The Resurrection of Crypto Coin Offerings: A New Golden Age After The Last ICO Bubble
The market is Initial Coin Offerings (ICOs) is dead. Long live the market of Initial Exchange Offerings. Credit has to be given to the entrepreneurs of the crypto company as they were able to basically revive a dead industry with this way to basically make ICOs, but with less uncertainty.
Investors are still dreaming with digital gold ideas and the market will very possibly start to go digital soon, so now is the time to make some money with new tokens. The same mentality led the world to the ICO craze of 2017, which saw most of its tokens losing more than 90% of their market value.
However, there is a far difference between them and now. ICOs were completely out of control in 2017. With promises of decentralization, many of them were simply cash grab scams and most of them failed to provide any value back to the investors.
Amid more regulation against unregulated security token offerings, the ICO market imploded back in 2018 and it looks like now it is ready to be resurrected.
Instead of offering the tokens directly to whoever wants to buy them, the new IEOs use exchanges like Binance. The platforms curate the tokens before they are put to sale and only the best products are actually whitelisted. Since the exchanges need to keep their credibility, there is no reason to believe that the projects will be scams.
This curation will severely reduce the changes of the clients being scammed, which gives some deserved legitimacy to the whole process, which was what killed ICOs back then.
A total of 23 IEOs have raised around $180 million USD this year and the numbers continue to increase. These offerings are not so unregulated and “free” as the ones from 2017, but they are far more secure.
Bill Shihara, the CEO of Bittrex, has told Bloomberg that the new wave of IEOs has the potential to be even stronger then ICOs were in 2017, as there is a clear demand for more and more tokens to be sold. This can be seen in the case of Binance, which generally sold out all of the tokens being offered on its platform in less than an hour.
While ICOs actually got $208 million USD in March and still get more money than IEOs, you should remember that they once peaked in $5.8 billion USD in a single month. Now, they get less than 95% of that money. IEOs will hopefully be more constant.
The main problem that still exists is that these companies are still very unregulated in some countries. Some countries and regulators, then, may not be very happy with them.
Can The New IEOs Be A Golden Goose?
If we have to choose a single company to be the face of this trend, it has to be Binance. The launch of the Binance Launchpad this year made its own token, Binance Coin, get a lot of value. By linking the participation in the sales with its own token, Binance not only profits from selling the tokens, but it also profits from creating a real use case for its token.
The company is basically having flash sales and the tokens get sold out really fast. This has, according to Jeff Forman, a partner of Arca Funds, created a golden goose. This is not really very decentralized, he affirmed, but nobody wants to kill the golden goose, so the companies just brush this off.
A problem that can arise after some time is that regulators may not be too happy that companies only let people who hold their tokens participate in the sale. Some even have affirmed that these new IEOs take what was worse in ICOs and make it even worse. The exchanges are basically acting as broker-dealers to sell securities, some regulators may say.
This is possibly the main reason for why U. S. investors cannot participate in most of the sales and Binance is set in Malta, a largely unregulated place.
In any case, many platforms are following Binance’s steps and starting to sell the tokens on their exchanges. Not all of them are so eager to do it, however, as Nejc Kofric, the CEO of Bitstamp, affirmed. According to him, the market needs to “walk before it can run”.
He defends that the industry has to be far more regulated before it can jump right in the ICO-related business again.