The Crypto "Bubble"
Posted by BANKUS on January 10th 2018
The head of global venture capital at Aberdeen Asset Management Plc, believes that we are in the midst of a virtual crypto-currency bubble, and likewise all bubbles, it will burst. That does not necessarily mean investors should stay away. Aberdeen’s venture capital, which holds about $1.8 billion in early stage funds, is planning investing in funds that use blockchain implementation and digital coins. Still Peter Denious said the cryptocurrency craze that is attracting millions isn’t sustainable.
“A lot of lessons will be learned and a lot money will be lost, before a lot of money can be made.”
Peter Denious, who is based in New York, said in an interview. “Prices right now aren’t being driven by network usage, they’re being driven by speculation that tokens are going to appreciate. It’s a gold-rush mentality. The winners will be those who are really creating highly disruptive, network-based businesses.”
Technology companies have raised $646 million this year in initial coin offerings which is six times more of last year, according to Coinschedule.com. The quick surge in token value, which has doubled on average since they start trading, has attracted investors to hand over millions to early stage projects. The craze has driven coins like ethereum, to jump from $8 to about $300 since the start of the year. All that hype is making many sceptical. Digital currencies’ potential to disrupt venture capital is also raising flags. ICOs are letting early stage companies to bypass venture capital. Peter Denious said this funding system will stay even after the market settles down, but it will co-exist with VCs as token sales only make sense for companies that benefit from a blockchain-based decentralized network.
“The ingredients are all there for a new asset class. We’re in need of restoring what the internet initially offered, which is the power of decentralization. The power has re-centralized in the hands of a few market participants and this technology can disrupt that. The potential is exciting.”
So what should an investor do with a world-disrupting asset, that’s also over-heated? Peter Denious said he’s focused on finding funds with expertise in the field and a good track record. Aberdeen’s interest is a sign that blockchain companies and their digital tokens have the potential to reach a wider investor base in the future. Peter Denious said he doesn’t doubt that will be the case.