In January 2019, financial writer and consultant Charles Bovaird asked his readers in a Forbes article about the death of the ICO market. Bovaird quoted analysts saying that the ICO market was pretty much dead right now.
After China banned ICOs and the US SEC regulators issued official warnings against Initial Coin Offering processes in the second half of 2017, the crowdfunding model entered in a downtrend that has been in place since then. Many in the space have been vocally against the ICO market, and even Investopedia reported back in 2018 that most of the ICO projects were scammers.
“Dead and over,” as Bovaird quoted analysts saying… but is it accurate?
While global funding in fintech companies rose to a record $111.8 billion in 2018 according to KPMG research, the ICO market fell throughout 2018, mirroring the market’s performance. Interestingly, according to ICOdata, 1,258 projects raised $7.8 billion in 2018, which was up from $6.2 billion in 2017. However, this total has fallen to $153.4 million in 2019, showing that the ICO market continues to wain, even as prices recover.
Clearly, startups that are developing ICO projects are struggling to raise money. However, the situation is changing as ICOs are evolving into a new form of crowdfunding.
IEO Projects Are Ending the Crypto Winter
So, is the ICO market truly dead? No, it’s just evolving. In the same Forbes article, Bitcoin Market Journal publisher John Hargrave countered that the ICO market is not dead, but changing.
In December 2017, Binance launched the first ever initial exchange offering (IEO) through the Binance Launchpad. It happened quietly in the industry, but it showed the path that would transform the crowdfunding market in the crypto industry.
First, What Is an IEO?
IEOs are similar to ICOs but implemented on an exchange or marketplace that allows people to participate more efficiently. In the platform, startups don’t need to develop their token sales on their own anymore.
Selective token sales are completed in seconds as platforms provide a place where everybody is there: network, money, security and a post-sale marketplace. IEOs provide projects with the option to get listed right after the selling concludes, so it allows investors to exchange, sell or buy more assets, or even cash in the investment if they want.
IEO platforms are changing everything in the way startups are raising funds and doing ICOs. They provide a holistic solution for startups that want to raise money. According to Arthur Boytsov, vice president of IEO consulting agency Priority Token, “We’re starting to see IEOs growing in popularity similarly to ICOs in 2017, and the projects which can manage to qualify for an IEO are likely to raise money quickly and easily.”
Why Are IEOs Better Than ICOs?
IEOs have more requirements than ICOs. Usually, the initial coin offerings are developed by the company launching the token. They decide the rules, and they make the offering. This raises questions regarding investor safety as nobody but the company is overseeing the process.
On the other hand, IEOs are different as offerings are conducted through exchange platforms that have high-quality standards. All projects hypothetically meet the legal, technical and team requirements from the exchange as cornerstone components for security.
Exchanges want to protect their customers. Platforms don’t want to get involved with unsuccessful projects or scam artists. So, not only KYC processes but also research, security, and reliable company backgrounds are required. Additionally, IEOs are not open to the general public as you must be registered on the selected exchange to participate
Finally, tokens issued in IEOs are typically listed on the exchange far quicker than ICOs. So, investors will be able to exchange, sell it or buy more to build their portfolios. This offers security, guaranteed liquidity and a marketplace where you can trade your new acquisitions.
So, let’s ask again: is the ICO market truly dead? No, it is just evolving. IEO projects are ending the crypto winter. The long crypto night has ended.
Edited by Tom Stankewicz
Disclaimer: This guest post is for informational purposes only and should not be taken as investment advice. It does not reflect the views of SludgeFeed or our editorial staff. Always conduct your own due diligence before making investments.