Market research on the initial coin offering market in the first quarter of 2018 reveals that institutional investors are playing an increasingly large part in funding blockchain projects despite many of them having no development before they are launched.
The research was conducted by ICO Rating, an agency which (you guessed it) rates ICOs. According to its official website, its analysis team of more than 50 experts “specialize[s] narrowly in evaluating companies in the fields of blockchain, cryptocurrencies and ICOs/ITOs.” It has offices, in Amsterdam, New York, Singapore, and St. Petersburg.
The report says that $3.3 billion dollars have been raised so far this year over 412 projects. This figure only counts money raised from completed ICOs (as opposed to pre-sales and unsuccessful/ongoing projects) and excludes the now-discontinued ICO of Telegram which was worth $1.7 billion alone. If these are counted the figure stands at over $6.3 billion.
The vast majority of ICO money in 2017 was the result of only a handful of projects, and according to this research, this trend continues this year, although to a lesser extent. It says that only half of the completed projects in 2018 raised more than $100,000, while over $1 billion was raised by only 20 projects.
According to the report, only 9 percent of ICOs came from pre-existing businesses, while 46.6 percent of these fundraising projects amazingly “had no development before their ICO campaign[s]” – meaning that they raised their money on the strength of an idea only.
ICO Rating CEO Sasha Kamshilov said: “Having a traditional business does not always rule out their use of blockchain with their products, however, this can sometimes create some discord amongst the perceptions of entrepreneurs.”
One sign that the industry could be maturing is that the average time taken to raise the required funds has doubled – now it is two months. There were, however, projects which raised all of their money in one day; in the past, some have been completed in minutes.
65 percent of tokens sold were intended for use with a specific product/service (utility or hybrid tokens), and only 3.8 percent were for cryptocurrencies. Perhaps this is for the best; according to Investing.com, there are currently 1,685 cryptocurrencies available for purchase in the market. Of fiat currencies, there are 180.
The report notes that “funding during public rounds has started to noticeably lag behind the infusion of institutional capital.”
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It adds: “Funds are ready to invest in ICOs but they are often deterred by teams’ negligence regarding organization of KYC and AML. These procedures need to be in place, and organized to a high standard, to reduce legal risks.”
25 percent of 2018’s ICOs were not legally registered, which sounds bad until you compare the equivalent figure for the previous year – 76 percent.
The report notes the increasing importance of cryptocurrency investment funds, of which there are 119 holding $27.8 billion between them. However, a full 40 percent of these have not published the identity of their CEOs and 9 have already been closed down.
The most popular industry by far for ICO projects is, perhaps unsurprisingly, financial services. ICOs related to this sector raised the most money too.
The post-ICO value of tokens is fairly dire – median return on investment is 49.32 percent, a significant drop from the previous quarter. Of tokens traded on an exchange, only 17 percent traded above price at sale.
The country with the most registered ICOs was the US with 59, followed by Singapore with 34 and then the UK with 26. This does not strictly correlate with the amounts raised; the US ($583.9 million) and Singapore ($468.1 million) remain in the top two but the UK ($99.7 million) slides right down behind Switzerland (14 projects, $268.2 million), China (9 projects, $202.1 million), and Estonia (16 projects, $122.6).
Interestingly two British overseas territories raised more money than their motherland: the British Virgin Islands (5 projects, $158.5 million) and Gibraltar (6 projects, $133.7 million).
Another notable point is that while Russia was home to only 13 projects, Russian nationals headed 45 of them – making Russians the busiest nationality ICO-wise. They just don’t do it at home.
Overall, by far the most money was raised in Europe (46.6 percent).