ICO’s, IEO’s, and even STO’s have failed to live up to their promised hype as it became difficult for blockchain companies to raise capital through them. However, some companies have found success in the token sale model.
The cryptocurrency frenzy of 2016, followed by the market-wide rally in 2017, brought Initial Coin Offerings (ICO’s) to the limelight. However, a study published in 2018 concluded that 80 percent of ICO’s completed during these two years were either fraudulent or a scam, costing investors billions of dollars cumulatively. While many believed that ICO’s would usher in a new era of fundraising and even eventually replace Initial Public Offerings (IPO’s) in the long term, this never ended up happening.
The disillusionment with ICO’s later paved the way for Initial Exchange Offerings (IEO’s) and Security Token Offerings (STO’s). However, they too have failed to live up to their promised hype as investors and regulators began scrutinizing companies more closely than ever before. Laws introduced by global regulators, including the United States Securities and Exchange Commission (SEC), have made it difficult for blockchain companies to raise capital through ICO’s, IEO’s, and even STO’s. Having said that, companies with strong product offerings have found some success in the token sale model.
Start of the Bitcoin Frenzy
Bitcoin entered 2017 on the back of a slow and consistent price rise in 2016. At the time, most other digital currencies held a close price correlation with Bitcoin. The asset class’ main user base consisted of technology enthusiasts and libertarians who believed in the vision of a decentralized currency.
According to data from Coinmarketcap, the world’s oldest digital currency rallied from $963 on January 01, 2017 to its all-time high of $20,089, by December 17, 2017. Bitcoin, along with hundreds of other digital tokens, rallied alongside buoyant investor sentiment during that time frame.
The sharp rise in…