Years ago, in the 1600s, in the time of the Dutch Golden Age. Tulip flower bulbs appreciated in price and later fell very quickly and suddenly in 1673.
Based on the speculation of the economists, it is said to be the very first example of a BUBBLE, a situation where by the price of a product suddenly skyrockets against pure speculation, reaches a peak and suddenly falls dramatically.
Tulip Mania can be likened to the scenario that we see in the crypto currency world, and mainly how block chain newbies are brining up shocking amounts from ICOs- Initial Coin Offerings.
Tulip Mania as said in 1637, Tulip bulbs was actually sold for almost 10x the yearly income of a talented craftsman, also if you take a good look at the price of Bitcoin alone, a year ago it was selling at $600, after a year it is selling at $5000. That is about 800% increase, it has managed to maintain that rate with a little sign of growth slowing down.
Can you see the parallel? It is actually tulip mania, although, we can't say its not warranted. Bitcoin and the rest of cryptocurrencies are only servicing a market need. Ethereum, due to what it brought to the table, there have been a rampant increase of Ether's value.
Fund Below what causes Crypto mania and why ICO investors should tread with caution.
1. The issue pertaining the barrier to low entry for organizations to continue holding their ICOs is making the market look soggy likewise giving then a bad name.
To be sincere, for new businesses to make money, ICOs are an amazing and legit way to raise money. Although some hoodlums are using the avenue of raising money through ICOs when they have not done anything asides putting together a white paper and designing a website.
In as much as Its very vital for companies to be positive about the projects they are working on, they should be sincere also in terms of being open concerning what they have achieved so far and what more needs to be done to make the project move forward and be successful.
Only an idea or a white paper cannot build a company, and any new business aspiring to raise capital from good Samaritans can never be seen as a serious project.
2. The Demand of ICOs is Weirdly Reminiscent, Compared to the Dot com Bubble.
My thoughts are that we will soon reach a very big moment where we can totally understand the crypto and blockchain world. Back in the days, any company can raise lots of money merely by making it look so flamboyant like a trendy Internet company. But is so unfortunate that we are facing the same occurrence today, only that investors are throwing their hard earn money to anyone who dangles an ICO without thorough research.
3. We Are Still Not Certain Of Which Products Will Be Innovative Or Are Simply Fantasy.
Still on the dot-com bubble, a lot of entrepreneurs chased ideas that looked outstanding in terms of theory but were rather advanced due to the Internet still at its growing stage, or it was simply great in theory, but in reality it was a mere fantasy.
New companies today that are confusing people to think that a product might be bigger than what they seem, are doing more harm than good to the ICO world in total and this act is going to harm a whole lot of people in the process. To say the truth nobody is aware of which crypto companies and blockchain will be the actual leaders yet.
Something that is not worth anything either from economic and moral view: before S&P 500 index could recover its lost ground from the dot-com crash it took them 17 years.
As the saying goes, What goes up must surely come dowm.
Reasons Why The Bubble May Burst:
Definitely ICOs will continuously raise heavy amount of capital, but it amounts to nothing that these sudden fundraisers will also start to delay as regulators reduces the number of people engaged in the activity.
The duration between when a startup raises money from the sale of token, and when it's put on the exchange platform is actually what create impacts on these bubble-like scenes the most.
Finally The Good News:
The awesome news is that ICOs are making way for some outstanding startups to have the backing they need to take innovation to a whole new level. Every one in the bkockchain space are very optimistic about what it's going to offer in the near future. On my own part I see the work most of these startups are carrying out to be very powerful.
My advice to entrepreneurs and investors is to be very smart, flexible and accountable concerning the way they choose their options.
Perserve in carrying out actions, take a thorough look at the board that is in charge of each company, not just be carried away by the white paper available for download on the companies website.
ICOs are very legit, So far they have a precise and actionable intention for a reasonable company.
Thanks for reading, you are highly appreciated.
