Andrew Lee presents research on ICOs with positive ROI, and makes an argument that ICOs not trading yet should consider offering optional refunds to investors.
I’ve been passively observing the ICO market and it was clear it has been returning extremely poor throughout 2018 and 2019, but for deeper trend analysis, I’ve unbiasedly collected data and looked at the stats. Please note that the data is completely unbiased in my selection. I’ve tried to include all of the ICOs that were the most well-known globally by reputation and I’ve covered all of the ICOs I could find that were ROI positive. In turns out only 5 ICOs were ROI positive after Q2 2018: Quant Network, Lambda, LTO, Contents Protocol and BitTorrent. It’s really important to note the trend on how much investors are losing with ICOs that are trading in Q3 2018, Q4 2018 and Q1 2019.
As for the ICOs that traded positively, it would be interesting to look at what were the commonalities between them for a reason for their positive performance. It seems high liquidity exchanges are the biggest common factor between all of the ROI positive coins. BitTorrent benefitted from Tron’s investor community and the liquidity on Binance. Contents Protocol benefitted from the liquidity on Upbit, the biggest exchange in Korea. Lambda, LTO and Quant Network did well on Bitmax which offers leveraged trading.
The amount of money that is trapped in SAFTs (Sale Agreement of Future Tokens) for project tokens that are not trading is not quantified or known publicly, but it is likely the 10s of billions US dollars to my estimation. If there was a reported $16.72 billion raised from ICOs in 2018 and many projects, based on personal interactions and observations, have delayed trading for a more bullish market.
What’s also concerning to me are the $50M+ ICO raises that are still not trading on secondary exchanges. These investors bought into the large promise of these projects, but there was absolutely no valuation model for why these projects should raise this much money. That includes Telegram Open Network, Filecoin, Dfinity, Polkadot, Orbs, Hedera Hashgraph, Blockstack and Videocoin.
In traditional equity IPOs, investment banks help advise on valuation and trading timing. However, in crypto, fundraising hard caps, which function similarly to IPOs, are picked most often by technical teams who decide on how much budget they need to fulfill their roadmap.
Although tokens provide “utility” and access to a product, they also borderline if not clearly function as securities as investors invest in the ICO at a primary market valuation and the tokens are soon after expected to trade on liquid secondary markets.