In our first episode of the ICO Investing 101 series, we take a look at the size of the ICO market, explain how profitable it would be to invest in different options in the last 150 days and guide you through the most well-known ICO scams. Enjoy your read!
How big is the ICO market?
In 2017, ICOs collectively raised 3.88 billion USD. Whereas, only halfway into 2018, ICOs have not only surpassed but nearly tripled the total 2017 market with 10.18 billion USD. Another interesting fact is that in 2017, ICOs also surpassed the traditional VC-style funding for Internet companies.
On the other hand, even though ICOs raised so much money in 2017, more than half of them have already failed and reportedly shut down. Still, many new ICOs keep coming to the market — as many as 1,388 were published in the last three months alone.
Good investment decision: Cash, Bitcoin, or ICOs?
The next thing we’re going to check is which of the following would be the best investment decision: to keep your money in cash, to invest it in Bitcoin, or to invest it in ICOs in the last 15 months.
The best bet for 2017 was, of course, to invest in ICOs. ICOs were booming in 2017 and turned out to be the best investment for 10 out of 15 past months. For 2018, the picture has completely changed, seeing the market in a persistent downtrend since the start of the year. So, the best bet for this period was to keep it in cash.
A report revealed another interesting fact — that the best time to invest in ICOs is in a bear market (i.e., when the market is going down). This makes sense since ICOs are the least correlated to the movement of Bitcoin and Ethereum.
Boston College Report
Boston College presented an interesting report, having conducted an analysis of 4,003 ICOs.
They found out that the average return for an investor was +82%. And this is an overall average, including all the ICOs that didn’t list their tokens in the first two months but instead valued them at zero. Besides, they averaged the amount that was invested with an average return of each individual investor.
Furthermore, they checked how much an investor would receive after holding the ICO tokens for a period of one month after the start of the initial trading. Such investor would still gain +48%.
However, for those trying to get the best out of their buck, the best strategy turned out to be flipping the token (i.e., selling the tokens immediately after they start trading).
Lastly, the study revealed that the average holding period (i.e., the time required before the tokens get listed on the market, so they can be sold) was only 16 days. Now, in these 16 days, the investors had an average return of astronomical +179%.
5 biggest ICO scams
This wouldn’t be an ICO report if we didn’t talk about scams. Scams are still a big thing with ICOs because the ICO market still lacks regulation.
The most recent one (April 2018), and apparently the largest ICO scam so far, was conducted by the same company which launched two projects — Ifan and Pincoin. This was a marketing scam — they convinced 32,000 people to invest. After that, the owners ran away with more than 660 million USD. Ironically, Pincoin’s slogan was “Sharing is Caring.” :)
Onecoin has been subject to an ongoing investigation for over 18 months.Five countries have published reports, warning investors about the Onecoin cryptocurrency. Chinese authorities have seized over 30 million USD from the company.
Then, you have heard about Bitconnect, right? Bitconnect was a typical Ponzi scheme. They had a landing platform that promised investors huge amounts of interest. Authorities have estimated that 700,000 USD of investors’ own money was lost.
Plexcoin was even crazier — they were promising 1,300% monthly returns. This in itself should be a huge red flag for all investors, yet many were still convinced to invest in this ICO. Luckily, the SEC (the U.S. Securities and Exchange Commission) classified the Plexcoin cryptocurrency as a security token and was able to freeze their accounts and stop their operations completely.
CentraTech was endorsed by superstars such as Floyd Mayweather and DJ Khaled. However, they were also promoting to have partnerships with Visa and MasterCard which ended up not being true. CentraTech’s two founders were arrested on fraud charges, pressed by their own ICO[?] which had meanwhile raised more than 32 million USD.
To conclude: don’t be naïve when investing in ICOs! If the company is promising too much, they usually end up failing. Also, keep in mind that the ICO ratings on the internet can well be bribed and can be unreliable, so always do your own research!
Watch Tim explain this topic on video:
This article is a part of our ICO Investing 101 series. See all articles or jump to:
ICO Investing 101 | Part 1: Some ICO Facts You Should Know
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DISCLAIMER: This article is for informational and discussion purposes only and does not constitute a marketing message, an investment survey, an investment recommendation, or investment advice. The article was prepared exclusively for a better understanding of market dynamics.