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Nine out of 10 cryptocurrency firms will fold, says Dogecoin founder

Jackson Palmer created Dogecoin as a joke (YouTube)

Nine out 10 cryptocurrencies created in the past year or so will fold – says the man who launched Dogecoin as a joke.

Jackson Palmer – who freely admits he did not make any money out of his creation – believes we are reaching a crunch point for many fledgling virtual currencies.

He said that 12 months ago, as market leading bitcoin was really beginning to attract mainstream interest, scores of cryptocurrencies “got a bit of seed money” and sprang into life.

Now, coming up to their anniversaries, reality is about to bite.

Bitcoin soared to almost $20,000 at the end of 2017 but has since fallen back to about $11,700 –  still way ahead of where it was a year ago (REUTERS/Benoit Tessier)

“There will be diamonds in the rough, but the reality is 90% of these companies will fail,” he said.

“The interesting thing is that these tokens will not go anywhere, even if the companies disappear. Will they still be traded?”

MORE: What is Bitcoin, how do you buy it – and is it a safe investment?

By the most reckonings, there are almost 1,400 cryptocurrencies available, with bitcoin, ripple, ethereum and iota as some of the leading names.

Many have been experiencing a rollercoaster ride in recent weeks as their value has soared and plummeted in equal measure.

Bitcoin rose to almost $20,000 towards the end of 2017 but has fallen as low as $9,200 in the past week or so. It’s now hovering around the $11,700 mark – about £8,400.

Some have described bitcoin’s spectacular rises and falls as classic signs of a bubble, but Palmer said that while many companies and currencies will fail, it’s not boom and now bust just yet.

“We not going to see a spectacular implosion,” he said. “I think the key thing that will affect things is not just companies getting taken down, more so regulators taking a look at the exchanges.

“A lot of what is happening [falling prices] is because of entirely unregulated markets, it’s considered illegal, including wash trading.”

Wash trading is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.

Indeed, South Korea has said it plans to ban bitcoin trading, while authorities in the US and Europe are now getting increasingly twitchy about potential fraudulent activity.

Dogecoin became so mainstream it even sponsored a Nascar racing car (Chris Graythen/Getty Images)

Palmer helped created Dogecoin in 2014, using an internet meme featuring a cute Japanese shiba inu dog as its face.

It was, he admits, launched as a parody. “I didn’t make any money out of Dogecoin,” said Palmer. “It was launched to take the p*** out of cryptocurrencies and it’s ended up being the butt of its own joke.”

MORE: ‘Bitcoin bubble is bursting and will fall a lot further’, warn economists

Dogecoin, despite not having any software updates in two years, was recently valued at $2bn.

And this, he said, was the most concerning aspect of cryptocurrencies. With so much attention of them, many inexperienced investors are being tempted into the market.

South Korea has said it is planning to ban trading on bitcoin and other cryptocurrencies (REUTERS/Kim Hong-Ji)

“The challenge is that Wall Street traders are now taking notice and thinking, ‘I know how to do this, I can make some real money here’,” said Palmer.

“Before it was the quiet, technical types interested in the tech side of things.

“It’s very important for the Wall St players to get smaller investors involved – and that’s where the trouble starts.

MORE: Wow, much hype: dogecoin doubles in value in days to pass $2 billion

“What happens is that regular people are getting involved who may not have money to lose. They’re like sheep to the slaughter.

“At the point when consumers get hurt, that’s when the regulators – who have been quietly sitting back until now – will get involved.

“You have to remember, there is always going to be someone far better at it [playing the system] than you.”

Palmer stepped away from Dogecoin a couple of years ago to focus on his “day job” of product management.

His other sideline is producing educational videos on his YouTube channel where he tries to guide people through the evolving minefield of cryptocurrencies, blockchain and investing, using his knowledge from inside to help others not lose money.

“Education is key – it’s not the fault of cryptocurrencies, it’s speculators.”