Various Risks & Pitfalls With Crytocurrencies & ICOs

Various Risks & Pitfalls With Crytocurrencies & ICOs

Jason Calacanis, a successful venture capital investor, is skeptical about the ICO pump and dump schemes and gives his warning.

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There is a word of caution coming in from Jason Calacanis. He is a successful venture capital investor with 150 successful startups as Uber, Swell, and Evernote amongst others to his name. He is skeptical about these ICO pump and dump schemes. This is pertinent because it comes against the backdrop of hundreds of millions of dollars being raise through ICOs. In fact, ICO market has steamed ahead of venture capital funding. In 2017 alone investment in excess of $3 billion has been recorded. This has led to the emergence of scores of blockchain startups. Their main intention is to go in for a quick cash grab, pump and dump schemes through these ICOs.

In many service marketplaces as Fiverr, many so-called ICO experts and independent advisors have begun to offer unbelievable white papers for around $100. This seemingly can be later used by blockchain startups to help them raise millions of dollars within a few hours.

Many Failed Business Back Again 

Mt. Gox is a now defunct bitcoin exchange which has earned notoriety for the loss of bitcoins worth $7 billion dollars. Headed by Mark Karpeles the former CEO of Mt Gox, he has now plans to come out with a new ICO. This is to revive Mt Gox. According to a statement coming in from Mt Gox the new ICO is to revive Mt Gox. This may not be legally and otherwise a sound decision. But Mark Karpeles is the belief that any sums of money raised could be used to pay off creditors as best they can.

The process of paying off creditors has not been completed by Mt Gox and Karpeles as per the Mt Gox bankruptcy proceedings. However, they are now looking for another $245 million to give a new life to the company. The company has lost nearly 1 million bitcoins because of sheer incompetency of executives and directors, including Karpeles. His own statement mentioned that 175 million USD was earmarked for uncooperative creditors. The funds would be held by the court as security until claim disputes are settled. There are also operating expenses of around 20 million USD for one year. Another 10 million US Dollars would be required meeting compliance requirements in the US, which could take months. Compliance in Japan & Europe would cost 1 million dollars. There could another 35 million dollars required for cash flow and 4 million dollars for campaigning to creditors.

Problems With ICO Market

ICO is a unique way of raising capital for running any project that requires token or a native cryptocurrency. Mt Gox is a one such centralized bitcoin exchange. It seemingly does not require a cryptocurrency which has been launched on an Ethereum protocol platform. The main objective of Karpeles is to come out with an ICO for raising $245 million towards a centralized exchange. If this trend of raising millions of dollars through ICOs continues, investors and users would most likely start protesting against such businesses.

There is no need for crypto-token or an ICO as far as Mt Gox is concerned. Many companies are shortchanging the system with promises of quick cash grabs. They lack long-term strategies and visions.