Crypto bubble will burst and it will be ugly

It seems almost every day that we are hearing of a new Initial coin offering raising tens (or hundreds) of millions dollars in a matter of days and the sheer mention of blockchain is invoking animal spirits in both investors and the general public. A friend recently told me that his hairdresser is now investing into Ethereum, and even the taxi drivers nowadays seem eager to discuss the newest crypto coin on the block. EOS recently raised $185 million even though their white paper states issued tokes do not have any purpose.

It read:

“As mentioned above, the EOS tokens do not have any rights, uses, purpose, attributes, functionalities or features, expressed or implied. Although EOS Tokens may be tradable, they are not an investment, currency, security, commodity, a swap on a currency, security, or commodity or any kind of financial instrument.”

Investors put $185 million into tokens that have no use whatsoever. If that sounds crazy it is because it is. The sole purpose of EOS tokens as per white paper is to fuel applications in the EOS network. Except EOS does not have an active ecosystems of applications and users. In another instance, Bancor ICO raised $150 million with 40 lines of code that were untested.

When a new coin raises hundreds of million $ with no product but a white paper we must ask ourselves whether this is sustainable and whether the valuations are realistic. While nobody doubts the potential of blockchain to change the world and revolutionize industries, I doubt the ability of these new platforms and coins to live up to their valuation and whether these valuations have any basis in the foundation whatsoever.

What is a bubble?

What are the signs of a bubble?

• Asset prices increase like a rocket - Does it ring a bell looking at the price charts?
• Even the general public talks about investing - Noticed that everyone is talking about crypto currencies this days? Me too. Google searches for "crypto currency in the last 12 months.
• Every investor seems to be winner - I heard so many people bragging about their investing success in crypto in the last weeks as never before. People who didn't know what is Bitcoin a year ago are raking in 500% returns these days.
• Even people who did not invest before invest now - When your hairdresser and taxi drivers are putting their life savings into new crypto coins it's probably a time to run away as fast as you can.
• This time is different syndrome - Blockchain is different, the coins will never fall! Sure, but so was internet back in 2000. Yet the bubble eventually burst and it took internet almost decade to really change the world.

Don't get me wrong, blockchain and cryptocurrencies are great, but ICO raising hundreds of million dollars based on nothing but a promise are not. Some of them will definitely live up to the expectations, but most of them probably won't. Consider yourself warned. People don't have to be trained to want to gamble in this country, but they have this instinct — a great many people — they're encouraged when they see some successes around. That's why the bells and whistles go off in the casino when somebody hits a jackpot, you know.

Looking forward to hear your thoughts in the comments!