There's no love lost for the cryptocurrency markets, at least from the perspective of the mainstream media. Just a few hours ago, Bloomberg ran an editorial entitled, "Ethereum Co-Founder Says Crypto Coin Market Is a Time-Bomb." With headlines like that, who needs subtlety?
It's also not accurate, in my humble opinion. At the heart of this latest controversy is the initial coin offering, or ICO. The mainstream sentiment, and a growing number of blockchain advocates, is that ICOs and the rise of cryptocurrency assets, are moving too high, too fast.
“People say ICOs are great for ethereum because, look at the price, but it’s a ticking time-bomb,” Charles Hoskinson, who helped develop ethereum, said in an interview. “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.” (Camila Russo for Bloomberg)
The ethereum co-founder further went on to say that "digital coin crowdsales that have collected millions of dollars in minutes." With so much capital at work, regulatory bodies, such as the SEC, are likely to get involved and hammer the growth potential of blockchain assets.
While regulation is admittedly a giant pain, it's also not an unexpected response. Wherever there is money involved, government always finds a way in. Additionally, it's not clear how governments will successfully regulate the cryptos. As an example, it's impossible to classify bitcoin as a security as the platform is decentralized; thus, issuance is not tethered towards a singular entity.
More importantly, blockchain fear-mongers conflate bullishness with instability. Yes, cryptocurrency markets have grown exponentially in the past few years. However, integration and awareness is also growing at a clip rate. On top of that, stock market participation is declining rapidly.
Where's all that money going? I can't assume that capital outflows are all headed towards blockchain assets like bitcoin and ethereum, but a good chunk of them are. Thus, I argue that cryptocurrency enthusiasm is justified, and we can see a lot more of it until we hit a true bubble.