes of riding these cycles long enough to look like a legitimate Store Of Value? Which one would be better for the theoretical long-term goal of replacing existing currencies with cryptocurrency?

(Not that I am saying every ICO is floated by angels with only the most perfect selfless interest in cryptocurrency; decide for yourself what percentage of the people doing this are running a scam.)

Re: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag

#40

Post by nostrademons »

psyc wrote: post #18
empath75 wrote: post #8

> Startups often need access to capital to promote ICOs. This should be a huge red flag. If a business is spending the majority of the money from early investors to find more investors, rather than actually developing and marketing their product, that's pretty much a text book pyramid scheme.

A huge proportion of the ICOs I investigate turn out to be pure facade. It's amazing to me just how quickly this con was honed and formalized, but I guess people have always been good at aping when it comes to get-rich-quick bandwagons. The standard ICO consists solely of: 1) A slick website. 2) A well-produced video. 3) A whitepaper that discusses trivially standard blockchain features and goals. No differentiation…

The brilliant part of it is that it's a double pyramid scheme. The people buying into these ICOs are doing so with Bitcoin or Ethereum that has often appreciated 100x or 1000x from when they bought it. So a company may raise $200M in an ICO, but the investors may've only paid $200K for their Ethereum in the first place. The huge dollar amounts attract more people into the ecosystem, which drives the price of your base cryptocurrencies higher, which means that the prices of these new ICO tokens are even cheaper relative to the dollar amounts paid in the first place, which encourages people to drop exorbitant amounts willy-nilly on ICOs, which attracts even more publicity, and so on.

Until one of two things happens: there are no more buyers for cryptocurrency, the price crashes, and all these ICO investors lose their shirts; or all money enters the cryptocurrency ecosystem, entrepreneurs develop new products & services that can only be bought with their proprietary ICO tokens, Ethereum replaces the dollar as the world reserve currency, and the dollar crashes. I would bet on the former being much more likely than the latter in terms of probabilities, but given that the outcome of the latter is that all savings of people who don't invest in cryptocurrencies are worthless, that fear may be driving a lot of the ICO speculation.

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