Major ICO Trends to Watch in 2018
Initial Coin Offerings (ICOs) have become the new standard for startup launches in a bid to raise capital in the easiest and fastest way possible. The year 2017 alone saw about 235 of such crowdsale events raising upwards of $3.7 billion cumulatively. This figure exceeds the total raised in the previous three years combined. Furthermore, for the first time ever, the total exceeded early stage funding by venture capitalists.
However, market trends are suggesting that the euphoria surrounding the space is likely to undergo an evolutionary process that will alter its course in 2018. Even though revenues tapered down towards the end of 2017, this does not imply that these coin offerings will die out. On the contrary, as Vitalik Buterin says, “The new generation of token sales will offer a significant improvement over the previous models.”
Take a look at some transforming trends that are likely to pave the way for this:
Introduction of Regulations
Early in September last year, China enforced a ban on all cryptocurrency trading including the token sale. This made a significant impact on the sector with a gradual reduction notable over the subsequent months. South Korea followed suit soon thereafter.
The lack of regulations in the space has made many countries wary of the trend and many authorities are trying to catch up by implementing rules to govern them. The definition of ICO limitations and regulations that require such token sales to be aligned with financial oversight authorities will make the space less treacherous and more suitable for investment.
The US Securities Exchange Commission (SEC) has already stipulated that some tokens qualify to be defined as securities which means that the regulations governing securities apply in such cases. In other countries like Canada, Hong Kong, Singapore and Russia, financial authorities are also evaluating the inclusion of ICOs into securities regulations.
Looking Beyond the Whitepaper
The last year has seen numerous scams with fraudulent projects working on a whitepaper and using it to attract investor funding into a platform that will never take off. But in more recent days, investors are becoming more careful and giving preference to projects that have a working product to showcase.
They are keener to see a demonstration of theory through use cases and business models in operation. The public is seeking more information about team members and other pertinent details to a project before making an investment.
While many 2017 ICOs revolved around the IT industry, the opportunities for players from other sectors are expanding. There have been healthcare projects and NGOs making use of the blockchain to offer improved services. This diversification process is likely to increase with more new players looking to the innovative space and taking advantage of the crowdfunding option.
There were a significant number of venture capitalists who made investments in ICOs in 2017. This trend has spilled over into 2018 with more big firms looking to add crypto investments to their portfolio.
With the ongoing interest in the cryptocurrency space by big institutions like Wall Street firms and the regulations that are already being enacted in several markets, the space is set to become more appealing to investors and acquire wider adoption.
In 2017, many ICOs featured appealing bonuses for early adopters. While this was aimed at luring them to invest in the models, the result in some cases was rapid token flipping that led to token depreciation almost immediately.
This has been a learning experience for the sector as a whole and is currently undergoing a massive restructuring. Fewer ICOs are inclined to offer such bonuses and those that do are offering smaller amounts with lockup conditions that will inhibit immediate trading. This allows for the demand of a platform’s token and its value to grow before investors start cashing out.
New Protocol Development
The blockchain community at large is seeking ways to regulate ICOs using internal measures before official regulations come into play. There is a new protocol known as the Simple Agreement for Future Tokens (SAFT) that is aimed at creating a self-regulating framework that will operate under the US securities regulations.
This proactive move is meant to engage regulators before they initiate a crackdown and to foster a sense of goodwill between them and the companies conducting token sales. There are no guarantees that the concept will gain widespread approval and use. But it serves as a positive signal that blockchain companies might be eager to embrace the regulations likely to be enacted in coming months.
The year 2017 has been a learning experience for investors as well as companies engaging in token sales. It has set the pace for an eventful year for this and other sectors in the cryptocurrency industry.