The Crazy World of ICOs: 200,000 CNY to 6 Million CNY in 2 Years
“I woke up this morning, checked my wallet and realized that I am now a millionaire. Now what?”
Liu, born in the ‘90s, is a non IT engineer who doesn’t have any knowledge about code and blockchain. He started investing in ICOs in 2015. His total assets has increased from 200,000 yuan to 6 million yuan.
It is 30 times more than his initial investment.
There are many surprising stories of overnight millionaires in the world of ICO tokens.
What is an ICO?
The term ICO, or initial coin offering, is created to describe a means of crowdfunding the release of a new cryptocurrency. Some prefer to interpret it as initial crypto—token offerings to differentiate the term IPO. As Wikipedia notes that:
“Unlike an initial public offering (IPO), acquisition of the tokens does not grant ownership in the company developing the new cryptocurrency. And unlike an IPO, there is little or no government regulation of an ICO.”
ICOs are often seen as a quick way to help tech startups raise capital without all of the necessary requirements that would come with an initial public offering in stocks.
For example, Quantum, an Ethereum-based liquidity pool, made history in China and raised $4.12 million.
Liu bought some Quantum tokens and earned 40 times more than his investment.
“It’s not about me being smart or visionary. I’m just lucky to follow the right person,” said Liu.
The right person he is talking about is Li Xiaolai, a Chinese bitcoin multimillionaire who set up a VC fund to invest in profitable blockchain startups.
In 2015, Li Xiaolai started a member-only group to help bitcoin newbies. Liu paid the membership fee and began to learn everything about cryptocurrencies.
At the end of 2015, Liu spent all of his savings and bought 40 bitcoins with the price of 2700 yuan per btc.
In 2016, he learned how ICO works in the group and invested 5 ICO projects, among which Gongxinhao-a blockchain-based platform-added 2 million yuan to his account.
If 2016 is the year of blockchain technology, then we could say 2017 is the year of ICOS. But will the ICO market keep its momentum?
Developers of Quantum explained that:
“ICOs are an evolution of crowdfunding helping to finance the emergence of blockchain startups. Now it remains contentious whether ICOS should come under the oversight and regulation of CSRC, China Securities Regulatory Commission. I guess there will be regulations.”
Just like angel investment, it is full of uncertainties when it comes to ICO tokens. Is the project a scam? Will it be successfully launched? Will the team of the project abscond with the money?
Deng Di, president of China Blockchain Research Center, warned that:
“ICOs are highly risky. For one thing, common investors are not able to judge if it is a scam. For the other, the development team can always break their promises without a legal binding contract with sufficient investors protections. I wouldn’t recommend beginners to jump in.”
For Liu, however, he believes that regulation is not a real problem.
“Bitcoin is not something that governments can ban. They can only obstruct it from being widely accepted as a means of payment. But they will not be able to kill it. The only challenge facing btc is its own civil war, whether it can overcome problems in the course of evolution. The PBOC denies it as a currency, but it never says one cannot use it to do transactions.”
As of today, Liu has not exchanged his tokens into fiat money.
“I’d love to buy a Tesla, I love Elon Musk. But I don’t even have a driver’s license. Buy a house? The housing price in Wuhan is now 20,000 yuan per square metre. I believe bitcoin is more likely to rise from 20,000 yuan to 100,000 yuan than the housing price. I’ll keep them in my wallet.”
Liu says that he hasn’t invested in ICOS for a while, partly for there are few projects that have possible future payoff. He is studying on several startups now, but is very prudent to finance them.
“Tokens or stocks, just make sure you invest in valuable assets. There are lots of analysts and experts in the market, but they are not always right, you have to improve your personal judgement.”
Now Liu quit his job and is looking for a position in the blockchain industry.
“Honestly, I feel anxious and stressed to be rich. Now I just want to obtain a sense of achievement in my next job.”
PS: At the time of writing, Huang Tianwei, CEO of btc38, posted an article claiming officials at the PBOC have asked them to submit a report on the status of the ICO market. Plus, he predicted that regulations on ICOs will be issued in the coming months. But he deleted the post an hour later saying he is sorry for the panic he may have caused.