Why Are Initial Exchange Offerings So Popular And Why Are IEOs Providing Big Returns?

Initial Exchange Offerings (IEOs) have expanded all over the world pushed by several top virtual currency exchanges in the market. The goal is to offer investors the possibility to invest in different recognized digital assets and projects.

In a recent article released by Christopher Brookins, the founder of Valiendero Digital Assets, tries to explain why these IEO are attracting investors’ attention.

Initial Coin Offerings Become Popular

The cryptocurrency market started a bull trend since it bottomed back in 2018. Bitcoin moved from $3,200 to over $9,000 and the trend could continue in the near future. Initial Exchange Offerings are also a new investment opportunity for individuals around the world.

The author of the article explains that these IEOs are illegal in the United States because the tokens are considered securities and unregulated exchanges are working and operating as brokers and dealers. But there are individuals in other countries that can have access to these tokens.

Brookins explains that new and small capitalization virtual currencies are “highly reflexive” and they are driven by two important variables, exchange volume (ExVol) and also market capitalization.

He explained that investors buy a new asset expecting it to provide a higher future price. That drives the value of the virtual currency even higher. With the growing trend for this digital asset, new investors and developers become involved, resulting in an increased activity, which is reflected in its price.

Finally, he explains that increased fundamentals and price attract new investors, something that drives the price of the token even higher.

The author of the article has also provided a correlation of the speculative demand ratio (ExVol to MCAP) to in price of several IEOs. In these charts, it is possible to see that the speculative demand ratio is a highly valuable signal for investors that are looking at IEOs during the first 180 days.

He then said that after 180 days, the ratio is still useful for price prediction but signal diminishes. About some IEOs, Brookins commented:

“For newer IEOs like MATIC, CELR and FET, the correlation of the speculative demand ratio is likely to rise over the coming months. Thus, current or potential investors should closely monitor the ratio’s trend as a directional gauge of risk and reward.”