Before and after the ICO suspension: Too many scammers drive up prices and become the norm

The introduction of a policy has made ICO (token) issuers and participants lose their previous excitement.

According to the Notice on Preventing the Risks of Token Issuance and Financing (hereinafter referred to as the Notice), token issuance and financing refers to the financing subject raising so-called "virtual currencies" such as Bitcoin and Ethereum from investors through the illegal issuance and circulation of tokens. It is essentially an act of illegal public financing without approval, and is suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities. All types of token issuance and financing activities should be stopped immediately.

Looking back at the almost crazy development of ICO, the topic that cannot be separated is the rising coin price and the myth of skyrocketing. However, many players have forgotten the basic logic of economics in their dream of getting rich overnight. What is the reason for the coin price to skyrocket by hundreds of times without any substantial application? It is the dealers and traders.

"All coins are zero-sum. Everyone is speculating on them. There are too many cases where the market makers use three to five million yuan to push the price up to the daily limit at the beginning, and then attract investors to buy, and then wash out their own chips." Wang Ming (pseudonym), a person in the currency circle, told a reporter from China Business News.

Now, after the domestic market has come to an end, many platforms and companies have chosen to move overseas to seek more opportunities.

“It must be hyped up to more than 100 times”

“There are too many scammers in ICO, and these people have messed up the ICO market.” Chen Hai (pseudonym), head of a blockchain investment platform, told reporters.

In Wang Ming's opinion, people have seen the myth of the ICO surge, but are not necessarily willing to delve into the reasons behind the surge.

In fact, ICO projects can create crazy price increases in the secondary market with just a white paper and a team. The price increase is not based on the true value of the token, but is achieved by the team's hype.

"We can see foreign faces in many white papers, and the issuers talk about how much overseas background and resources they have. In fact, these are not true. Someone has sold me before that it doesn't cost much to set up a complete foreign team, and then build an English website. In fact, as long as investors check, they will know that these foreigners do not exist at all." Chen Hai stated the blindness of investors with great sorrow.

Quantum Chain increased by 47 times, GXcoin increased by 36 times, and Binance increased by 20 times... The reason why investors are blinded is that they are blinded by these soaring coin prices.

"If you ask me now, on the one hand, I regret not buying more at that time; on the other hand, I am afraid that I will become the one who takes the blame." Wu Yue (pseudonym), a cryptocurrency player, told reporters.

When Wu Yue was preparing to invest in ICO, he bought Shark Coin on recommendation (Note: Shark Coin was listed as "financial fraud" in the "2016 Latest MLM Organization List" released by CCTV). He was very lucky, and saw Shark Coin increase from a few cents to a few dollars in a few months, a tenfold increase. Wu Yue did not dare to hesitate and sold it immediately.

"In fact, you don't need too much technical knowledge. You can judge based on common sense that someone was manipulating this coin at the time. Because there is no technical progress itself, but the liquidity in the secondary market is very good. So after it rose to a certain level, I dared not hold it anymore." Wu Yue said.

In fact, in the article "Why didn't we launch Shark Coin?" written by Lao Mao, the operator of the blockchain asset trading platform Yunbi.com, the issue of "manipulation" was also mentioned. The article stated that the development team of Shark Coin held a large number of chips and jointly controlled the price with the platform and the manipulator team.

But in Wang Ming's opinion, the above speculation is too common in the cryptocurrency circle.

It is understood that the logic of the so-called speculation is that the money is dispersed in the hands of several people, and they use the money to buy a large number of coins to create a situation where the market of this coin is very hot. Because the total number of coins is so large, people feel that the coin is in short supply, thereby raising the price.

“Most of the coins in the early days were like this. There was nothing behind them, but they used three to five million yuan to push up the price by the daily limit. This attracted people to buy, and then slowly washed out their chips. But if someone is doing the plate, there must be costs, and if there are costs, the price of the coin must be raised, at least 100 times.” Wang Ming said.

According to him, most coins have no functions and no content, and they will fall very quickly. For example, if it takes 1 million yuan to raise the price from 1 cent to 1 yuan, it may fall back to 1 cent very quickly. Therefore, the price of coins must be raised to a very high level from the beginning before they can be shipped, so the altcoins we see usually rise by a hundred times.

The key issue is that everyone thinks they are Wu Yue, the lucky one, and will not be the one to take over. But the fact is that only a few people make money.

"During the stage when ICO was developing rapidly, many people have been saying that they hope to embrace supervision and that the market can be regulated. But the current situation is not that bad money drives out good money, but that bad money directly destroys the market," Chen Hai told reporters.

Moving overseas still requires "being the banker"

The aforementioned Announcement requires that all financial institutions and non-bank payment institutions shall not conduct business related to token issuance and financing transactions. Any so-called token financing trading platform shall not engage in the exchange of legal currency and tokens, "virtual currency" between each other, shall not buy or sell tokens or "virtual currency" or act as a central counterparty to buy or sell tokens or "virtual currency", and shall not provide pricing, information intermediary and other services for tokens or "virtual currency".

At present, there are "sellers" in various ICO groups who "buy certain coins at high prices". Where do people sell these digital currencies that have no future in China? The answer is obvious: overseas markets.

Currently, NEO (Antchain), BTM (Bytom), GXS (Shared Shares), etc. have been launched on foreign trading platforms. Among them, NEO is the largest ICO project in the domestic market, and officially became the first original public chain in China in 2015. On September 7 this year, it announced the coin withdrawal plan and was launched on Bitfinex a few days later.

For ICO projects, going overseas is one of their options. Many industry insiders believe that a large number of ICO projects will die, while some projects will go to the international market and look for investors around the world. Some projects will operate on their own, or seek institutional financing or go the private placement route.

"For some coins, the price offered by the buyers is generally 20% to 30% higher than the market price." Li Hua (pseudonym), a staff member of a trading platform, told reporters.

"There is no lack of hype. There is news that a certain coin is about to go to the overseas market, so the price of collecting the coin will naturally rise. A large part of the mentality of those who collect coins is gambling, and the currency circle is a big casino." Li Hua said.

According to him, the problem now is that it is difficult to convert US dollars into RMB, but apart from this, it is still possible to make money in the overseas market.

Generally speaking, ICOs listed overseas must be verified by the platform.

"As the initiator, all you need to do is get an e-wallet abroad. Foreign platforms charge lower fees than domestic ones. As for the review, those currencies that are pure scams or even pyramid schemes will definitely not pass, but some are difficult to define. Is it because the technology has not been developed, or is it intentional on the part of the initiator from the beginning? You say I'm a liar, but I say it's a dream. It's hard to tell," said Li Hua.

Wang Ming revealed to reporters that some foreign trading markets are also run by Chinese people. "All the trading platforms I know about are set up abroad, so many things can be negotiated and handled flexibly," Wang Ming said.

Similarly, even in overseas markets, ICOs require someone to “sit in the lap”.

“It’s ugly when no one places an order in the secondary market. Someone is still needed to raise the price. In fact, foreign countries are also quite enthusiastic about ICOs. After all, greed is human nature and knows no national boundaries,” said Chen Hai.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.