Arthur Hayes, the former head of the cryptocurrency exchange BitMEX and a well-known entrepreneur, published a new essay titled “The Cure,” where he discusses the key problems of “venture” coins and proposes his vision for the revival of the Initial Coin Offering (ICO) as a way to bring back true decentralization and super profits for retail investors.
The businessman advocates returning to ICOs for the development of cryptocurrency projects since modern startups are focused on the requirements of centralized exchanges (CEX) and venture funds, which threatens the principles of decentralization.
In contrast, ICO (Initial Coin Offering)
A method of raising capital for new cryptocurrency projects. Founders issue new tokens or coins that can be purchased before the official product launch. Investors buy these tokens hoping that their value will increase as the project develops. ICOs allow bypassing traditional capital-raising mechanisms, providing the opportunity to invest directly through blockchain technology. allows small investors to participate in the development of innovations at early stages. This model does not require intermediaries and does not depend on the platforms and capitals of large funds.
On Meme Coins and Venture Tokens
Hayes identified three key factors that contributed to the success of cryptocurrencies: government corruption, the magic technology of the blockchain, and greed, which allowed many users to become very-very wealthy. However, smaller investors can no longer count on such profits as before.
The entrepreneur emphasized that the modern cryptocurrency market has transformed into a system similar to traditional IPOs (Initial Public Offering)The process through which a private company issues its shares for sale on the public market for the first time. This allows raising capital from investors for expanding the company or other purposes. During an IPO, the company becomes public, and its shares become available for trading on stock exchanges.. So-called venture coins have not shown significant growth since the last bull market (2023). Earning super profits is now possible only through meme coins, which give a chance to climb one or two steps on the ladder of wealth early on. But every participant is fully aware that the meme coin they buy has no practical value, does not generate any cash flows, and therefore, is essentially worthless.
“They are fully prepared to lose all their money in pursuit of financial dreams. Most importantly, there are no regulators telling them what they can or cannot buy. And there are no shadow capital pools waiting to dump the recently unlocked supply if the price rises too high,” wrote Hayes.
Venture investors make money by passing the hot potato of illiquid SAFTs (sales of future token agreements) from fund to fund, increasing their value at each step. When a crypto project hits the exchange for initial listing, its FDV (Fully Diluted Valuation) often exceeds $1 billion. To achieve a 10,000-fold return, the FDV must grow to an unrealistically huge number.
If meme coins are a lottery, and venture tokens will never bring super profits, then Hayes sees this prospect in ICOs.
Features of the New ICO Cycle
ICOs are returning as the industry goes back to decentralized models, where teams can directly raise funds from the community without intermediaries such as venture companies or CEX. New projects like Alkanes offer innovative smart contracts on Bitcoin. ICOs offer investors high risk and potentially huge profits, reminiscent of the early days of Ethereum. The community is ready to dive back into this speculative environment.
While most ICO tokens, i.e., 99.99%, will turn to zero after one cycle, a few teams may create promising projects. And the first investors in these ICOs have a real chance to achieve a 1,000-fold, or even 10,000-fold, profit.
This is reminiscent of the past: Ether priced at $0.33 during the presale would now be worth 9,000 times more. However, the modern process of forming crypto capital makes it nearly impossible to achieve such profits.
New Opportunities
Hayes suggests returning to the ICO model, which has the following advantages:
According to Hayes, despite the huge risks, ICO remains the only real chance for investors to achieve super profits of 10,000x.
