The Columbia Law School blog has conducted an investigation which found that most companies who claimed to be developing “blockchain systems” ended up doing nothing with the idea. Oftentimes, these announcements were made to boost stock performance under dubious pretenses.
A few Columbia Law School researchers have come to the conclusion that, despite many companies promising ‘blockchain projects’ between 2009 to mid-2018, “few firms developed successful blockchain projects.”
Most Mentions of ‘Blockchain’ Happened at the Top of the 2017 Hype Cycle
The blogpost harkens back to the statement made by Securities and Exchange Commission Chairman Jay Clayton who highlighted a “growing trend of blockchain disclosures from public firms with no meaningful track record in blockchain technology.” So, the researchers sought to confirm Clayton’s comments.
According to the researchers, 736 8-Ks were filed containing the words ‘blockchain,’ ‘bitcoin,’ or ‘cryptocurrency’ altogether issued by 224 unique SEC registrants. Firms purely mentioning these terms for speculative purposes tended to be vague in their descriptions.
Moreover, the team found that most 8-K blockchain-related announcements happened at the top of the 2017 hype cycle. This immediately raised eyebrows. In total, the team said that 77 percent of all of the 8-K disclosers were purely speculative and done out of opportunism. In almost all cases, any positive reactions reversed within 30 days. However, the study also confirms that these ‘speculative’ mentions of blockchain by companies continued through 2018 Q2. They seem to have fizzled out by the bottom of the bear market, however.
The most notorious example of this is the case of Long Island Iced Team which opportunistically changed its name to “Long Island Blockchain.” The company is currently under investigation by the FBI.
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A Cascading Stock Rally
The researchers noted how, due to ‘blockchain mania,’ that some more mainstream and crypto-reticent investors were eager to get involved with the sector indirectly through publicly-traded equity securities.
The strong demand but limited supply of equity securities in blockchain-related firms resulted in a major price spike, which further fueled this positive spiral as a kind of self-fulfilling prophecy.
Yet, this is not to say that all of the blockchain hype was for naught of course. The good news is that most of these opportunistic firms jumping on the blockchain bandwagon lost interest by the end of 2018. The ones which did stick around ended up producing their own blockchain networks, like IBM.
Do you believe that most companies who claimed to be ‘looking at blockchain’ in 2017 did so opportunistically to boost their stock? Let us know your thoughts below in the comments.