It is mainly the new “token” cryptocurrencies that are issued in ICOs with no regulatory oversight, which have exploded since the start of the year, that are causing the most anxiety.
One, the “Useless Ethereum Token”, which appears to have been set up as a way of showing how worthless many of the ICOs really are, is nonetheless changing hands for 3 cents a unit. “No value, no security, and no product. Just me, spending your money,” its website states.
“It’s just so easy to raise money on an ICO right now, it just feels like there’s a gold rush going on there,” said Moffat. “Some of the new currencies – beyond bitcoin and Ethereum – could crash to zero.”
By mid-July, about $1.1 billion had been raised in ICOs this year, roughly 10 times more than that in the whole of 2016, according to cryptocurrency research firm Smith + Crown.
The rapid ascent of ICOs prompted the U.S. Securities and Exchange Commission (SEC) to warn last month that some ICOs should be regulated like other securities.
This is new digital territory and how the rapidly proliferating cryptocurrency market will play out is anyone’s guess.
While critics say the highly correlated nature of the currencies means the weakness of newer entrants could bring the whole house down; others argue market forces will ensure the best players prevail.
“Will some of these (currencies) go away? Of course,” said Vias of Ripple.
“We’re going to see Darwinism in real-time here. Only the strong will survive.”