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83% of Exchange-Listed Coins Traded Below ICO Price, Research Shows

Georgi Georgiev | May 11, 2018 | 09:00

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Almost half of the projects who started an Initial Coin Offering (ICO) didn’t have any development work done prior to the fundraising event, research shows. The majority of projects which got listed on a cryptocurrency exchange traded below the ICO price. 

ICOs have become an increasingly popular way of raising capital throughout the last year. A lot of people, including the CEO of the world’s largest cryptocurrency exchange – Zhao Changpeng, recognized them as viable and more convenient ways of fundraising compared to existing solutions.

Yet, there’s always been a cloud of ambiguity around them, with more and more projects arising as scams. Earlier in March, it was reported that roughly around $9 million per day was burnt due to ICO and other crypto-related scams. As we are well past the end of the first quarter of 2018, it’s time to reflect on what happened in the world of ICOs.

Lack of Substance

According to research from ICOrating, 46.6% of the projects didn’t have any development prior to their ICO campaign. Even though this is a major red flag for any investor or contributor, the numbers are definitive. It shows that half of the people invested in an idea, rather than in something that’s backed up by a working product or even a minimum working product (MVP) of any kind.

What is more, 9% of the projects didn’t have any functioning business prior to their ICO. Meanwhile, 40% of the projects examined provided absolutely no information regarding their asset management strategy or even the names of their CEOs. This is a major red flag.

Half of ICOs Failed

A total of 412 ICOs staged in the first quarter of 2018 and only 204 managed to raise more than $100,000. Out of those, 89 got listed on public crypto exchanges, which is what the wide majority of regular investors look forward to in order to ‘flip’ the coins for a profit.

However, out of the coins that got listed on an exchange, 83% actually traded below the ICO price. This goes to point out an important sentiment – even if the ICO managed to raise a lot of money and hit its funding target, it doesn’t guarantee a return on your investment.

What Does This Mean?

None of the above goes on to say that ICOs are to be considered dangerous, scamming or unreliable. As a matter of fact, the opposite is true – under proper regulations, ICOs can truly become a much easier and quick alternative to traditional funding methods, which exclude the majority of the population.

However, the statistics are quite definitive in the sentiment that there’s a long road ahead. Active regulations are needed to put this otherwise convenient model for raising capital within certain legislative frameworks so that investors can be protected while businesses can pursue clear guidelines and have an easy access to funds.

Do you think ICOs are a reliable way of raising capital? Have you invested in an ICO before? Please let us know in the comments below!

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