There are different cryptocurrency exchanges that are currently offering users the possibility to purchase tokens from a large number of projects. These Initial Exchange Offerings (IEOs) are something similar to Initial Coin Offerings (ICOs) but with previous analysis and due diligence from the crypto exchange in which the tokens are launched.
IEO Tokens Are Not Having A Good Time
After the ICO craziness that the market experienced back in 2017 and the beginning of 2018, several regulatory agencies started to regulate the market and control ICOs. Several of these projects were created in order to steal users’ funds and run away with the money. Meanwhile, those that were able to keep operating couldn’t deal with the bear market that affected the whole space during 2018.
This is why Binance, OKex, Huobi and Bittrex, decided to create a new system for launching tokens called Initial Exchange Offerings (IEOs). These platforms allow projects to sell their tokens to interested users using a platform designed by the exchange. These exchanges investigate the projects before allowing them to publish content and try to be sure that everything will go as planned.
However, there are some issues with these IEOs that are affecting the tokens launched. On April 30, 2019, Bittrex started an IEO token sale for Ocean protocol. This project offered 56.4 million OCEAN tokens for $0.12 per token. The IEO gathered $6 million.
After the token sale that lasted three days, the digital currency was listed on Bittrex for trading as soon as May 3rd. The token lost 80% of its price since then. Many long term investors would clearly regret their decision to invest in this digital asset. The price of the token fell right after it was listed on the platform. Many investors purchase IEO tokens because they speculate on the price it will have right after being listed on the exchange.
Alex Krüger, a recognized cryptocurrency investor and analyst, shared a few charts showing how digital assets launched through IEOs fell dramatically after being listed on exchanges.
These are all of Binance IEOs since the tokens started trading publicly. Can you spot a pattern? pic.twitter.com/7LdQ8kBdC1
— Alex Krüger (@krugermacro) April 29, 2019
At the same time, he said that the IEO tokens have been crashing during a bull market in which almost every single coin experienced price increases during the same period of time. He then asks why did that happen. Some of the comments to this Tweet suggest that this is due to the fact that IEO tokens are being sold at a premium price. Furthermore, other users believe that IEOs are exactly the same to ICOs but promoted by crypto exchanges.