At press time, Bitcoin was up 15% on the 24-hour charts, with most of the altcoins close behind. Bitcoin (BTC) has been on an upward streak for days, signalling the first bull run for these experimental markets since 2017.
Today’s crypto industry is much different than what we remember from two years ago. 2017’s blockchain startups were typically introduced using an ICO (Initial Coin Offering). This novel fundraising tool started out as a penny-stock IPO (Initial Public Offering) clone, one which managed to connect with private investors while bypassing the hurdles of conventional securities-offering laws.
By 2018, the party was over. The crypto markets crashed in January 2018, and numerous regulatory agencies (including the United States’ Securities and Exchange Commission – SEC) sued the scammiest of ICO offenders. Not all ICOs were (or are) scams, but the uncertainty in these markets has dramatically reduced the amount of money raised through this method. In fact, ICO fundraising is down almost 100% from a year ago.
Let’s assume that recent price trends continue and a full-blown crypto recovery emerges. The timing seems right: Google and Facebook have rolled back crypto ad bans; E*Trade is launching Bitcoin/Ethereum trading; and some blockchain companies are abandoning the ICO in favour of the STO (Security Token Offering).
Is Investing in Crypto Different Than Gambling?
The STO is an attempt to retrofit the ICO without going afoul of federal securities regulations. In short, STOs have to be officially permitted by the governments of any nation from which they accept investors. These investors must be registered with the government.
These few but significant changes are meant to bring stability and investor protections to these markets, ensure that scam ICOs are a thing of the past, and prevent money laundering and other illegal practices from being filtered through this fundraising method.
So, will the STO catch on, and will it bring credibility to crypto investing? In its heyday, the ICO craze made millionaires overnight. Nonetheless, sceptics incorrectly likened them to the concept of gambling in an effort to highlight the element of chance involved. When you play casino games online, your odds of success are built into the system. Games have variable levels of skill involved, but all feature strong degrees of uncertainty that no amount of work or knowledge can reduce.
The critics said that ICO fundraising was the same way; however, this was not the case. ICO companies typically offered their investors no equity value, and most of them didn’t have a working product or source of revenue. So much money was entering the market that speculators drove up the prices of hundreds of unworthy projects before the bubble popped.
This time, the software behind these projects is more developed. Blockchains like Ripple are used by financial institutions around the world. Daily Bitcoin transactions are matching or exceeding all-time highs. It seems obvious that new blockchain projects will find a way to raise funds in this environment. The question is, will they do so through legitimate means (the STO, or similar models) or will they replicate the shady ICO climate of 2017? And will it matter either way?