Crypto assets are still relatively new compared to other asset categories. Unlike stocks, bonds, and cash, which are all more than one hundred years old, cryptocurrencies only really burst on the scene in the last decade or so and are still finding their feet.
One of the most exciting developments in the space is that of initial coin offerings or ICOs. These are essentially the cryptocurrency analog of traditional stock marketing IPOs (initial public offering) where companies raise money by offering shareholders a stake in their equity. Related to ICOs are IEOs, or initial exchange offerings. These are essentially the same but raise money through an exchange instead of directly to retail investors.
The Promise Of Crypto Assets In 2019 And 2020
The sheer returns available to investors through these offerings are quite extraordinary. Take the QTUM’s ICO, for instance. The currency, which combines the best of bitcoin’s security features and Ethereum’s smart contracts, opened at just $0.03 per unit. Before long, however, the price rose by more than 300-fold to a staggering $103 per unit, cementing outsized returns for those who managed to jump on the bandwagon early.
The history of the ICO market is fascinating. Back in 2017, it went into a frenzy. Investors believed that we had finally reached the point where the crypto space was going to break out and fundamentally change the way that the world transacts. The predictions, however, didn’t pan out as many expected, and in 2018, the market got a lot quieter.
Is The Crypto Asset Market Maturing?
At the end of 2019 and the start of 2020, we see a maturing of the market. Valuations are not as high as they were, and there is a steady flow of products coming online, each of which has the potential to offer consumers real value. These companies aren’t vapor-ware for the most part, but genuine products that people will love if adopted on a large scale.
Many commentators see this maturing as a good thing. There’s a strong case to be made that the crypto market in 2017 looked a lot like the stock market during the Dotcom bubble of 1999. Investors had no idea how to actually go about valuing the underlying assets and so ascribed enormous multiples to each share. This newfound prudence means that many weaker IPOs never come to market, leaving investors with choices that stand a genuine chance of becoming profitable.
The market sentiment was different in 2017 too. Many investors were driven by greed more than fear. Some commentators spoke about how it was possible for practically anyone who got into the market early enough to make triple-digit returns, if not more. When the market crashed, it revealed that those predictions were bogus and that crypto-assets weren’t immune to the regular laws of economics.
Investor speculation in the crypto asset market is bad news for the project as a whole. Because of what’s happened in the past, many mainstream investors are dubious about the value of crypto assets. Some stay away out of principle. Thus, many of the world’s finest investors aren’t involved in the price discovery process of crypto assets at all.
As we head into 2020, there’s a hope that the market has turned over a new leaf and that it can prove itself to be a viable place for people to put their funds. From a value perspective, there are reasons to do so – most commentators believe that blockchain will ultimately change the world in which we live in fundamental ways. It’s just a question, like with the Dotcom boom of the late 1990s, of seeking out those companies that stand of change of creating real value in the future.
Returns On ICOs And IEOs Over Recent Years
Returns on ICOs and IEOs have been all over the place in recent years, owing primarily to the fluctuations in price. While investors have been disappointed recently, many are in the market for the long haul and expect to make considerable gains.
Research agency Longhash recently conducted a study investigating whether ICOs made investors money or lost them money. The team looked at more than 77 projects and concluded that in 66 percent of cases, market participants saw a decline in the value of their funds.
What was even more alarming about the data was just how rare it was to make truly spectacular returns that made it worth taking the original risk. The average ROI was a seemingly impressive 68 percent, but that was due to a just a handful of projects earning ROIs of more than 178 percent.
How Should Investors Approach ICOs And IEOs In 2019 And 2020?
So what’s the best approach for an investor today? The belief of many is that we’re still in the experimental phase of the crypto asset revolution. At the end of the road, perhaps twenty years from now, crypto technology is expected to offer enormous value to offer humanity, just like network computing at the end of the last century. However, there’s no clear-cut way for most investors to figure out which ideas will succeed or which will fail. Again, it’s the same vexing problems that investors had when first evaluating the internet.
In situations like this, it makes sense to invest across the board. An average 68 percent return is still pretty impressive, even if it does mean that the majority of the individual IPOs that an investor buys go to zero. Diversification, as always, is the approach that most people should take, unless there is an excellent reason to believe that a particular crypto company or product will succeed.
Knowing precisely what is happening in the crypto market and which enterprises are hosting IPOs and IEOs is vital for any investor. Fortunately, there are now tools to do this available online.
Watch out for 2020 as The London Crypto Exchange will be starting its own STO and ICO for all investors.