2019’s State of the Crypto Report by Blockchain Capital revealed quite a few interesting facts and figures about IEOs and their performances this year. There’s no denying that 2019 saw the dominance of exchange tokens or tokens issued by cryptocurrency exchanges, targeted towards incentivizing participants to use their platform.
As evidenced from the screenshot above Binance’s native platform token BNB has undeniably grabbed the first place and is considered as the most popular exchange tokens. However, the Blockchain Capital report hints at another troubling statistic- the decline of BNB’s price movement, which is linked to the overall decline of exchange token prices due to tepid market conditions. This is further explained by the graph included in the report.
Besides Binance, Kucoin Shares, the native currency of the famed Kucoin trading platform, has also failed miserably, as performances post 2018 would indicate. Other notable mentions include the Huobi Token from the Huobi cryptocurrency exchange, which has lost more than 45% of its value since it’s the highest point $5.15 reached in 2019. Bitmax Exchange’s native token also failed to register any significant spike in prices and has been on a decline as well.
Many explanations have been offered to demystify the abysmal performance of exchange tokens and other platform-based native tokens. The influx of platform tokens can be traced back to the success of BNB, after which, a significant number of exchanges hopped on to the bandwagon. However, after the hype got over and the cryptocurrency market started to decline, most of these exchange tokens also failed to perform.
Blockchain Capital’s report also included a troubling statistic about IEOs or Initial Exchange Offerings, where a similar pattern has been noted. In this case, as well, most other exchanges followed Binance’s path and almost 60 token sales were conducted. A recent Messari study found that these token sales raised a total of $1,044 Million.
Blockchain Capital’s report noted that IEOs had recorded some positive dynamics during the 2019 bull run. It has largely been a replacement for ICOs in the eyes of many investors. However, as the hype started to disappear, and investor perception changed, IEOs started to be viewed as a “once lucrative investment” opportunity and started losing traction. It has not proved to be a sustainable model for a majority of platforms.
As shown in the above graph, major exchanges excluding Kucoin, Gate.io, OKEx, and Binance, have all recorded negative year-to-date for IEOs. While Binance recorded over 150% gains, exchanges such as Huobi, Bibox, Bitmax, Bgogo, Bitrex, Probit, and Bitforex, all recorded negative YTDs.
Another recently published report by BitMEX found that a significant number of 2019s major IEOs experienced negative returns apart from a few exceptions such as Matic Network.
Courtesy: BitMex Report However, it should be noted that the popularity of participating in IEOs is still significant as indicated by users of exchanges such as Coinsbit and P2PB2B exchanges which have launched quite a significant number of IEOs on its platforms till date. British company regulated by FCI law Wolf’s Group is a European consulting company specializing in various strategic industries, announced the launch of its IEO on the P2PB2B platform, scheduling it for 3rd January, and on Coinsbit for 11 January.
It is a group of companies that are licensed by Estonian regulators and listed on the stock market. One of the major reasons why some investors shy away from IEOs is because of the lack of legitimacy presented by some typical blockchain revolution projects. Wolf’s Group, on the other hand, has been active in the market for a long time.
Based on the reactions from the investor community, the popularity of IEOs is still far from over. The seemingly poor performance of IEOs should not be considered as a deterrent, as IEOs is still the best, low-risk way for projects to raise Capital. A typical IEO still reels in around $3 to $8 million if conducted properly.
Initial Exchange Offerings are still in its fledgling stages and the number of concluded token sales in each exchange remains comparatively low. Thus, it seems too early to draw any concrete or definitive conclusions, based on the above statistics or findings. That being said, multiple reports including Blockchain Capital’s State of the Crypto Research put Binance at the top. BitTorrent IEO, which was managed exclusively on Binance, registered a 6.4x return.
When it comes to liquidity in the IEO market, quality beats quantity. Binance leads the way with a much greater return on investment (close to 94%) for its listed tokens. Bittorrent’s success contributed largely to this, as it is the first IEO to reach its funding goal of $7.2 million.
Blockchain Today’s Editorial Team was not involved in the creation of this post.