Blockchain's biggest week reveals which projects have made it through crypto winter
After what seemed to be a never-ending crypto winter, we finally got a chance to see which projects have prevailed as market conditions take a turn. No, my team and I did not attend Consensus this year. In our opinion, events outside of Consensus delivered more value and opportunity to speak with key people. Yes, I know that the main event had all the big names giving speeches and discussing different topics during the panel discussions. But we didn't come to New York to listen to panels. Instead, our focus was to network, meet, and discuss relevant topics with key figures in person.
"How do you revive the ICO market? You change the name."
– Arthur Hayes.
It's funny yet true. We got a chance to speak with him and discuss different aspects of this market. The name ICO still carries a negative stigma from 2018, when most of the projects folded due to market conditions, poor risk management, lack of development, and, in some cases, scams.
However, one of the main values that IEOs add, in Arthur's opinion, is the fact that after raising funds, projects don't need to scramble to list their token on an exchange with a hefty price tag. We've already seen IEOs that sell out in minutes raising millions of dollars through platforms like BinanceLabs. Other exchanges are following a similar structure too.
Below is a chart from BitMEX research showing top exchange platforms by IEO funds raised – US$m.
List of IEO token sales:
He also pointed out that on average, only 4.4% of tokens get allocated towards IEO. Therefore, any price appreciation can significantly benefit the majority token holders (ie. team, private investors). Most of these projects experience a downward sell pressure after initial trading starts. This can raise suspicion about vesting periods for early investors or the team.
It seems like the retail market is getting carried away by participating in random IEOs on prime or subprime exchanges and expecting 4x returns. We've already seen exchanges like Bittrex deliver an IEO yielded -33% in ROI (VeriBlock). Arthur mentioned that the IEO phase will be much shorter than that of the ICO in his opinion. He predicts a hype cycle of about six months for IEOs before the market will be saturated enough for a correction we've seen similar to ICOs in 2018.
Don't get me wrong, ICO and IEO crowd sales can be successful and profitable. I’ve personally worked with multiple projects that are growing and delivering after raising funds through this model (Celsius). However, it's important to keep in mind all the essential factors when considering participation in this renamed fundraising model. Take a look at my previous post about evaluating projects in 2019. It's also important to consider ethical behavior of a given exchange that's hosting the IEO. Exchanges can artificially pump the price of an IEO at the start of trading to create FOMO. Aside from IEOs, Arthur made a prediction of 10k BTC by the end of 2019 with retail traders continuing to be a dominant player in this industry. Yes, Hayes does not see institutions getting in any time soon. It was indeed a pleasure discussing those topics with him and getting his perspective.
We also attended an event hosted by Ledger, where we met OTC providers and projects that survived tough market conditions. I met a project that did exactly what I was talking about throughout 2018 in regards to hedging ETH exposure when raising funds. They understood that by keeping their funds in ETH, investor funds are exposed to potential downside risk. Therefore, they instantly converted their ETH into fiat throughout their ICO. This allowed them to use the funds they raised for development and not be undermined by the downturn of the market. They set an excellent example for upcoming ICOs/IEOs.
The last event that caught our attention was East Meets West. The focus of that event was to bridge the gap between Asia and the U.S. There is a lot of misconception when it comes to an understanding of what is going on in Asia concerning crypto and blockchain. We've learned that the most common misconception is about regulation. Even though there is a lot of rhetoric about crypto being banned, there is nothing that has been passed as a law yet. Most "regulation" is pending approval as a law. This means that it may or may not pass. It's essential to keep in mind that South Korea, one of the dominating markets in crypto, is approaching elections for National Assembly on April 15, 2020 which is in charge of passing legislature. It is possible that the opposition party can win, which will impact the way crypto regulations will be implemented. We've also spoken to multiple capital groups from the East. We were pleasantly surprised to learn that they know of IOST and are currently in talks with the team for potential investments.
All in all, New York Blockchain Week was a great success. Our focus now is on capital groups, projects, and developers that have shown interest in IOST. As we work through our pipeline, keep an eye on announcements from our team on new partnerships.