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The first quarter of 2018 was a pretty dramatic time in blockchain and cryptocurrency life. While we are seeing a steady decline in the price of bitcoin and altcoins in general, with most chips trading even below their ICO prices, there has been no slackening of the amount of chips. money raised during this period.
In late February, crowdfunding companies raised more than $ 1 billion for the third consecutive month. Of the billions harvested this year, $ 788 million came from projects based in the United States, $ 265 million from China and $ 249 million from Lithuania. Switzerland, the center of the European crowdsale, is fourth with $ 249 million. The figures above reveal that there is a reasonable gap in how these funds are collected, describing a somewhat balanced ecosystem.
Despite the political and institutional resistance to the cryptocurrency ecosystem, with particular attention to ICOs, this steady upward trend is arousing some curiosity. Questions about the fundamental indices that underlie the upward trend if the expansion of the ICO is ubiquitous as well as the sustainability of the current behavior of the industry.
Overall quality of ICOs
Founder of LKI Consulting, a public relations firm that has managed several ICOs in recent months, Laura Kornelija Inamedinova believes that the reason for this ICO trend should be related to the increase in the overall quality of ICOs . She recalled the situation that prevailed in this industry six months ago, where everyone could announce an ICO, because all that people needed was a nice and attractive idea.
Inamedinova explains that time has shown that on the contrary, these aspects are the most important for having a successful ICO. As a result, the increase in the number of high quality and well-developed projects contributes to growing investor confidence.
Although the OIC market generally experienced an explosion and recorded impressive numbers, a number of projects that failed to achieve this goal were deemed unsuccessful. Inamedinova identifies knowledge and communication as the main factors that determine the success of a project.
Inamedinova tells CCN:
“A successful ICO undoubtedly requires the team that has excellent knowledge of business and technology.On the other hand, communication is still a little under- Estimated, but it is as important as the understanding of particular industries.A good communication strategy always helps to display the best features of your project, as well as attracting more people through creative campaigns. Moreover, the way in which team members communicate with investors can tell a lot about the reliability of any ICO, failures tend to be vague and even rude, which obviously indicates a very imperfect strategy. “
The first big wave of ICO announcements began in the summer of 2017. Regarding the nature of these projects, the first results will be visible in a year or two after the process fundraising, which could be between six and eighteen months. the moment of writing. It will not be a surprise that most projects can fail (unfortunately, this is a fairly common thing in the world of startups and innovations) and the mass deception will grow. However, it turns out that interested people will not stop establishing new projects that will be significantly improved and certainly more successful. Eventually, blockchain technology should become massively applied not only in country offices, but startups, businesses and even the public sector will eventually adapt and use it widely for security and convenience reasons. .
Looking beyond the numbers
The founder of Cashaa, Kumar Gaurav, thinks that the industry should look beyond the crowdfunding exercise conducted by many projects right now in terms of ICO. Gaurav, whose company has denied more than $ 14 million out of the $ 33 million raised in an ICO for compliance reasons, identifies many flaws in public perception of the true substance of crowdfunding.
One of the trends identified by Gaurav is the recycling of investors and investments within the ecosystem that seems to inflate the industry beyond its true capacity. He notes that most investors have a habit of selling older chips, buying new ones, cashing in profits and moving on to the next one. This is possible because of the very competitive market that is flooded by all kinds of projects. Competition leads to high bonus pledges, so even when the value seems to fall, the over-inflated bonuses support the profit for investors. The question is how long can such a system be maintained?
Another problem identified by Gaurav is that ICOs attract many investors from outside the industry who are only interested in their own profits and not necessarily by technology or support to a company in particular. In addition, there are many beginners who are really interested, but only begin to learn and may be afraid of market uncertainties, so they sell more easily. The current situation can create difficult long-term situations for a company having raised funds via ICO and relying both on their Bitcoin and Ether, as well as on their own symbolic price.
A complex installation
The above description reveals that many of the OIC investors are simply speculators who may be short-term. This makes it difficult for project builders and developers to effectively implement their plans and goals. According to Gaurav, to get to this point, it is necessary that the money coming from these more “difficult” groups is exactly necessary to maintain the high amounts in the ICOs, as the investor landscape has become wide and only looking for 39 to increase from the start, the groups involved long-term investors from the OIC coming from the blockchain industry are not enough.
At this point, the question of what criteria are applied to determine the success of an ICO arises. Nowadays, it is common to rank an ICO as successful based on the amount raised during the crowdfunding process compared to obtaining one using traditional methods of fundraising. However, by examining their own definition of success, which was generally defined by the absolute ceiling, until the majority of country offices even reach two-thirds of that number. Then, to avoid being perceived as a failure, companies began intentionally setting lower goals. Therefore, Gaurav explains that to decide what is a successful ICO, we must also look at what happens to the business after a year or more.
“Nearly half of the 2017 ICOs have already disappeared, some of them not having high enough or having fled directly, but the majority having disappeared discreetly, another group having stopped communicating and having a negligible community size and therefore a likely chance of failure.This represents a total of about 60% of the ICOs that must be considered a failure already, “ says Gaurav.
Having a long-term perspective
So, instead of looking at impressive numbers, we might need to look at long-term activities such as product development and the company’s community engagement to be able to judge whether it’s successful or not.
One of the criteria is the life of the company and, if possible, its product, the year mentioned above having already made the difference. In any case, especially if the company has been around for less than a year, it is important that the team consists of well-known, long-term committed people in the industry and who have made their proofs.
The complexities that exist in the ICO ecosystem, as they have already been described, may be considered a normal phenomenon in the development stages of any new innovation. However, in the years to come and once the hype is gone, as the different ways of raising money have their advantages and disadvantages, we will see a more stable industry and the amounts raised in the ICOs will become close, if not equivalent. . high on the traditional way, but with its own particular advantages of implementation.
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