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Initial Coin Offerings: Not For The Faint-Hearted

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Initial coin offerings are the latest way for blockchain startups to raise capital and engage with their prospective client-bases. Investors have been making huge returns but the market has all the hallmarks of a bubble and is bound to burst sooner or later.

The ICO market has been red-hot in recent months. Only an indicator is the increased popularity of the search term “initial coin offering” on Google.

In fact, the total number of ICOs in the first half of 2017 surpassed the number for the whole of 2016, according to Santiment, a crypto-market intelligence platform: the increased interest reflected on Google is certainly no coincidence.

Advocates argue ICOs, where companies create and sell a new digital token or ‘coin’ to investors to raise capital, offer issuers huge advantages. They allow them to raise millions with lower barriers to entry than alternatives like debt financing or an IPO and link issuers with investors that are also typically early adopters, beta testers, development contributors and evangelists.

While issuers are attracted to ICOs by the flexibility that is possible due to the lack of regulation around them, investors are principally in it for the returns. These have often been spectacular, with returns of 10 or 20 times the initial investment not unusual.

But others warn of the volatility and risk for investors. In our latest piece in our digital currencies series, Gabriel Dusil, co-founder of blockchain infrastructure company Adel, describes the ICO space as “Wild West”. He knows what he’s talking about: Adel conducted its own ICO in March 2017.

You can read the full article “ICOs: not for the faint-hearted” here.

 

Ben Bschor
About Ben Bschor
Ben is Managing Editor of Euromoney Institutional Investor Thought Leadership. His role includes leading the development of large editorial reports, surveys and interactive websites, as well as managing freelance writers, analysts, economists and designers.
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