After more than a year of runaway valuations and mind-boggling capital raises, the controversial initial coin offerings (ICOs) are beginning to face real scrutiny.
According to a recent report by BitMEX Research that broke down Ethereum (ETH) holdings across projects that recently conducted ICOs, many of these projects appear to have profited after selling almost all of the Ethereum they raised.
1/ BitMEX Research publishes a new report analysing the Ethereum holdings of the ICO projects. We establish that the ICOs have already sold almost as much US$ worth of Ethereum as they initially raised.
— BitMEX Research (@BitMEXResearch) October 1, 2018
“Of the 222 projects which we looked at, they raised US$5.5 billion worth of Ethereum and they may have already sold almost exactly the same amount (just US$11 million less),” claims BitMEX.
The report indicates that despite Ethereum’s 85% reduction in price since peaking in January, these blockchain projects have realized gains of $727 million from taking profits on Ethereum.
While the blockchain projects have made out relatively well, investors have been left with ever-decreasing token prices and losses that will likely never be recouped.
Other recent reports have shown that tokens outside of the top-100 list are currently facing a $5 billion shortfall against the total amount of funds raised during ICOs. Of the 562 tokens analyzed, only 30% currently have valuations above their initial raise. Additionally, a whopping 324 tokens have completed ICOs, but yet to be listed on any public exchange.
This ongoing sell-off of Ethereum is also considered one of the driving factors of Ethereum’s price decline, as bulls are unable to outpace the ever-increasing supply being dumped on the open market.
While converting Ethereum to fiat does make sense to reduce volatility, doing so damages the transparency as investors can no longer track project holdings via public addresses. Given the lack of regulatory oversight on ICOs, there is no accountability for blockchain projects, even those considered to have high-potential, to simply walk away with investors’ money once it is converted to cash.
The impact of this activity is evident, as the total number of successful ICOs sits at 52-week lows while the capital raised from these sales hit a 16-month low in August.
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.