Jihan Wu, founder and CEO of Bitmain, which happens to be the most valuable company in the entire crypto industry, does not believe in the future of the initial coin offering (ICO) model. Speaking with CoinGeek, the accomplished entrepreneur criticized ICOs for being too unstable and not trustworthy, compared to initial public offerings (IPOs) – their counterparts in traditional finance.
Wu expects the ICO model to collapse as he claimed that, “I believe ICOs are kind of an unsustainable financial bubble. It will burst eventually. It’s just a matter of time. I believe it’s just one year or two. Either way, it will just disappear.“
Wu’s critical outlook towards ICOs does not derive from the nature of virtual currencies or numerous failed or fraudulent ICOs. The man who managed to monopolize the crypto mining industry believes that the ICO model is still superior to the current IPO structure, used by the majority of traditional companies, aiming to raise funds. According to him, the traditional financial assets, such as stocks and bonds, will eventually have to move to a tokenized platform.
However, the ICOs offer no protection to investors, who might find out one day that their investment is suddenly regulated as a security. Also, in contrast to IPOs, the investors are not paid dividends and do not get the share-voting right.
Instead the crypto HODLers scan the ICO market to hopefully find tokens that will skyrocket at some point further down the road, instead of looking for projects with real-world application. A recent study found out that selling a token within two weeks brought the best ROI (return on investment), confirming such claims.
The world’s largest crypto exchange Binance has echoed a similar sentiment recently, even though the company was founded via a successful ICO. Nonetheless, Ella Zhang, head of Binance Labs, claimed that ICOs are a bubble that artificially inflate the value of most crypto projects and the industry would benefit if it burst.
Despite the bearish outlook on ICOs, Bitmain continues to invest in a number of crypto startups. The company reported profits of over $1.1 billion in the first quarter of 2018 and has put a sizeable amount of it in both established companies as well as newcomers of the crypto market.
Earlier this year, the mining giant led the latest funding round of US crypto startup Circle, then shortly after purchased a controlling stake at Opera Software AS for $50 million. The Opera browser has since been updated and now includes a cryptocurrency wallet as one of its native features. Bitmain has also invested in Block.One, a company behind EOS, and a blockchain startup Lamba among a number of other ventures.
While many altcoins are hitting their yearly lows, ethereum has suffered the biggest losses on its price. Numerous experts are blaming a large number of failed and fraudulent ICOs launched on ethereum blockchain for its downfall. The current bear market forces many ICOs to liquidate their tokens, leading to further losses of ethereum price.
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I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.