Wall Street Piles into Cryptocurrencies, Others Speak of “Biggest Scam Ever”

I don’t remember ever having seen crazier times of more pandemic proportions.

By Wolf Richter of WOLF STREET

“It is the biggest scam ever, such a huge gigantic scam that’s going to blow up in so many people’s faces. It’s far worse than anything I was ever doing,” explained Jordan Belfort concerning ICOs (initial coin offerings) of cryptocurrencies. The former penny-stock broker portrayed by Leonardo DiCaprio in The Wolf of Wall Street should know: He spent 22 months in the hoosegow for securities fraud and money-laundering.

Just about anyone can call themselves a startup, make promises of future products or services, and sell digital tokens to raise funds. These digital tokens become tradable cryptocurrencies. Buyers do not receive any ownership of the startup, which is what traditional startup investors get. Instead they’re usually promised something in the future, such as free access to the service once available. It doesn’t really matter what the promises are because people buy the tokens to get rich, hoping that they’re getting into the hottest cryptocurrency on the ground floor. ICOs are not regulated and anything goes.

So far this year, there have been 202 ICOs that have raised just over $3 billion, according to the Financial Times.

Including those ICOs, there are now about 1,000 cryptocurrencies with a total market capitalization of around $170 billion, from bitcoin on down. Hundreds have fizzled, their value has evaporated, and trading activity has died. Whoever bought them has now become the end user of a useless digital token

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