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The ICO Rollercoaster: Analyzing the Peaks and Troughs of Crypto Fundraising

In the age of digital currency, the landscape of investing has drastically transformed. A decade ago, investors had limited options like stocks, bonds, and real estate. Today, however, they face a dazzling array of investment avenues through new-gen technologies like cryptocurrency. One such avenue that has taken the investment world by storm is the Initial Coin Offering (ICO). For our readers at Bitcoingambling.org, we present a deep-dive into the ICO rollercoaster.

The Novel Ride of ICO Funding

The ICO terrain is fascinating, particularly because it syncs seamlessly with the foundational principles of democratised finance – a key promise of blockchain technology. ICOs empower start-ups to raise funds – often massive amounts – bypassing traditional channels like venture capitalists or angel investors. They do so by offering tokens representing a utility within their project or a stake in it. Investors buy these tokens with fiat currencies or cryptocurrencies like Bitcoin or Ether.

Between 2014 and 2018, startups raised an astounding $22 billion through ICOs according to CoinDesk’s ICO Tracking Service [1]. Yet, the journey has been anything but smooth. Speculation, wild price volatility, regulatory issues, and scams have taken investors on a rollercoaster ride, portraying the very peaks and troughs of crypto fundraising.

The Ascent to the Peak

ICOs did not rise to prominence immediately after their creation. The path to acceptance was gradual, but resilience shone through. A breakthrough moment occurred in 2014 when Ethereum raised $16 million through an ICO, the largest at that time [2]. This was a peak that marked the beginning of a steep climb.

In 2017, ICOs exploded in popularity and volume, scaling new heights in fundraising. That year, ICO funding surpassed venture capital funding for the first time, prompting an eruption of interest in these novel instruments [3]. The peak came towards the end of the year, with December registering record figures.

One of the most notorious peaks was the ICO by the Block.one team for their EOS project. In 2017-18, this year-long ICO raised $4.2 billion, dwarfing even tech giants like Uber and Spotify in capital collection [4].

The Plunge into the Troughs

Yet, with great peaks come great falls. In 2018, the ICO market witnessed severe corrections. This was partly a result of the broader cryptocurrency market crash – the “Crypto Winter” – where prices of Bitcoin and other leading cryptos plummeted sharply. ICO failures also entered the spotlight, further undermining sentiment.

In January 2019, the Wall Street Journal reported that out of 3,470 ICOs that had completed fundraising in 2017 and 2018, 1,450 are “offering no discernible product or communication about progress” [5]. Further, ICO scams like Centra Tech underscored the inherent risks in this unregulated market. The ICO rollercoaster, it seems, was from one trough to the next.

Regulatory Actions and Market Sentiments

As ICOs rose to prominence, regulatory bodies worldwide frowned upon this wild-west landscape. China led the charge in ICO crackdowns, banning them outright in September 2017. The U.S. Securities and Exchange Commission (SEC) also acted, deeming most ICOs as securities which mandate strict regulatory compliance.

Subsequently, new ICOs witnessed dwindling investor interest and lower returns, marking another trough in ICO history. 2019 saw a marked shift from ICOs to a new model of fundraising – Security Token Offerings (STOs) and Initial Exchange Offerings (IEOs).

Where Are We Now?

While the ICO rollercoaster ride has indeed been thrilling, it has also been revealing. Inherent issues in the model and the surrounding uncertainty led to a shift toward IEOs and STOs. Yet, there are signs that ICOs may be teetering back towards another peak.

In August 2021, Ethereum co-founder Vitalik Buterin opined that “Legitimate ICOs could still have a promising future” [6]. Across the globe, many jurisdictions have begun clarifying regulations and giving ICOs a measured nod.

As the ICO rollercoaster continues and we inch towards what could be another rise, the crypto fundraising landscape promises to remain as dynamic as ever. After all, in the realm of cryptocurrency, change is the only constant.

Sources:

[1] https://www.coindesk.com/2018-ico-funding-already-outpaced-2017
[2] https://www.investopedia.com/terms/e/ethereum.asp
[3] http://fortune.com/2017/06/12/ico-initial-coin-offering-funding-ventures/
[4] https://www.bloomberg.com/news/articles/2018-05-31/crypto-coin-claiming-to-be-better-than-ethereum-raises-4-billion
[5] https://www.wsj.com/articles/the-year-social-media-disrupted-ico-funded-companies-11545885200
[6] https://finance.yahoo.com/news/determine-ethereums-vitalik-buterin-most-200000320.html

Written by
Johnni Macke
As a critical voice in the realm of cryptocurrency ethics, Johnni Macke commentary navigates through the socio-economic ramifications of Bitcoin gambling, complemented by her active participation in fintech symposiums that discuss the future of blockchain in finance.

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