What We Can Learn From XRP and ICOs About the Crypto Equity Scam

We have another case of mismanaged expectations on our hands. Some XRP holders are upset at Ripple’s selling of the token and its effects on the price. This is as good a time as any to talk about the issues of mismanaged expectations for investors of cryptocurrency projects with more vague connections between token and company.

Loose expectations of owning a piece of success are enough to lure inexperience investors

Problems start when investors start buying tokens associated with projects that sound really cool. The thought process is fairly linear and logical: project X seems innovative, and buying into said project will yield a return on investment in case it is successful. The issue is that the “buying into” part is often ill-defined. For many, buying into the token Ripple (before the XRP rebrand) meant a share in the success of the company and project Ripple. On an even more overt scale, thousands invested in countless ICOs, whose tokens were deliberately marketed as investing the seed capital in the company. Yet, at the end of the day, no direct association between the token and project was defined beyond “this is our token and you pay us money to get it.”

Now are all loosely tokenized projects scams? No, not at all, not necessarily at least. However, investors who bought tokens with some kind of expectation of ownership over the issuing body were indeed scammed, whether it was by the principal company, a third party pushing them to buy, or whether they scammed themselves through their own ignorant exuberance.

Investing in an asset with no equity is a recipe for disaster

Needless to say, lots of investors got burned through this method. Countless ICOs tried and failed, at best, and at worst simply ran off with the money. Still others launched further ICO rounds, casting doubt on the value that previous investors had acquired versus that of new entrants. Those tokens ended up being just that: token representations with symbolic,…

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