A Boxing Champ’s “Left Hook” of ICO Exuberance

Floyd Mayweather, widely considered to be one of the greatest boxers of all time, recently joined a growing number of investors worldwide in drinking the proverbial “ICO Kool-Aid.”

Recently, in a post on Instagram that garnered wide media attention, ‘Money Mayweather’ announced that he’ll be promoting an initial coin offering (ICO) through Stox, a blockchain-based prediction company, on the heels of his fight with Conor McGregor on August 26.

In his post, Mayweather ranted that he’s going to make a “s— ton of money” from his campaign.

This underscores a growing concern in some circles about the irrational hype of ICO, creating a bubble that eventually has no other choice than to pop.

‘Irrational exuberance’ is a term used by former Federal Reserve Board chairman Alan Greenspan, in a 1990’s speech delivered to the American Enterprise Institute during the ‘Dot Com’ bubble. The phrase is now often used as a warning siren, signaling that a market might be somewhat overheated and likely to bust. A March 2000 book called Irrational Exuberance, in fact was written by Nobel Prize-winning Yale University professor Robert Shiller, eight years before the Global Financial Crisis of 2008, the worst such economic downturn in living memory for most.

ICO participants invest money, receiving digital “tokens” in return. From their inception, ICO’s have been generally unregulated, a trend that shows signs of being reversed given a recent ruling by the U.S. Securities and Exchange Commission noting that in certain scenarios, ICO’s can be considered securities and thus will be regulated accordingly.

Part of Mayweather’s ICO exuberance may be attributed to a reported IRS tax liability of $22.2 million he’s saddled with.

Says Jan Isakovic, CEO of Cofound.it, a distributed global platform built by the blockchain community that connects exceptional startups, experts and investors worldwide, “It’s easy to understand the appeal of token crowdfunding; this is the first time that the general public can participate at the earliest stages of building future world-wide platforms and companies. But with great promise comes great risk.”

He goes on to say that as the industry is still unregulated, great projects stand side by side with projects of a dubious nature; and typically it’s the dubious ones that have the slickest web page. His advice?:

“Potential investors should exercise caution: do careful vetting of the team, evaluate the business potential of the idea and make sure that the blockchain startup’s valuation makes sense.”

Maksim Balashevich, founder of Santiment, a firm that delivers market data feeds, newswires, and crowd insights for the Blockchain world had this to say:

“It’s also important to understand the project’s goals, its target user base, and its marketing power before participating. To that end, there are public white papers and commentary available online that can help prospective participants better understand each project’s likelihood of long-term success.”

“Anyone participating in an ICO should first educate themselves about the community behind the project. Following (online) community dialogue can make it easier to spot “red flags” and avoid potentially shady projects.”

Maybe ‘Money Mayweather’ would do better to look into some monetary economics and put a portion of his vast earnings into bitcoin instead.