STOs seem to be outpacing ICOs lately, but are they here to stay?
Security tokens have been all the buzz in the crypto community the last six months. This buzz can is illustrated by the Google search traffic for keywords related to ICOs, security tokens, and the like.
It’s clear from Google Trends that ICOs are trending downward in popularity:
While STOs appear to be gaining traction:
Is this trend, or popularity metric, also reflective in the actual ICO/STO market itself? Let’s analyze some ICO Alert data in order to find out whether this trend holds any water. This graphic shows data we've collected between January and October of this year on utility and security tokens launching.
Based on the data, there is a clear trend in popularity amongst security tokens, directly cannibalizing utility tokens. This might be a sign of the ICO market maturing, as many ICOs with utility tokens have seen 95% declines from ATHs amid the larger crypto bear market.
Furthermore, many ICOs seem to be structuring their sale as a security, in order to avoid regulatory risks and the heavy hand of the SEC. Check out Mike Finch’s, ICO Alert co-founder and COO, recent State of the ICO Market for a further analysis.
But why STO over ICO? Investors in crypto are smartening up; most savvy investors like to see working products or prototypes before making risky early stage investments. More importantly, investors sometimes want to receive actual ownership interest in the companies running token sales. It is important to note the difference between investing in crypto companies and investing in crypto networks.
One of the reasons ICOs exploded in 2017, was that for the first time at scale, companies could raise money without diluting ownership of the company itself. It remains to be seen whether utility tokens will be able to re-grab the attention of crypto enthusiasts and/or investors.