According to reports, new hedge funds are now investing millions of dollars into Initial Coin Offerings.
ICOs: The New Way to Make Quick money?
In the last couple of months, Initial Coin Offerings have received a lot of attention from investors worldwide. According to data from Coinschedule, 153 projects were able to raise the impressive amount of $2.3 billion through ICOs. Experts believe that hedge funds are the main contributors of these ICOs.
A recent article at Bloomberg is reporting that the top hedge funds that invest into ICOs are Blockchain Capital, Pantera Capital, and Polychain Capital. All three hedge funds have allegedly invested $50 million in the presale of the Kin ICO. Startups are mostly favoring hedge funds and major investors with discounts that can reach up to 30% of the ICO price.
The new practice is called ‘flipping’, where hedge funds quickly sell their tokens once they hit exchanges and have substantial trading volume. But most of the hedge funds have stated that they are planning to hold onto their presale investment long-term.
Is It Time For Regulations?
Regulators worldwide have started to warn investors from fraudulent token sales that aim to steal the raised funds. Recently Chinese and South Korean regulators issued a ban on all Initial Coin Offerings and threatened to fine all parties that deal with them. The U.S. Securities and Exchange Commission (SEC) issued a warning to all investors back in July 2017 but hasn’t implemented any official regulations for token sales.
Chairman of SEC, Jay Clayton, stated following in the Bloomberg article:
It would shock me if you don’t see pump-and-dump schemes in the initial coin offering space,
He also added:
This is an area where I’m concerned about what’s going to happen to retail investors.
The SEC is planning to further monitor the current ICO market in order to better understand. Analysts and experts believe that the SEC might introduce a regulatory framework for ICOs in the future.
What are your thoughts on hedge funds getting better terms on ICOs? Do you think that this might hinder the success of future ICOs? Let us know in the comments below!
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