Are Initial Coin Offerings (ICOs) More Marketing Than a Reality?

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It is surprising that Initial Coin Offerings (ICOs) moved this year more than 3 billion dollars. But it is not the limit that ICOs will reach. In 2018, they are expected to grow even further, multiplying this year’s record.

ICOs, scams, failures or risky investments?

In order to invest in an ICO, lot of research should be done during the pre-investment period. In the course of this time, lots of ICOs appear. They seem to be the next world-changing idea, the future itself in present times. An incredible white paper, with experienced working team and big investors betting on it. What can go wrong?

According to Token Report, less than 10% of ICOs token releases keep in the market after Initial Coin Offerings. “Of the 226 ICOs analyzed, only 20 are used in the running of their networks. The rest can only be traded, and are purely speculative instruments”, Galen Moore, chief executive officer of Token Report told in an interview and later quoted by Bloomberg.

The idea of ICOs is to develop a token that could be used in a specific industry for the exchange of goods and services. Investors who support the ICO will receive the token created by the ICO, but at a lower price. If the ICO is profitable and meets all the expectations, the tokens would have a higher value.

According to CoinSchedule, in 2017, Infrastructure and Trading & Investing were the two categories with the most ICOs. Only those two sectors gathered 50% of all the Initial Coin Offerings. The next three categories are Finance with 9,4%, Data Storage 8,8% and Payments 6,6%.

Bitcoin price affects ICOs

As a result of the two bitcoin forks in October and November (Bitcoin Gold and SegWit2x), Bitcoin price skyrocketed. This growth in the price can be explained because of the nature of the hard forks. When Bitcoin splits, the owners of Bitcoins will have the same amount of Bitcoin but in the new blockchain created. In order to take more profit from this situation, investors were holding Bitcoins instead of selling them or choosing other Cryptocurrencies.

“ICO tokens are not the hot story at the moment, but could return to the forefront of people’s imaginations as the bitcoin fever trade unwinds and searches for yield in returns in other markets,” told Charles Hayter as quoted by Bloomberg.

It seems that October will be the month in which ICOs raised the less funds in almost half a year. This situation can be related to the Bitcoin fever descripted before. But, it is important to remark, that Initial Coin Offerings sometimes fail to achieve their main goal. Thus, they become just a speculative tool for some investors more than a successful initiative or project.

The Bletchley 20 Index, composed of 20 medium sized cryptocurrencies by market capitalization, scored the same as in June. During the last month it lost almost 20%. The Ethereum Token Index, measures assets run on the Ethereum platform. It showed the worst result of the year some days ago.

At the beginning of the year, Bitcoin price went from $960 dollars to $6345 dollars’ yesterday.

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