Posted on

ICO Market Doubled in a Year, Investing up Ten-Fold

Initial Coin Offering–Despite the sinking price of cryptocurrency across the market, initial coin offerings have managed to fair well in terms of growth through 2018. While the entire industry is embroiled in a bear cycle that has continued into the eighth month of the year, ICOs have doubled since 2017, while drastically increasing the amount of investment funds.

According to a report by ICORatings, a website that publishes independent research about upcoming and launched projects, the entire ICO market has doubled within the last year, with projects having already raised $11 billion throughout 2018. To put that figure in perspective, ICORatings reports that ICO investing through Q1 and Q2 in 2018 is ten times that over the same period last year, showing a substantial boom in investing in new coin projects. While the ICO market has drawn significant criticism over the last several months due to the propensity for scams, empty projects and unproductive profit seeking through cryptocurrency, the overall health of ICO investing appears to be thriving.

The report includes specific details about Q2 2018, stating that 827 new projects raised over $8 billion in funding, up from $3.3 billion in Q1. The 151 percent increase through the second quarter of the year is reflective to the interest generated by cryptocurrency, in particular the low barrier to entry for startups and developers that is afforded through the initial coin offering model. However EOS, currently the fifth largest cryptocurrency by market capitalization, made up the largest share of the ICO pie,

“Funds raised by EOS project account for most of this increase, they have collected $4,197,956,135 for a year-long ICO.”

ICORating also highlights Europe as the leader for all ICO projects, launching 46 percent of new developments this year, with North American investors contributing the most capital. In addition, the report mentions that Asia has seen an increase in investment capital flowing into ICOs, despite a decrease in the overall number of projects launched.

While the current atmosphere surrounding cryptocurrency and Bitcoin hinges upon the U.S. Securities and Exchange Commission’s ruling on the creation of a BTC ETF, ICOs have already started to incorporate larger amounts of institutional investors. The report shows that institutional capital in ICOs is on the rise, while retail investment continues to decline. ICORating finds this to be a favorable position for the growth of the ICO market and general well being of cryptocurrency, as greater institutional interest leads to higher standards in the development of the projects. In addition, the fundraising of ICOs will become more dependent upon “how well projects cooperate with investment funds,” thereby raising the standard across the industry.

Despite the positive news published by ICORating on the growth of the market, reports earlier in the year revealed the industry still has room to grow in terms of achieving higher quality. A study published by Statis Group found that 80 percent of ICOs in 2017 would fit into a category of “scam,” relaying the experience of investors who have found themselves duped by empty projects or teams that run off with investment funds. However, most have recognized that ICOs offer a high degree of innovation as a model for funding new projects and, despite the bad actors filling the space, are helping to grow the industry in terms of development. 

loading…

Posted on

Study Concludes 80 Percent of ICOs in 2017 Were “Scams”

Initial Coin Offerings (ICOs)–The bad news for ICOs continues to roll out this summer.

Last month, TechCrunch published a review of the crypto industry, concluding that over a thousand projects were already considered dead, despite some still having a presence on exchange and coin listings. The overwhelming majority of failed projects were in the form of short-lived ICO projects, which barely made it out of the fundraising period before dying in the interim following coin issues.

Research out of the Boston College Carroll School of Management supported this claim, when they found that over half of all ICOs die within the first four months of issuing their tokens. Only 44% of the projects were able to sustain any sort of growth or momentum past the four month mark, with the survival rates dipping even further thereafter. While they concluded that the profits for ICOs are still substantial relative to the traditional stock market (about 82% ROI in 2018), there is a significant drop-off in return from 2017, where some investors were collecting four-digit percentage gains on their investment. In addition, the risk of investing in ICOs has steeply increased despite the fall in return, which the researchers found antithetical to good investment practice. They also found that most of the profit surrounding ICOs occurred in the first week of token issues, with a steep drop off past the two week and two month-mark, thereby recommending that ICO investors sell their coins as quickly as possible to insure the greatest risk/reward return on investment.

All of this is troubling given the growing landscape of ICOs in 2018, already surpassing the total volume of projects issued in 2017 despite being only halfway through the year. As prices for established cryptocurrencies continue to plummet, more developers are drawn to the industry of cryptocurrency via the ICO format as an unregulated road to riches in the volatile market. However, a new study concludes that the majority of these “developers” are more akin to scam artists, and that the entire industry should be vigilant in promoting and reviewing ICO projects.

Issued by the ICO advisory firm Statis Group, the research concluded that 80% of ICOs in 2017 constituted a scam. The study cites the exponential growth of cryptocurrency projects as leading to the variability in quality, up from just 14 crypto assets in 2013 to over 1500 currencies at present. While the study examined the full breadth of ICO existence in 2017, from initial proposal of the project to when the coin was ultimately available for trading on exchanges, the evidence was damning: only 20% of initial coin offerings during the year passed the criteria for being a legitimate project; the rest were scams. Three percent of the total ICO volume was declared “dead” by the end of the year, which the researchers referred to as no longer being listed on exchanges for trading. Which means, in less than a year, some coins had managed a proposal, funding, and token issue only to be such a colossal failure that exchanges would no longer list them for trading.

On a positive note, the research concluded that the majority of  monetary value was being funded to projects that the analysts rated “higher-quality”, despite the total volume of projects skewing heavily towards being a scam,

Over 70% of ICO funding (by $ volume) to-date went to higher quality projects, although over 80% of projects (by # share) were identified as scams.

While ICOs represent the current avenue for innovation and new development in the space of cryptocurrency, the vast majority of projects being labeled scams in addition to the high rate of failure is likely to draw more attention to the need for regulation in the space of crypto fund-raising.

loading…