In 2013 Mastercoin created the first Initial Coin Offering (ICO) and in the years since then thousands of ICOs have surfaced, creating a bubble that peaked in 2017. This flooding of the market, along with the saturation and noise in the market, resulted in the brutal failure of more than of ICOs of 2017.
An initial exchange offering differs from the conventional ICO model in one key aspect. Rather than the token being distributed through the project, and the token being sent to investors wallets, the tokens are distributed through an exchange. This means investors buy the token directly on an exchange.
IEOs were supposed to be the next ICOs. However, people in the U.S. cannot take advantage of IEOs yet. IEOs are currently illegal, as tokens are clearly securities and unregulated exchanges are acting as brokers. Global investors, however, have shown that IEOs are the go-to way to fundraise a crypto project. The $1.5 billion raised by IEOs in 2019, without the participation of U.S.-based investors, exemplifies this.
However, Longhash has released a study that shows that out of 7 projects, more than 66% of the tokens suffered a decline in value after the IEO. They raised USD 1.1 billion in May, while the total for June collapsed to USD 125 million, which was also less than the USD 153 million generated by exchange offerings in April.
Some business insiders, however, said that the trend of announcing IEO projects by exchanges were nothing more than the old wine in a new bottle, and follows the same additional funds collecting tactics used by exchanges and projects during the 2017 ICO craze.