Supporting a business that hasn’t been built yet with ICOs is very risky, but it’s just that kind of risk that supporters usually find thrilling. You’re betting on whether something will take off in the long run but you could lose everything if it never gets off the ground. Some people are attracted to this type of risk-taking activity, hoping it will take off and they will make a fortune.
There are plenty of cautionary tales, however. Jordan Belfort, better known as the Wolf of Wall Street, has been sounding alarm bells about ICOs, calling them the “biggest scam ever” and telling everyone who will listen that it is going to blow up in everyone’s faces. According to Business Insider, “Belfort told the Financial Times: “Probably 85% of people out there don’t have bad intentions, but the problem is, if 5 or 10% are trying to scam you, it’s a f**king disaster.”” This was after saying, “It’s far worse than anything I was ever doing.” It’s worth noting that this is a guy who once landed his helicopter in his backyard with one eye shut because he was so high he had double vision, so he does have some experience with making bad decisions.
A recent Business Insider study found that, “Cryptocurrency exchanges are rife with “pump and dump” scams that would be illegal in most markets and leave unsuspecting investors at risk of large losses. . . after the price rises, they attract other, unwitting investors to buy into the price momentum. The “pumpers” quickly sell the coin to make a profit. The coins often crash just minutes after the initial surge, leaving the second wave of investors with losses.”
ICOs can be a great thing for startups and even for investors, but proceed with even greater caution. Learn more about the rise of ICOs from this infographic.
