The founder of Hotmail, Sabeer Bhatia, has issued a stark warning for cryptocurrency investors.

Speaking to Arabian Business, the 49-year-old from Chandigarh in north-west India, who founded and then sold dotcom success story Hotmail in the late 1990s, said that valuations were based on speculation rather than proven success.

“The underlying business model that I have looked at is fraud. Cryptocurrencies are nothing more than white papers, a hope in the way the world will be,” he said.

Bhatia added that ideas which have not been implemented could not be valued at billions of dollars.

“There is a token called IOTA, which is based on the Internet-of-Things. But they haven’t sold a single device to anyone. The whole idea is: ‘In the future, one IoT device will be able to talk to another IoT device and settle any financial transaction between them using blockchain. That’s the idea. And although it’s never been implemented, the idea is worth $15bn? Really? The values are entirely speculative,” he said.

While Bhatia is supportive of the potential of blockchain as a means of cheap, instant and democratic cross-border settlement, he sides with Warren Buffet in the belief that many investors will lose out in the investment. He also rejects the oft-cited parallels with the dot.com bubble – of which he was famously a part – in the late 1990s, when billions were ploughed into websites that had no underlying business yet and ultimately folded, causing a huge sell-off on the markets and wiping out many investors.

“It’s worse. The likes of Pets.com and the Books.com were at least versions of e-commerce platforms that are only growing today,” he said. “There [were] missteps back then but, guess what, we’re doing everything online today. They were right… but they were too early and didn’t have the staying power like an Amazon. Those failures tried to pick a vertical and wanted to be the solution for that segment. [There’s] nothing wrong with that.”

Cryptocurrencies, the decentralised, computer-generated, algorithm-certified means of exchange dominated headlines towards the end of 2017 when prices spiked and volumes surged. Bitcoin reached a peak of $20,000 in December before falling to below $7,000 in less than two months.

For Bhatia, investing in any cryptocurrency practically defines the phrase “too good to be true” and has urged caution from the beginning.

“It has certainly caught people’s imagination. And it’s become a movement. People are fascinated with anything that is successful and financially... But now we’re getting down to the nitty-gritty. What are they?

“The most successful companies of the last 10-15 years have been networks,” he continued. “Facebook, WhatsApp, Instagram, and even Uber is kind of a network. It seems that cryptocurrencies are trying to grow a network and people buy tokens and people participate in the growth of the network. But what is the network really doing? The fundamental question of creating value for society is one they carefully dodge.”