An independent study by Autonomous Research has found that initial coin offering (ICO) activity globally has dropped over 90 percent this year. With the high of about $3 billion in funds raised by token sales at the beginning of this year, September investments were less than $300 million, according to the firm.
ICO Activity Plummeted
ICO activity was significantly down in September, according to a study by Autonomous Research. The firm wrote:
Last month saw about $300 million in ICO funds raised, with the month before that revised to a bit over $400 million, a far cry from the $2.4 billion in January of this year. If we include EOS and other chunky private token raises, the highs go to over $3 billion, suggesting that monthly ICO activity is down 90%.
Without taking “EOS and other chunky private token” data into account, the amount of ICO funds raised was down 88.53 percent last month from January. Otherwise, the drop reached 90.7 percent. “We’ve scrubbed token offering data from September, and the trend continues generally to be down,” the firm emphasized.
Founded in 2009, Autonomous Research is an independent research company offering global investment research in the banking, investments, insurance, finance, and information service industries. Autonomous Next is the firm’s London-based practice focusing on “the impact of technology on the future of finance,” the firm’s website details.
Investors Losing Interest in ICOs
Autonomous Research noted three reasons that could explain the drop in token sale activity. “First, perhaps investors have devalued the idea of buying a utility token (does nothing yet, legally non-binding), and instead want to buy equity in the same companies,” the firm wrote. By examining “Pitchbook’s data on blockchain and bitcoin venture capital raises,” the firm found:
There is indeed a lagged effect in venture as well, with increasing drips of capital, reaching over $1 billion in August 2018.
The firm believes that there are two reasons for this observation: “fintech companies like Robinhood and Revolut pivoting into crypto” and “Bitmain trying to vacuum up capital before the public offering.”
Security Token Offerings
The second factor for the decrease in ICO activity concerns security token offerings (STOs). According to the U.S. Securities and Exchange Commission (SEC), ICOs may be securities offerings and fall under its jurisdiction. “STOs are the new ICOs,” wrote blockchain consultant Michael K. Spencer, elaborating that “security tokens are actual financial securities.”
Citing that investments in security token offerings have not grown to full strength, Autonomous Research emphasized:
STOs won’t hit the market in earnest for another half-year at least due to regulatory indigestion.
The last reason the firm put forward relates to “the collapse/crisis in Chinese P2P lending since 2015, and whether that risk-seeking capital wound up in ICOs.”
While China attempted to shut down all service providers of cryptocurrencies and ICOs, token sale activity remains. The People’s Bank of China (PBOC), the country’s central bank, admitted last month that a number of crypto trading platforms originally set up in China have left the country to operate overseas but continue to provide service to domestic users. In August, there is reported that P2P crypto lending grows increasingly popular in China.
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