Governments aside. ICOs and the emergence of hundreds, if not thousands, of new cryptocurrencies have brought a wealth of new players into the Bitcoin and blockchain technology business space. Drapers take on the ICO craze is optimistic, as it introduces a new mechanism for funding ventures.
“Its fantastic.” Draper said. “These ICOs are allowing people to pay for the future they want to see.”
However, when it comes to ICOs. Draper maintains the same due diligence that he has long since established in venture capital.
“While some [ICOs] are just vaporware where theyve got nothing. I back those ones I feel are movements where people are willing to dedicate themselves to building something great,” he said.
Under the same line of thinking. Draper proposes that most new coins — those that dont have a marketplace, community or system for demand and supply, and dont really have a viable reason to exist
— will not trade, though a few may rise to a level of extraordinary value.
“If it is a cryptocurrency that is doing something better than Bitcoin or maybe better for a specific reason or group of people, then there might be a true reason for a coin [to exist].” he said. “I think, as in the dotcom era. there will be like five that make it big.”
While Draper is hesitant to compare the world of cryptocurrencies too closely to the emergence of the internet and its accompanying bubble of investment, he believes bitcoin and other cryptocurrencies have acted as catalysts for change in a similar way.
“The way the internet changed communications, entertainment, taxes and information in general, cryptocurrency will do a similar thing to much bigger industries
— real estate, government [and] healthcare.” he said.
If and when a similar crash takes place in the cryptocurrency space as it did following initial investment into internet companies. Draper predicts a migration from some of the more tangential cryptocurrencies to those that have paved the way. including Bitcoin.
“During and after the dotcom crash, the quality investments people made were Amazon. Google and Microsoft.” Draper explained. “People gravitated toward quality. They thought this has been fun. but what is really going to work. By consequence, the quality cryptocurrencies will become even more valuable because more attention pointed in their direction means more engineers putting in effort to work on those [cryptocurrencies] problems.”
LOOKING TO THE PAST, POINTING TOWARD THE FUTURE
Though he admits hes not certain how exactly this will happen. Draper thinks back to his experiences as a leading investor in the early internet for lessons about what will happen in the near future of Bitcoin and other cryptocurrencies.
He looked back and found that “most of our effort in the dotcom world has solidified to about five companies and that took 20 years. There will always be smaller companies and coins trying to compete. But I imagine there will be 5 to 10 major coins and the others will be smaller. These little currencies will keep the big ones honest in the marketplace.”
Perhaps the best lesson a cryptocurrency investor can learn from Draper is to pay close attention to what makes a successful project and. despite what may seem like early success, to be wary of the risk.
“A company must have a total dedication to what they are doing.” he said. “There needs to be a feeling that this thing is going to happen with or without you as an investor. People [who have] passion toward the thing that they are doing become clear when you start asking them about it. However. Ive been fooled a lot and I imagine I will be fooled for years to come.”