What is similar between ICO and IPO?
In the late nineties and early 2000s there was an IPO boom (initial public offering) New companies connected with the market of advanced information technologies began to appear on the Nasdaq exchange in large numbers. These companies offered their shares to a limited number of persons. During the IPO, speculators often doubled their money on the day of trading. During the 2000s, the IPO boom touched very many – companies, investors with large capital, even vendors who worked at Walmart and taxi drivers. Nevertheless, most IPOs were at the stage of a business idea. Some of them were unnecessarily indirectly connected to the Internet or were pseudo-valuable.
Today it is almost the same story in the ICO world. Many take part in ICO or pre-sale of some random token that promises to use a block to deliver local products or some other idea that can potentially benefit from the use of a decentralized accounting system. Some ICOs in the beginning of 2017 really brought their investors a profit 10 times greater than the investment in the project, which only heated interest in the ICO. Unfortunately the list of ICOs that brought their investors profit is not as great as one would like.
Another parallel of the Blockchain boom with bubble. Som is that in both cases, the “magic” word in the project name gave a stock price increase from 30% to 50%.
I think everyone already guessed what “magic” words I mean. 2017 – Blockchain, 2000 year. History repeats itself.
Methods of risk assessment.
As in the 2000s and now the real value of the action of the next “Start up” is very difficult to assess. The resources that traders use are based on the analysis of results over the past period of time. And when the company just appeared on the market, or rather not even appeared, but simply “lives” on paper as ideas. In such cases, investors need to be several times more careful when searching for tools to assess the liquidity of a new project.
What are the differences between ICO and IPO?
We talked a lot about a similar between ICO and IPO bubbles, but there are alarming differences. In the case of a docked bubble, the IPO was backed by guarantees from underwriters – banks and insurance companies that guarantee payment in the event of financial losses.
For the Blockchain investors, the situation is much more sad. In exchange for its investment, the investor receives a token with a beautiful name ABC, CBA, or much better NOTHING, which in fact, apart from the promises of the company, does not carry any guarantees. This is especially true for those who invest in an ICO product or services that do not really need Blockchain technology. The idea of speculation on the ICO is to buy “air” from an unfamiliar person in the hope that someone will buy the same “air” more expensive.
The idea of market capitalization.
Market capitalization is defined as the value of all shares in circulation. Nevertheless, do not forget that some of the shares or tokens are kept by the creators of crypto-currencies and ICO projects. Therefore, coinmarketcap.com consider only the “circulation stock” in other words the number of coins that are not held by team members selling their crypto currency. Therefore, it is worthwhile to pay attention to the share that the founders of the project hold. By the way, Coinmarketcap.com had a function that showed “Total market Cap”, which allowed to see the total capitalization taking into account the amount of crypto currency held by developers and founders of ICO and crypto currency. If you wish, you can still find this function in coins and assets separately, it just disappeared from the main interface of the site.
Number of scammers
In the stock markets, there have been and are cases of fraud. Over time, it turned out that a number of IPOs were just pyramids. Darker looking at the ICO market now, even with the naked eye can be seen “dummy”, who do not even have a development team and the only team working on the project is marketers.
Types of investors
While the dot-com bubble had its share of retail investors, the main driver was organizations and experienced traders. In a crypt bubble, most investors are newbies who probably never held shares. It is worth noting that the crypto currency market is not yet stable, after recessions, there are recessions. And there is no guarantee that investors lovers will psychologically sustain the depreciation without beginning to sell their bitcoins or other altcoyins. Since most investors do not have any experience with the loss of money in investments. When the bubble bursts, they all go to the exit at the same time, which will give an opportunity to buy their assets for ridiculous money.
It is for this reason that technical analysis will work much better in crypto currencies than in stocks. Based on the image of the investor, it can be concluded that the crypto-currency market is likely to change under the influence of fear and greed, which gives fertile ground for Technical Analysis.