Written by Mike Finch

Co-Founder, ICO Alert; Founder, Sutler Ventures
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November 6 2018

State of the ICO Market

False narratives in crypto, ICO data, ICO listing sites promoting scams, and how we move forward.

state of the market


ICO Alert disclaimer


As we move forward there are a few things within the ICO industry that I want to take a minute to talk through and highlight:

  • False narratives in crypto and how they affect you

  • ICO Data (PSA: This is not an assumption)

  • ICO market issues and how you can help

  • How we move forward


Narratives and Trends



1. a general direction in which something is developing or changing.

“an upward trend in sales and profit margins”

2. a fashion.

“the latest trends in modern dance”



1. change or develop in a general direction.

“unemployment has been trending upward”

2. (of a topic) be the subject of many posts on a social media website within a short period of time.

“I’ve just taken a quick look at what’s trending on Twitter right now”




1. a spoken or written account of connected events; a story.

“an interesting narrative about her year in Bolivia”

2. the narrated part or parts of a literary work, as distinct from dialogue.

3. the practice or art of telling stories.

“traditions of oral narrative”

4. a representation of a particular situation or process in such a way as to reflect or conform to an overarching set of aims or values.

“the coalition’s carefully constructed narrative about its sensitivity to recession victims”


People tend to think about trends and narratives in conjunction with investing. Investors will follow trends and narratives in order to anticipate the movement of funds from other investors or to follow the growth of certain industry categories. After all, if you can predict a trend in crypto you can make a lot of money. Take scalability as an example: this was of little concern in the early days of cryptocurrency, but over the past few years it’s been a huge narrative that has developed over time as different trends have emerged. Crypto hedge funds have built entire investment theses off of solving the problem of scalability, because the narrative is that once we have a scalable platform, we’ll be able to drive adoption through dApps and more. The most popular narrative to reference seems to be Bitcoin transforming from a new payment method to a store of value. Most folks I have talked to are not convinced either make sense for Bitcoin at this stage, nor do they know why or how Bitcoin will retain its market dominance, but nonetheless these narratives are driving major investment decisions on the retail and institutional level with major players like Bakkt, Fidelity and more entering the space.


These narratives change and are enforced, but what’s the big deal? What we don’t realize is that our industry suffers from a huge narrative problem related to price action, and what narratives are enforced by members of our industry when price drastically shifts up or down. This problem surrounding narrative has nothing to do with investing or speculation, but rather the way that we handle the growth or decline of the cryptocurrency market cap. We’re all great at highlighting top projects when the market is up, because it must be the technology and user adoption that is moving the price up… ...right?!


When the market cycle swings backwards and we see a price crash of any degree, we tend to push against the pieces we feel caused downward price action. For example, for a long time after the fall of Mt. Gox the industry went anti-exchange to the point that Coinbase was the most hated institution on “planet-crypto.” I myself remember yelling at Olaf on Reddit because I couldn’t believe he alone couldn’t handle hundreds of thousands of new users (my bad man!). Fast forward to today and CZ of Binance is worshipped like a god at conferences and “Crypto-Twitter” wants all the Bakkt and NYSE exchange announcements they can get. The exchange narrative has changed.


This narrative problem lies in the way we as an industry perceive ourselves in the past, present and future, how we handle the maturation of this brand new, decade-old technology, and how we hold each other accountable when it really matters. I’m bringing all of this up because I believe the ICO industry is going through the same narrative problem that exchanges and more did in the past.


A little context for those who aren’t aware…


Roughly two years ago, a blockchain based fundraising model called an “ICO” started to grow in popularity as a way to “get in early” and support a startup that may one day change the world and hopefully benefit you financially along the way. Myself and my brother created a website to track these new ICOs and we were off to start pumping Ether gas limits (transaction cost associated with the Ethereum blockchain, which is primarily used for ICO investment) as high as fiscally possible to get in early on the next big project.


Over the next 12-16 months we saw the craziest mania surrounding ICOs that we may ever see. Fast forward to November 2018 and the burns of a crypto market crash are still fresh, but with a new narrative surrounding ICOs and their negative effect on the crypto market. I disagree entirely with this narrative. People will claim that ICOs allowed mom-and-pop investors to try to pump-and-dump “the next bitcoin” and without ICOs this crash would never have happened. Others will say that over “some (assumed) majority” of ICOs are scams and give crypto/blockchain a bad name. Finally, my favorite is that all ICO teams are irresponsible and don’t manage their money correctly, allowing their budgets to fall victim to price fluctuation when raising and holding funds in bitcoin or ether.


There is some truth in each of these generalizations, but all are generalizations at the end of the day.

  • ICOs never saw the majority of retail inflow due to the complexity involved with ICO investment (see figure below).

  • Of over 5,000 ICOs we (ICO Alert) have collected (good and bad), far from the “majority of ICOs” have been marked as scams by our data team.

  • Banking options post-ICO for ICOs were slim to none, especially when raising millions of dollars very quickly from non-accredited investors all over the world. Even the largest ICO, EOS, had issues moving their previously converted fiat into banks, according to large international crypto OTC trading desks.

Diagram of the current investment problem in the industry

The insane market pump came from a lack of liquidity and the growth of Bitcoin over a multi-week run, fueled by an inflow of novice retail investors through applications like Coinbase (Please know that I’m not hating on Coinbase right now).


Today the industry is more vibrant than ever because of ICOs. Projects like Qtum, SALT and so many more have shown massive growth and real-world partnerships for their investors. At the same time, additional fundraising opportunities have emerged like the Security Token Offering (STO) and airdrop which further increase the avenues for fundraising and user growth for these cryptocurrency projects. The flawed narrative is that ICOs caused the crash or are holding the industry back, when in reality it is ICOs that will propel the adoption of the industry forward in the coming years. This will be done through decentralized autonomous organizations, incredibly strong dApp economies and new on-ramps for everyday people into crypto. Judge the concept of an ICO on the success of its ability to fundraise, not the success of a startup inside a decade old industry.


So how does your message change with positive or negative price action in crypto? We might not notice, but the rest of the world does and this industry needs a consistent message toward positive growth and innovation if we want others to take us seriously.


The ICO Market, by the Numbers

The beauty of the blockchain is that at its base layer, it’s hard-coded data. The blockchain can’t lie or be manipulated one way or another, and it’s technical validity has no exposure to any political movement or super-corporation. However, the interpretation of that data can be skewed, flawed, or misinterpreted by those with subconscious or conscious goals for themselves or a narrative that is currently being enforced. There are a lot of third parties in the space taking micro amounts of data, making assumptions at the macro level. If you read the fine print (assuming its responsibly there) you’ll see this in crypto research, data reporting, and blockchain analysis. For example, macro level conclusions coming from evaluating 100 ICOs in 2017 vs 100 ICOs in 2018. There were thousands of ICOs each year. One year saw a massive pump and another saw a massive dump, each with significant outliers in an already small dataset...


You can start to see where the data is no longer accurately represented and assumptions are made by those with the wrong intentions.


The main issues in crypto and ICO data thus far seem to be surrounding some combination of the following:

  • Lack of quality data in the space: We hear this time and time again from colleagues in the space looking for accurate data. Sourcing quality data in the crypto industry is incredibly difficult when incentive layers exist that don’t always match up with providing quality data. Scraping ICO websites today in order to collect data on projects from early 2017 is often impossible, especially when the website or data no longer publicly exists, and teams have failed, scammed investors or been hacked are no longer accessible for your ICO price questions. Today, you simply will not be able to collect some of the data from 2016 and 2017 unless you were there collecting it at the time and have the data already.

  • Subjective metrics for data collection and inclusion: This is harder to see at first glance, but corrupts data significantly. Third party data firms will implement their own filters for data collection in an effort to improve the “usefulness” of the data. For example, when answering macro level questions like “How many ICOs were there in 2017?” data will be incomplete from the start because there will be prerequisites required for the ICO to meet in order to be judged as an ICO by the data analyst/firm. An example of this subjective prerequisite is often how much money they raise or how “quality” the project is, as decided by subjective metrics. There is no way you can make macro level, general conclusions for the crypto/ICO market if you do not have an objective data collection process.

  • Comprehensive and trusted nature of the data: We have built the ICO Alert brand on the these two important points: trusted, comprehensive data. As the market continues to mature, new investors in 2019 will not have to experience the same wild-wild-west that 2016 and 2017 investors experienced. New ICO platforms are launching, trusted parties are emerging and poor projects are dying out, but as you’ll see later in this article, the battle over scammy ICOs is not over. Trusting a platform to not provide you a link that could be directing you to a scam site or exposing you to bad actors is the most important component for retail traders/investors in the ICO market.


For experienced investors, a comprehensive view of what you can invest in is necessary to find what others have not been able to discover. The problem of discovery with ICOs is still a problem, with major ICO listing sites requiring projects to pay outlandish fees for listing or simply not collecting valuable ICO data at all. Many projects have postponed their sale until 2019, but are offering attractive private or semi-public sales to wealthy, educated investors. Right now might be the best time ever for an experienced, cryptocurrency investor (retail or institutional) looking to get into a sale at an early stage.


So, understanding the issues that exist within the ICO data market, let’s take a look at what the folks at Elementus say:

ICO fundraising by monthNote: Includes outliers EOS, Tatatu and Telegram

Note: Does not include EOS, Telegram or Tatatu, considered outliers

For those that don’t know them, Elementus is founded by Max Galka and Mike Kalomeni and is a platform for combining, analyzing and programming on data for any non-private blockchain. In English: Elementus is a better-blockchain-reader that can actually tell us how much a project is raising, from how many investors, across whatever timeline and number of wallets an ICO has setup. Again, there’s a huge problem with data and research in the space being based off of assumptions vs. actual real, understood data from the blockchain. This is a consequence of the lack of tools available for data analysts to work with - something Elementus is bringing to the table.


“Elementus collects, organizes and analyzes blockchain data, making it universally understandable and useful. We identify the blockchain’s accounts owned by businesses (ICOs, exchanges, mining pools, funds, …) to offer actionable information based on on-chain activities.”

Mike Kalomeni, Elementus


As you can see by Elementus’ data, the ICO market is not “dead,” like you’ll see portrayed by many in the space who don’t have the appropriate tools to come to an accurate conclusion. In the place of accuracy, comprehensiveness or trust, assumptions are made and they will affect the way that you’re making decisions. The assumed and inaccurate ICO data plaguing your timelines and news stories is an example of false trends fueling an unfortunate narrative about ICOs. Good investors are able to limit outside noise and make their own decisions. The best investors leverage objective data to improve their returns in the short term and long term, accessing real data, industry averages, and more.


The ICO narrative is flawed, and ICOs are definitely not dead.


ICO Market Issues

Don’t get me wrong, the industry isn’t perfect and we have a long way to go towards real adoption. Post-ICO, most of the user adoption is fueled by gambling projects. We see massive wash trading and TA signal painting on reputable exchanges and scams still abound around the globe. Projects that raise huge sums of money need to structure reasonable roadmaps and deliver on promises 100% of the time. Third parties need to shape up and self-monitor if there is any hope for a system that isn’t stifled by careless regulation as an result of harmful practices in the space. One of the largest issues in the ICO space to date has been the introduction of ratings. Most “ICO listing” websites use ratings as a way to filter “high-quality” projects to investors, but ratings are often paid for or based on metrics that don’t accurately represent the quality of a project.


There are essentially three ways that ratings are being created:


1. Crowd-sourced ratings: Using a large number of outside ICO enthusiasts or “experts” to judge an ICO through each investor’s own due diligence. In theory this works well, but people are corrupted easily and incentive structures aren’t generally aligned between ICOs, expert ratings and retail investors. This is something that was finally proven by Alethena on the ICO Bench website, but ultimately paid-for-ratings happens across the industry. ICO Ethics recently exposed ICO Holder as well, laid out in this blog post.

Alethena sums this up well in a quote on the status of many third parties in the space,

"Anyone interested in either launching an ICO or investing in one will bear witness to a wholly corrupted market; telegram groups with fake and bought group members, numerous fake YouTube profiles offering review services, illegal email data lists, listing websites with fake traffic and, among many others, so-called ICO rating websites behind whose seemingly serious facades lurk a murky network of deceit and corruption. 

The situation described is not only harming the reputation of the ICO as a form of corporate finance, it is also casting a bad light on the entire blockchain technology and its other use cases. We from Alethena believe that, given the potential that security tokens, decentralised financing and equity on the blockchain provide for startups and companies, fighting for more trust and transparency is a necessity. However, this requires resolute action from the entire community against every form of fraud and non-transparency. One thing is clear: if we want long-term success with our ideas and innovations, we must resolve this situation as soon as possible.”

Tim Glaus, Alethena Co-founder and COO


2. Internal ratings: The website or teams will evaluate the projects themselves based on their own subjective factors. While internal ratings might be harder to compromise, they are based on the due diligence of someone an investor trusts. These internal ratings are inherently subjective and act as a filter you’re saying you’re okay with when you use the ratings as your own investment due diligence. Even worse, these sites providing ratings “due diligence” today have no team information, but are trusted by newer investors who don’t have the time or knowledge to do their own research. Ratings and new investors do not mix, do your own research and educate yourself before you invest.

3. In-depth, research-oriented ratings: While these are still ratings, they are better than most, often using objective data and sound principles to come to conclusions. However, this comes with the need to understand how objective data metrics can be manipulated. Telegram is a great example of this need for context and understanding, when coming to a subjective conclusion through objective metrics. Telegram was a strong indicator of the amount of fundraising the project could expect. The thought was that the more Telegram followers a project has, the more funding it will likely raise, but that was quickly compromised with projects adding users to their Telegram without their permission, skewing averages and results of this objective metric for ratings. Without this context, the objective data may still be accurate, but it has been compromised by bad actors with strong financial incentives.


Even worse, many of these sites do not properly filter for scams. Here is the latest list from an ICO Alert partner, ICO Ethics, who filters scams using proprietary techniques that get directly at how scammers are pulling the wool over your eyes:


ICObench: 22 scams (provides ratings)

CoinGecko: 35 scams (provides ratings)

ICO Holder: 134 scams (provides ratings)

ICO Slot: 103 scams

FoundICO: 48 scams (provides ratings)

ICO Marks: 24 scams (provides ratings)

The Tokener: 31 scams (provides ratings)

TrackICO: 29 scams (provides ratings)

Investing.com: 14 scams

Neironix: 76 scams (provides ratings)

ICO Champs: 13 scams (provides ratings)


ICO Alert: 0 scams


A significant change must start with you: the investor, third party, ICO project, or enthusiast if anything is expected to change. Otherwise, regulatory agencies will come and fix the problems for us, probably in an overreaching, careless way that won’t benefit anyone other than themselves. All of us incentivize projects by investing in those we believe are high-quality, responsible and ambitious. Do the same for third-party companies in the space providing information to you as an investor. Every view counts, don’t waste it on a financially motivated site with shady actions and a short term outlook.

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How Do We Move Forward?

The good news is that every day the problems are becoming more clear and industry leaders are emerging who are able to fight these problems head on. For example, Binance has done a fantastic job of leading the charge on charitable giving by ensuring all listing fees go to charities and have started the Blockchain Charity Foundation. Projects like Tron and Coinbase have followed suit, donating to organizations helping shift the narrative from terrorism or hackers to charity and global relief. There will be others who use their platforms to benefit the greater good, all while the bad actors in the space are exposed and weeded out. It takes a full effort to ensure that the narratives we enforce are the ones that will push the industry forward. Focusing on the projects that are excelling instead of the projects that are declining is key, while we weed out the projects and third parties taking advantage of an immature industry and novice users/investors.


This is important because its my opinion that the cryptocurrency industry is about to go through an identity crisis. Cryptocurrency is arguably gaining mass adoption at a faster rate than it ever has, especially in the institutional space. Retail investors are moving back in slowly after a significant market decline and additional investment vehicles like futures from other providers and ETFs are right around the corner. I agree that a lot of this is great for the industry, as it provides additional liquidity, improves adoption (especially from an older, wealthier audience) and helps showcase cryptocurrency as a more mature “asset class” of sorts. However, behind the scenes there are actions happening that are at the antithesis of some of the philosophical pillars to cryptocurrency.


This Q4 breakdown on stablecoins from Zach Le of Trinity Blockchain Management is a great example of a catalyst to a forthcoming identity crisis in the space:


Coinbase’s listing of USDC marks the beginning of a crucial shift in monetary power. The great crypto depression of 2018 has shown the market how desperately it needed a stablecoin. Without such a token, the selling pressure from risk aversion would generate massive volatility as everything had to be liquidated back to BTC or ETH before entering fiat. This results in almost all alt tokens having a beta coefficient of one or higher. For those unfamiliar, the beta coefficient is part of an old model called the Capital Asset Pricing Model and is defined as the measurement of risk within an asset that cannot be reduced through diversification. USD stablecoins provide investors with a means to diversify out of the crypto market while remaining in crypto. This translates to lower transaction costs and greater nimbleness in asset allocation.


For a while, this function was served by Tether Limited through USDT, and for a while, no one asked too many questions about it because it served such a crucial need. Tether’s terms of service have changed multiple times, and its redemption process is not easily accessible to retail traders. It is also important to note that retail traders make up a large portion of Tether holders. Regardless of what the market’s opinion is of Tether, it has served its purpose as the proof of concept for an electronic dollar, and that was the main focus for the large financial institutions.


The crypto market’s attention started focusing on USD stablecoins in the latter half of 2018. These emerging firms all understand that this is merely at the tip of what the electronic dollar’s market cap is. There were approximately $1.69 trillion USD in circulation as of September 26, 2018, of which $1.64 trillion was in Federal Reserve notes. This is in USD alone. If we are creating a tokenized society for the future, then it would be fair to assume that USD tokens will serve as digital cash. Not cash in the technical term of how we use physical cash today, but rather in a savings and investing format. Is the average crypto trader more likely to keep $50,000 in the bank or USD tethers? With the introduction of GUSD, USDC, and similar products, keeping money in USD stablecoin tethers is a better choice than keeping it in the bank. The irony is that it’s still at the bank.


Circle Internet Financial, Inc is the company behind USDC. Circle as a company is one of the most reputable firms in the crypto space. Circle has been around for some time now, and one of its most notable backers is Goldman Sachs. The firm’s decision to participate in Circle was during Lloyd Blankfein’s tenure as CEO, and the firm’s current CEO, David Solomon, is keen on blockchain technology. This can be seen both in the firm’s positioning in the market as well as their PR. Circle undoubtedly has a very diversified holding within the crypto market. The company acquired Poloniex earlier in 2018, and now has its USD stablecoin listed on Coinbase. If it goes through, Circle’s acquisition of Seedinvest will enable the firm to expand its offerings to support issuing and offering tokenized securities. These pieces will provide Circle the opportunity to control the exchange, the future tokens, and the electronic cash – effectively a large portion of the digital money supply.


The power to print money is reserved for Central Banks. Although USD stablecoin companies are technically not printing any new money, they are still, in some way, printing and controlling the money supply. In my opinion, this erodes the power of the Central Banks and consolidates it into the hands of corporate banks. The problem is that most of these banks are deemed “too big to fail” by the government, and so the two are intertwined.


Is this the decentralized future that Nakamoto was talking about?

–Zach Le, Trinity Blockchain Management

The question surrounding a decentralized future is a question that a few have brought up. So many of the ICO projects last year were centered around eliminating the middlemen in ‘x’ industry taking a chunk of profits away from the ecosystem. Banks don’t care about Bitcoin or the philosophical approach that we all fell in love with, but they don’t want to miss the Bitcoin train that is leaving either. Bitcoin, if it continues to grow, will provide an alternative approach to the current financial industry in a variety of different ways (see this podcast from Pomp for more thoughts on this evolution of Bitcoin). The banks’ approach will not be to join the party with you, but instead they want to provide the booze, food and host the party. The fear is that by becoming the party host the banks will be able to end the party early, control the party or shut it down entirely.


This introduction of banking into crypto likely won’t result in any decision making on your part at first. I’m sure this “centralization of crypto” will bring profit to everyone and adoption to the industry in the short-term. Long-term though, this may end up centralizing crypto and putting the control back into the hands of the largest corporations Satoshi looked to avoid. If large corporations are able to control the on and off ramps for cryptocurrency, they are in many ways able to control how you and I access it. If there is control by these corporations there is control leaving the retail investor/user. A pillar of Bitcoin and cryptocurrency is to “control your own funds,” something that is fading quickly behind the scenes, and I have a hard time believing that this will not end in an identity crisis for the cryptocurrency industry. Instead of a focus on innovation and decentralization, we’ll see controls instituted that bring the control back to banks, and away from you. This will be done with a focus on “stability and maturity” and is happening already by enforcing narratives around the immaturity and volatility that currently exists in this new industry. One day we may see businesses with a “centralization of control” in the cryptocurrency space instead of a core approach towards decentralization for user benefit. After all, the narratives that we are all reinforcing (exchanges are bad, ICOs are scams, etc.) plays right into the hands of the corporate elite. They want to bring this “maturity and stability” for the everyday investor that will supposedly help the investor, where in reality nothing has changed - control is just more digital now, behind a different product (i.e. “Blockchain!”). Don’t believe me? Did you know that Coinbase can freeze your USDC account just like any other bank?

Section 14 of the Circle USDC User Agreement lays this out.

This shift is occurring already, so at minimum be aware of the change in control. I’m not convinced this centralization of crypto will happen or result in something negative to the new decentralized economies emerging, but it’s something to be aware of. These points aren’t meant to be anti-banking or anti-regulation, but “pro-user,” the most appealing part of cryptocurrency.


So we move forward individually, but together. Individually we make our own decisions about what narratives we listen to and reinforce, what projects we invest in, what third parties we give our views (and thus money) to, and what platforms, products and services we work with as users and investors. Together, we work to retain control and avoid the same problems that exist in the traditional banking world. In order to do this we need to work together to solve these problems and self-regulate in order to retain control. Reinforce the right narratives, avoid shady third parties and projects, fix the problems together and we’ll arrive at the benefits of decentralization that we all fell in love with when we first went down the cryptocurrency rabbit hole.

Topics: ICO, Data, Cryptocurrency, News, Analysis, Security Token Offering