Crowd Funding researchers estimate that as much as $4B were raised in 2017 through initial coin Offerings or ICOs. That is double the amount venture capital funds as LightSpeed Venture Partners and Benchmark came up with during the same period.
From a neutral point of view, ICOs did leverage on the power of the people. It’s pure psychology at its best. Encouraging common people to invest in ventures they know nothing about because most don’t want to miss out. In the crypto-sphere, most refer it to a fear of missing out (FOMO). Hype and many scientists have proof that the late December 2017 cryptocurrency rally was mostly out of hype. Exacerbating this is the sad fact that there is no regulation and many con artists are taking full advantage of this.
Vitalik Believe Most ICO will Crash
But here’s the caveat. Vitalik, the Ethereum founder has a gloom projection of ICOs in general. This is ironical because most coin offerings are done on his platform. He says that up-to 90% of all coin offerings won’t make it past the development stage and couple with weak or non-existent laws, it shall be worse.
“It is an established fact that ninety percent of startups fail. And it should also be an established fact that 90 percent of these ERC20s on CoinMarketCap are going to go to zero.”
Unfortunately, it’s the investors who bear the brunt. Already, research finding shows that more than 10% of all the ICO funds are gone. Going down with them are grand projects behind theoretical market analysis and flashy websites in the wake of increasing government regulations.
The Chinese were the first to crack the whip on ICOs. Inevitably, this set the balling rolling for other jurisdictions that were waiting for a simple nudge and to call action. China’s basis became a replicable blueprint for countries as South Korea who had similar concerns.
At core were the deafening calls for consumer protection through favorable laws and government intervention.
Of course, many didn’t expect such. However, with more than 50% failure rate, investors are playing hard ball. Regulatory bodies are doing their part and so are influential companies as Google, Facebook and Twitter. All of them are following the same course, purging all cryptocurrency advertisements especially ICOs.
It’s helpful and while investor caution is at an all time high, it’s the blockchain ventures promising security tokens that should up their game. In 2018, more ICOs are failing to meet their soft caps as investors insist that start-ups link their real assets with tokens.
Besides, investors know that the only offer ICO companies offer them is “possibilities” of future token appreciation and are now demanding more. Like IPOs, many are now angling for interest earnings on their tokens on top of possible dividend compensation in case the company over perform.
What ICOs Are Doing
To counter this, it’s becoming increasingly common to find companies like Quintric backing their tokens with precious metals as Gold. Many more are self regulating through SAFT agreements. This encourages stability, responsibility and a win-win scenario mainly for investors who want to see value, not scam.
By the same vein, ICOs correlates positively with millenials. Studies show that young people trust peer to peer reviews and likely to invest in social media active start-ups.