It seems that the ICO model of funding is still pretty much alive, though the class of investors has now changed. A Bloomberg report published recently said that wealthy investors are still buying ICO tokens.
The role of ICOs in advancement of crypto space is unforgettable. Who can forget that it was the ICO craze which started the biggest bull run of cryptocurrency markets, the bull run in which Bitcoin touched an all-time high of $20,000. That sort of valuations pulled a lot of new people into this space, the end result of which was rapid technological as well as financial advancement of entire cryptocurrency markets. However, a large number of ICO projects also died of slow death in the prolonged crypto winter that started in November. The winter is still far from over, and many of the ICO tokens have seen sharp declines in their valuations. Does it mean the end of road for ICO funding? Not so soon.
The journey of this new and innovative funding mechanism is still far from over. Initial Coin Offerings – or ICOs – as they’re known, are still pretty much alive. The only difference is that the type of investors who funds them has changed. Rather than targeting individual investors who look for quick bucks the startups are now pitching their projects and tokens to wealthy buyers.
The first difference notable difference in the ICOs of today vs. ICOs of 2017 is that of location. While in 2017 the highest number of ICOs were being held in US, today the scene has shifted to somewhere else. Switzerland and other countries with friendly crypto regulations have become the new homes to a large number of ICOs being held today. The seeds of this trend were sown way back in 2018 itself. Within first quarter of last year a huge jump was observed in the number of ICOs being held in Switzerland. For example, out of 113 ICOs held in first quarter of 2018 only 22 were held in United States – that’s a fifth fraction of the pie according to data provided by Bloomberg. By Q4 these figures fell even more – just 12 ICOs out of 111 were held in United States, thanks to SEC’s non-friendly stance towards them.
Now, the other major difference has come in the buyers of ICO tokens. While North American investors have almost stopped investing in ICOs, wealthy buyers in other parts of the world are still buying them. For example, HNIs in Eastern Europe and some parts of Asia are still investing in ICOs. According to Lex Sokolin, Global Director of Fintech Strategy at Autonomous Research:
“The global geographic distribution of crowdfunding investors through social media that put money into new technologies through blockchain-based platforms is out of the Pandora’s box.”
Now, this new class of investors also requires projects to be more solid than an average investor. Therefore, the latest crop of ICOs is also more matured than the majority of ICOs that were held during the ICO boom of 2018. Justin Sun, who just launched his BitTorrent Token to much fanfare, said on this:
“These days, people are looking for both vision and signs of good execution.”
This is a clear sign that ICO model of funding is not going anywhere in the near-term. Instead, it’s going to live with a more matured class of investors, which is better for startups and investors both. Investors have the ability to get higher returns on their investments, and startups get freedom from a thousand investors shouting about them on social media.