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Just a couple of years ago, ICOs were the most successful way to raise capital for new cryptocurrency and blockchain projects. Then came the bear crypto market, causing the biggest drop in capital raised by ICOs ever seen. The bear market has since dragged on for more than one and a half years and ICOs have suffered all the way through the bearish run.
A recent report done by BitMex Research shows that just in Q1 2019, ICOs are down 3,800 percent. These statistics are unprecedented and practically mark the end of the line for ICOs.
The report also paints a hopeful picture for IEO’s, the new way to raise funds for projects by associating themselves with certain crypto exchanges. The report, which is titled ‘Initial Exchange Offerings,’ reads:
“The ICO market is down around 3,800% in Q1 2019 (YoY), based on the amount of capital raised. In this relatively 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.”
The reason for optimism is the performance of IEOs so far that have managed to raise just short of $40 million in the last four months. “Perhaps in an attempt to address some of the concerns about the poor investment returns and the lower levels of enthusiasm for ICOs, IEOs appear to have gained in popularity,” the research report speculates.
Binance, Huobi, and Bittrex take the top 3 places respectively in terms of IEO funds raised. Kucoin and OKEX take the 4th and 5th place respectively. The top 5 spots for IEO token market capitalization taken by the same firms.
However, the report claims that while early investors saw good profit margins, once the tokens become tradable, the returns have been typically poor. On average, developers only made 4.4 percent of the total tokens made public. Keeping the rest to fund the development of the project by selling them through the cryptocurrency exchanges.
“Therefore, there are opportunities for project teams to make considerable profits from selling coins they granted to themselves,” BitMEX Research wrote. The report further concluded, “While exchanges, traders and subscribers may have done very well from IEOs thus far, we are less confident on the outlook for long term investors.”
The report does alert readers to take the statement with a grain of salt since it is “simply a high-level analysis” and BitMex has not looked into the projects in detail. Yet, it does offer a gloomy overview for ICOs, and an auspicious boding for the new emerging IEO phenomenon.