Op-Ed

Mixed Feelings for ICO’s vs. Steadfast Investor Faith

Rising to fall?

The rapid expansion and increased popularity of cryptocurrency this year has helped initial coin offerings (ICO’s) attract a record breaking $12 billion in the first half.

According to Autonomous Research LLP, this is a dramatic win for ICO’s from a $7 billion trade worth for the whole of 2017 and more than a 50-fold jump from 2016.

Investors have continued to pool despite an overall bitcoin downfall of 70% from December 2017. The investor faith has remained intact despite several ICO’s failing to fulfill their performance promise and becoming in-operational within days of issuing currency.

The current amount raised in ICOs has significantly risen up from the previous years. From low point like $3.8 billion sometimes in last year, the amount has blown up to $11.9 billion now.

Even with such a remarkable difference in the raised amount, the projects have faded away since they were scams. A website called Dead Coins enlists all the obsolete digital currencies. It has been estimated that 800 crypto coins or more have become completely dysfunctional.

Some analysts have dissented the verdict that ICO’s will remain as consistent in raising customer interest and investor funds in the farther future. Their loose accountability being a major reason for it. ICO’s are assumed to be self disciplined and self managed, this underlying assumption that investors make accounts for a big part of why they have failed to perform in the past.

China banned ICO’s in September 2017, because of poor market regulations accompanied by growing, overwhelming impact of strong ICO networks on their financial market. This was a result of the mushroom growth in the hot and steamy Chinese economy and eager investors thrilled by the new investment opportunities. The central Bank of China ordered immediate refund of the sold currencies to the investors.

The U.S. Securities and Exchange Commission (SEC), seems to be vary of the functionality of ICO’s. Other than the very recent subpoenaing of ICO’s and launching interrogatory question sessions into their daily workings, reforms are to made as released earlier this year.

Lex Sokolin, global director of fintech strategy at Autonomous told Bloomberg that many of the blockchain-related projects funded by the offerings are likely to fail and that:

This is a high risk sector. It is early stage tech and lots of it by definition is going to die.

According to a joint report from consulting firm PwC and the Swiss Crypto Valley Association, Initial Coin Offerings (ICOs) have raised:

In total, 537 ICOs with a total volume of more than $13.7 billion have been registered since the beginning of the year. In comparison, in 2017 there were a total of 552 ICOs with a volume of just over $7.0 billion. Also, the average size of an ICO has almost doubled from $12.8 million to over $25.5 million since last year.

However the ICO’s making it big in the crypto world are continuing to do so in despite all murky claims. EOS, a platform for open-source blockchain projects, and Telegram, a messaging service have been the spotlight offerings of the year.

Telegram raised $1.7 billion through its ICO, while EOS raised over twice as much at $4.1 billion. They have collectively raised more that $6.1 Billion, almost what the remaining 535 ICO’s in the crypto network according to the PwC press release.

U.S., Singapore, and Switzerland are now the three most important ICO hubs worldwide, largely due to progress in regulation. Perhaps the SEC regulations will help in accelerating the situation in U.S. too, which is a large financial market. Especially after SEC has raised investors’ awareness on the subject of their rights in the investment process and the ownership of these assets.

Whether ICO’s do more harm than good is a widely debated but rarely concluded subject. But they surely are making waves and turmoils in the finance industry, despite the littering scams and failed projects.

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