In 2017/2018, initial coin offerings (ICOs) were the major tools for raising funds of crypto/blockchain startups. However, in 2019, this enthusiasm has died amongst investors leading to a 97 percent decrease in ICO investments in the first quarter of this year.
2017/2018 Bull Market To Blame For Drop In Initial Coin Offerings (ICOs)
A report released by BitMEX, a crypto trading platform specializing in margin trading, has indicated that only 40 million U.S dollars were raised in Q1. The low interest in ICOs by investors has been attributed to the 2018 bear market that followed the 2017/2018 bull market.
In 2018, crypto/blockchain firms that attracted most funds in their ICO period included Telegram, EOS, t0, Dfinity, Bankera, Orbs, PumaPay, Unikoin Gold, Jet8. The last three in this list are reported to be operating at a loss since their average ICO price has fallen by 64 to 99 percent.
For example, the return based on average ICO price for Orbs, PumaPay, Jet8, and Unikoin Gold is down 64 percent, 93 percent, 99 percent, and 88 percent respectively. The amount raised during their respective ICOs is $118 million, $117 million, $33 million, and $32 million respectively.
According to the report:
“The ICO market is down around 97% in Q1 2019 (YoY), based on the amount of capital raised. In this challenging climate to raise funds, some projects have changed the ‘C’ in ICO to an ‘E,’ perhaps in an attempt to assist with raising capital. At least for now, to some extent, this appears to be working, with almost $40M having been raised so far this year.”
The change of the ‘C’ in ICO to an ‘E’ depicts a shift from the traditional initial coin offering to a revamped version known as initial exchange offering (IEO) which is gaining momentum among investors due to its profit margins.
The dwindling interest around ICOs was also noted by ICObench, a rating platform. As per ICObench’s report, ICOs issued in the first quarter of 2019 were less compared to those issued in the last quarter of 2018.
In a recent survey, less than half of institutional investors indicated that they might consider investing in ICOs “in the next five years.”