Initial Coin Offerings (ICOs)–Brian Kelly, founder and CEO of the digital investment firm BKCM LLC and a regular on CNBC’s popular crypto-based programming, has said in a recent interview that he believes the days of ICOs coming out of nowhere to million-dollar valuations is over. Instead, he believes the market has already moved towards a more mature view of the innovative funding cycle of cryptocurrency, with ICOs largely being held to a higher standard than they were even at the start of the year.
In part, the new approach has been forced upon the market and investors due to the ongoing bear cycle conditions. Rather than being flush with capital from Bitcoin and altcoin bull-runs to end 2017, most crypto investors are having to take a spare approach to their investment, in addition to legitimate fears over where the price of crypto will be at the start of an ICO buy-in versus when the coins are actually released on the market.
Speaking in an interview with CoinTelegraph, Brian Kelly expanded on his view of ICOs and how he sees the market responding to such a shift. As opposed to doing away with the controversial, and at times outright scammy method for raising capital, Kelly believes the initial coin model will stay for some time in cryptocurrency, albeit at a change from current standards,
“It will stay,” Kelly said, “but with a little change.” He went on to add, “the days of a whitepaper and a dream and $30 million are probably over.”
Kelly also gave details on what he considers when reviewing a project to invest in, listing positive factors such as promoting activities that will increase network adoption, as well as having a strong presence in industry catalysts such as conferences.
Despite regular news stories of ICOs making off with investor funds or failing to fulfill whitepaper promises (the most damning being a study published in July that found 80 percent of all ICOs could be classified as a scam) the overall health of the market has been strong throughout the year. Since the midway point, ICO volume in 2018 already doubled that of the previous year, with developers in nearly every industry flocking to cryptocurrency to cash in on what they view as easy profit. At the very least, the ICO model does provide a fast and efficient way to raise funds for projects, as opposed to the more gated approach of raising through angel investors and venture capitalists.
However, ICOs also provide very limited returns for investors, particularly those who are hoping to hold their coins for appreciation or as a long-term investment in a project. Research out of the Boston College Carroll School of Management found that over half of all ICOs die within the first four months of reaching the market, with the vast majority of profit to be made occurring in the first two weeks. Investors who fail to sell in that window are not only exposing themselves to much greater risk relative to their early cash-out counterparts, but they also run the risk of the entire project collapsing or failing to gain any adoption via exchanges.