DNotes Founder Alan Yong writes a solid think piece on the rampant speculation going on in the cryptocurrency industry, especially with ICOs, why it happens and what its overall effects are. He has claimed over and over that this "lottery" mentality has really harmed not just the investors who have lost out, but the industry as a whole.
Government regulation and enforcement can to some extent help with this problem. By requiring any entity issuing tokens deemed to be securities per the Howey test to register with the Securities and Exchange Commission (SEC), the government provides an opportunity to weed out either outright frauds or schemes that might be sincere but are not really sound (half-baked ideas and so forth). But regulation and enforcement have their own issues and while they might protect investors from scam A, they don't in and of themselves help the same investors avoid the next scam which maybe found a loophole (or these days, ran as an unregistered ICO).
The real answer of course is education. Individual investors have to take responsibility for their own financial education. To do that, you (the individual investor) have to first recognize that you don't know what you need to know. Then you have to set out to research and learn the important information you are currently lacking.
It sounds easy, but one thing I have encountered in general, but especially in the cryptocurrency industry, is a certain reluctance on the part of people ignorant of a topic of importance to actually take the time to educate themselves. My "data" is by no means thorough or scientific, but I have noticed times when I've made a post on the Bitcoin Forum linking to a truly educational article right in the beginners and help section, it doesn't get a lot of traction. Few see it and even fewer comment on it. Why wouldn't someone planning to invest in cryptocurrencies want to take an hour or so to read through an article detailing the kind of due diligence questions investors need to be asking of any project under consideration?
One reason is that knowing how to invest properly has the feel of something you should just know. It has that feel of "common sense." So I think a lot of people assume they already know what they need to know. It often takes being burned to realize how much you don't know. And then there's the matter of admitting that you really don't know something that only yesterday you assumed everyone just knows and therefore you too should know. And now you find you don't know? How embarrassing is that! And if you go on the Bitcoin Forum to seek some support in mourning your loss (from having gotten burned), you can count on some know-it-all calling you an idiot, which really doesn't help with the feeling of embarrassment over what you thought you already knew and should have already known but didn't.
I remember a time in my life when I felt like I needed to know everything in the field I had chosen to major in while in college. If I didn't know something I kind of faked it. Looking back I realize this was very stupid, because no one else at the college expected me to know everything. After all, I was supposed to be there to learn about that field. So why did I feel so strongly that I should already know all about it? To this day I'm not sure, but I've since managed to convince myself that there is no shame in not knowing something, even something related to a subject matter you are expected to know about, and that actually asking questions to probe a matter to better understand it (as opposed to demonstrating how much you already know about it) is a sign of actual intelligence, and truly intelligent people will recognize it as such and reward it. For example, I teach theology to adults and children for a living. It's a job I love and find rewarding. But you know what? There are questions about God and Catholic doctrine and the moral life that still stump me. And I'm OK with that! When someone asks me a question I don't know, and I know I don't know it, then I can take some time to research it and integrate it into my body of knowledge before getting back to the inquirer.
The cryptocurrency industry has the advantage of being a new industry, which means in one sense, we're all newbies, all learning the ropes, and there is a lot of ignorance to go around. Ignorance is easily correctable as long as you're aware of the ignorance and then take steps to gain necessary knowledge. So when I got started here I didn't have any sense that I should know something already when it came to the technology.
But basic financial know how, including how to invest properly, does happen to be a subject matter I thought I knew more about than I actually did. I've learned that I don't know nearly as much as I thought through experience. Perhaps that is why they say experience is the best teacher. It's not so much that experience itself teaches you anything. It just highlights the need to know and supplies the motivation to go learn.
If you're in that place where you are ready to learn what you're going to need to know about the cryptocurrency industry, here are a few places to get started.
My experience with cryptocurrencies and why I believe in DNotes This is a good story of someone who experienced a few hard knocks and then came across DNotes, what I'm starting to refer to as the solid cryptocoin. I'd put this in the category of inspirational.
The Bad Bitcoin This site is actually fun to read through, though I have to warn you it contains salty language. Its main claim to fame is that it has amassed the longest list I have ever seen of Bitcoin scam sites along with their own commentary. There are so many scam sites out there you have to search for them alphabetically! You can check sites you come across against their list. If it's not on their list, you can report it. It also contains this excellent article telling you about the main categories of scam sites they come across.
DNotesEDU You can find a wealth of information on financial literacy as well as cryptocurrency industry specific know how. The articles are concise but thorough. This is the site where you want to grab your favorite brain food, a notebook and pen, and plan on at least an hour or two of study time!
The woman who led crypto-policing in the US... Let's face it, we all have our conspiracy theories on US regulations, but how much to we really know about them? What better source than a detective who has worked on cracking some of the more noteworthy instances of crime involving cryptocurrencies. In this detailed interview, Attorney Kathryn Haun shares some rare insight and her unique perspective on the cryptocurrency industry, how to regulate it, and where it's headed. It's a really fun and informative read.
Next Gen Crowdfunding Education This site isn't about cryptocurrencies, but it has a lot of great content on investing in general, particularly if you are not an accredited or institutional investor. You can also learn how to launch your own crowdfunding campaign in case you have a good idea for which you want to seek funding. Much of the due diligence information is very applicable to any ICO you might be interested in.