Financial Theory: ICOs are starting to look like “Tulipmania” during the Dutch Golden Age.
Circa 1600 AD in the Dutch Republic, tulip bulbs (yes, the flower) were introduced into the market. A frenzy ensued. People began purchasing the bulbs only with the intention of reselling them for more later. Few people actually planned on planting the bulbs and growing the flowers. The prices eventually crashed (aka corrected) because few people actually wanted to buy, keep, and grow the bulbs.
This is thought to be the first example of a “Speculative Bubble” in recorded history. We have seen many since (2000 .com bubble, 2008 real estate bubble to name a recent few). In each case, the market value unhinged from its intrinsic value.
To dive deeper, check out this link: http://ift.tt/QgHrrg The only way to avoid this is to build utility for what is being purchased. In other words, it has to be used for something.
Again, I urge the community to refocus its attention to using digital currency for something. Ask your local retailers to accept them and use them to pay for things. This will increase utility/liquidity, and decrease likelihood of a crash.
TL;DR Like tulip bulbs in Golden Era Dutch Republic, cryptocurrencies will crash unless we stop investing in them and start using them.
Disclaimer: Clearly this is just one side of the coin. I am a believer in cryptocurrency and am invested in it.
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