The massive holding of ICO is one of the main trends in the cryptocurrency market in 2017. How did it all begin, what key events determined the ICO market this year and what to expect in next year? Will it be easy for startups to make money with ICO or will the barrier for entering the market increase significantly? Let us analyze the statistics and listen to what the experts say.
The practice of initial placement of cryptoactive assets to raise funds from investors appeared about 3 years ago. However, they actively talked about it in the end of 2016 – beginning of 2017.
The market was just preparing for the mass distribution of ICO in 2016. Not all users have realized that you can invest not only in cryptocurrency, but also in startups associated with it. The developers themselves did not yet know in detail how to prepare, launch and conduct ICO. However, the successful experience of companies that took the risk and benefited showed that it is possible and necessary to invest in cryptocurrency projects.
46 ICOs were held in 2016, which together raised about $ 1 billion in investments. Among the most successful projects are DAO (total amount – $ 150 million), Waves (16 million), Consensys (7.5 million), Golem (3 million), Wings (2 million).
As of the end of the year, it became obvious that ICO is a very promising direction for both developers (who raise money) and investors (who invest in profitable projects). Not surprisingly, 2017 began with a heightened interest in ICO.
The developers were stimulated by the growing popularity of start-ups among regular users, who sharply became interested in cryptocurrency and also the comparative simplicity of ICO. The sale of digital tokens was practically not regulated at the legislative level until the end of the year and start-ups had complete freedom of action.
Specialists of the research company ForkLog Research made a sample of 148 cryptocurrency startups that raised $ 2.4 billion in investment and analyzed trends in the 2017 ICO market.
It is worth noting another characteristic trend of 2017 – many ICOs have been collecting investments in a very short time (from several hours to several days). That is, in the boom conditions, people massively invested in the ICO, bringing startups with quick and very tangible profits.
Already in the second half of 2017, the ICO market declined. According to the ICO Rating, the share of successful ICOs was 50% in the first half of the year, 30% in the summer, and 20% in the autumn. That is, only every fifth project became successful, the rest turned out to be a failure. Moreover, even those projects that did not fail at the launch stage did not always manage to collect the planned amounts. Almost 70% of all ICOs failed to collect even 90% of the planned investments.
Also note the increasing maturity of the market. First of all, the investors themselves become more experienced and critical. Gradually, they stop to respond to any “beneficial offer” and they assess the viability of each individual project, taking into account market trends or its own investor logic.
Of course, the situation was further aggravated by the fact that the investors on their own experience were convinced that not all promoted projects could really shoot. Many startups traveled only on the high popularity of ICO, but in fact the price of the created tokens in the interval between pre-sale and market entry fell in 2-3 times.
And finally, the news that shook almost all the cryptocurrency community in 2017 – the ICO will be regulated by the state. Not everywhere, of course, but alarm bells sounded all over the world.
China went even further and in September announced a total ban on holding an ICO. Halyk Bank, the Securities Market Regulatory Commission and a number of other government organizations have united and issued a decree according to which any activity related to trading in digital currencies is prohibited in the country. Moreover, all the companies that conducted the ICO were ordered to immediately return the money to depositors. It is noteworthy that by the end of the summer, 65 ICOs were launched in China, which raised almost half a billion dollars, that is, 1/8 of all investments in startups in 2017. When the Chinese projects merged, the capitalization of the cryptocurrency market within a week fell by almost 20%. South Korea also announced a ban on ICO after China.
Hong Kong has taken a more neutral position – the sale of tokens that fall under the category of securities will be regulated at the legislative level. Similar tactics were decided to be followed in most European countries. The European Securities Market Authority issued a statement addressed in November to all investors by investments in the ICO are associated with enormous risks, and the tokens themselves have no tangible value. The ICO ban was not discussed, but representatives of the Office stressed that in order to avoid legal trouble. All transactions must comply with a number of statutory documents.
It is already noticeable how the state is trying to control the market of digital currencies and there is every reason to believe that in 2018 the situation will only get worse. Even those countries that do not follow China’s path and do not ban an ICO at all will do everything to increase control over the market. In particular, analysts talk about ICO taxation, the prospect of which looks not so unreal as it was at the beginning of 2017.
Some experts put forward curious hypotheses about the appearance of crypto-offshore – a kind of “islands of freedom” that can form in countries with loyal legislation regarding cryptocurrency (for example, in Singapore, the Cayman Islands or the Isle of Man).
In conditions when individual investors are afraid to invest in ICO and campaigning itself may be taxed, the main focus will be on large investors. Experts predict that the main clients of ICO in 2018 will be corporations and venture funds. Accordingly, the ICO format itself will change.
This item is directly related to the previous one. Serious investors are not ready to buy a cat in a bag – they need confirmation of the project’s profitability. Therefore, startups will have to prove their viability. If the company wants to launch ICO in 2018, it will need to write a sensible White Paper, explore the market and bring the economic base under its proposal.
Experts predict that marketing tools typical for 2017 will gradually lose their value. If small investors could be attracted by advertising in social networks, spam e-mails and viral content, then serious corporations need at least analytical reports and press releases in status publications.
Most of the projects in 2017 were funded by cryptocurrency – primarily Bitcoin and ethereum. Experts expect that in 2018 the emphasis will be on fiat money. After all, venture funds will come to the market that do not yet have the tools to evaluate the profitability of cryptocurrency projects.
Experts estimate this trend positively. If the cryptocurrency market will be filled with fiat money, we can talk about real confirmation of the economic value of ICO.
Even if the number of ICOs is reduced to hundreds, investors will not have the physical ability to carefully study and analyze each project. Therefore, there will be a need for professional intermediaries who will undertake the analysis and screening of startups. Such intermediaries will be the so-called rating agencies, which monitor the current ICO and sort them in order of profitability. However, in order to make ratings of startups and sell practical advice to other people, it is not necessary to have your own agency. This can be done by ordinary users who have solid experience in cryptocurrency investing.
Analysts claim that 2018 will be held under the auspices of mature and high-quality ICOs. In the past, incredible sums collected in record time will remain. If the promoted project could have raised $ 100 million in just 1 day in 2017 (as, for example, the retailer Overstock.com recently did), then in 2018 the investment will be gradual and more pragmatic. Investors will look at the project for a long time, compare it with other offers and only then pour into it a clearly planned amount of money. About the spontaneous investments of users, heated by the mass agiotage, in the new conditions it will be possible to forget.
Anyway, there is no talk about the decay of the ICO market. Experts predict that quantitative growth will simply be replaced by qualitative and at the output we will see a more mature market with decent offers. If it is worth experiencing to someone, then only start-ups are ephemeral, who make low-grade product with the goal of rapid enrichment. If analysts’ forecasts are confirmed, they will be eliminated before entering the market.
As for individual investors who are not associated with large corporations, everything is not as bad as it might seem at first glance. Yes, the emphasis will be on large investors, but ordinary users will also be able to invest profitably in a promising startup. So far, most countries are only talking about banning cryptocurrency transactions, so there is still time to join the profitable ICO. Moreover, the quality of startups promises to significantly increase.