The latest Bloomberg article highlights how hedge funds can flip ICOs leaving honest investors holding the bags. In light of the announcement of the SMTs for Steem and the official promotion of the ICOs by Steemit it is now important to consider the possibility that there may be hedge funds and schemes involved in these ICOs. Consider that on Steem all transactions are public with no private transactions so in some ways it's very transparent and will be extremely traceable if people try to do anything foolish. At the same time the hedge funds don't offer any real utility to the crypto space besides to bring liquidity and then how do they make their profit?
“It’s not healthy for the ecosystem, and it’s pretty abusive,” said Kyle Samani, a managing partner at Austin, Texas-based Multicoin Capital, which invests in ICOs. “They are getting a discount because they are a big name, and they think it’s going to draw the retail investor. It’s the greater fools theory –- I’ll buy it if there’s someone who’s more of a fool than me.”
Beware of ICOs which invite huge VCs to invest at an earlier time and or lower rate than retail investors. There is the risk that the whole thing could be a pump and dump scam involving collusion between the VC and the developers of the crypto project. SMTs will bring the scam ecosystem to Steem and while it will probably boost the value and price of Steem I wuold hope Steem has other ways to build demand for Steem which involve actually using Steem such as gamification.
Conclusion
Communities is a good idea which we have wanted for a long time and ICOs are nice too but how do we bring it together in a way which continues to build the Steem community? In addition, is it going to be possible to do fundraising for donations, non-profits, etc which aren't "ICOs"?
Suppose you want to help the poor, or the homeless, or victims of the terrorist attack in Nevada, or victims of the hurricane? We need to figure out ways to use tokenization for these use cases as well and maybe let these use cases also increase demand for Steem.