Regulators have warned investors about risks of new mushrooming cryptocurrencies. Despite warning signals, investors are diving in, even if such tokens are named after a popular internet meme or contain words like ‘useless’ in their title. A demand for cryptocurrencies that meant to be a joke highlights how overvalued and risky these currencies have become, some analysts say.
The popularity of bitcoin and other cryptocurrencies has swelled incessantly. Last year bitcoin price spiralled up nearly 20 times, while exchange groups Cboe Global Markets and CME Group launched futures contracts on the cryptocurrency. According to Autonomous Research, a data provider, in 2017 startups raised more than $4 billion through ICOs. Yet, cryptocurrencies remain highly volatile. Last week the Bitcoin price took a plunge below $10,000, or twice below its record level in December, before regaining some ground.
The joke cryptocurrencies also show how easy it has become for their backers to raise money quickly. A computer programmer can modify an open-source code, create a website and put new tokens for sale in a matter of a single weekend.
The Useless Ethereum Token (UET) site reads, “Seriously, don’t buy these tokens. You’re going to give some random person on the internet money, and they’re going to take it and go buy stuff with it.” The cryptocurrency’s logo depicts the middle finger to its buyers. Despite the site’s warnings, in the last three months UET price has increased more than 240%. The market cap in January at some point topped $300,000.
As of now, 254 people hold 4 million UET tokens, data from online tracker Etherscan show. “If [UET] does get picked up by any of the major exchanges, I promise to use some of the ICO proceeds to constantly and incessantly manipulate the market,” says the token’s website.
UET is not the only digital currency created for amusement that has attracted multiple buyers and stacks of cash. The most popular, dogecoin, bears its name after a widespread internet meme about a Japanese hunting dog lying on a couch. Dogecoin came to prominence soon after it was created in 2013. Then it lost its appeal for years and rumours started to spread about its possible disappearance. But in early January dogecoin’s market cap reached astonishing $2 billion.
Maximilian Keller, one of dogecoin’s developers, is openly concerned about the trend. “It worries me that such a volatile space attracts so many new users right now who might have a hard time grasping just how much risk they are taking in investing,” he said.
