Ethereum’s price breached $220 today, just days after it broke $250, as the currency’s downtrend continues with no end in sight.
It has dragged nearly all other digital currencies down with it, turning everything red, down 10%, 20%, some even 30% or more.
Fingers are usually pointed at Mega ICOs that raise hundreds of millions without any restriction on their spending, without any accountability on how the funds are used, without any audited reports updating investors, without really much of anything at all.
As such, some ICOs have purportedly been sending their eth to open exchanges after raising hundreds of thousands. Investors have seemingly punished them as both EOS and TenX, for which there is some evidence of cashing out, have seen a considerable price fall.
TenX plunged, with their price hardly higher than the ICO price in dollar terms, while EOS has dived to $2, in the past few days, from an all time high of nearly $7.
Some $650 million worth of eth was concentrated during a 19 days period in the hands of just six projects that set caps in the hundreds of thousands, ignoring the good practice rule of having caps in the $10-$20 million.
Not least because that may keep them in line with SEC’s crowdfunding rules which sort of exempts projects that raise up to around $10 or $20 million. At such amounts, you can easily argue it’s the price of innovation if anything goes wrong.
At $200 million, you’re left with no argument whatever if anything at all goes slightly wrong not least because it would probably affect the entire ecosystem, including ethereum, bitcoin, and probably all other digital currencies.
The DAO is hardly a forgotten memory, nor are its effects at the time. As such, unless a project has millions of users or revenue in tens of millions, ICOs should be capped, and should really follow all SEC’s crowdfunding rules and guidelines even if they’re not necessarily directly regulated.
ICOs should give full business projections, revenue estimates for five-years, user growth projections, audited financials and quarterly investors reports.
And ICOs that have already received seed funding need to show users, revenue, or an actual working product, as well as why they need the funds and exactly what they plan to do with it.
Otherwise we’re just burning hard-earned and limited funds on a tiny number of projects which are mostly evaluated based on how good they are at marketing.
As for the problem with caps, namely that they are sold out in seconds, perhaps one ICO should try and open at a valuation of $1 trillion, gradually reducing until market participants are happy to pay. We can then examine whether that works or something else should be tried.
Of course, placing all the blame on Mega ICOs isn’t likely a full explanation for why price is going down and decent, innovative, ICOs that do limit their token sale probably do act as a counterweight of sort by adding to ethereum’s utility.
But concentrating half a million eth in the hands of just two projects at around the same time probably contributed to what was an already fragile atmosphere as far as trading sentiment is concerned as the market moved towards a downtrend at around that time.