The venture capitalist Bill Gurley was recently asked whether he thought cryptocurrency “initial coin offerings” (ICOs) were in a bubble. Billions of dollars have been poured into over 1,000 new digital coins issued by startups so far this year. These coins mimic the construction of bitcoin, meaning they can be freely traded on digital exchanges and have no central bank standing behind them.
Gurley had an interesting answer. Yes, he said, ICOs look speculative, because interest rates are so low and “there is nowhere [else] to put money.”
“As long as those interest rates stay as low as they are, I think you’ll continue to see some form of speculative behaviour and tech is a great place for speculation. Look at what is going on in the ICO market, in cryptocurrencies, and you see that no one is afraid to speculate in this market,” he told CNBC.
The ICO sector today has one big thing in common with the dot-com bubble of 1999: People are “investing” vast sums of money into “assets” that have no history of producing revenue, and those assets are rising in price only because other people are also pouring money into them.
Ethereum, the second-biggest cryptocurrency after Bitcoin, was itself launched through an ICO in 2014. Ethereum has risen over 3,000% against the dollar in 2017 and its success is one of the reasons people are feeling good about crypto right now. But many of the other coins that have sprung up in its wake look a lot more risky…
