IEOs Are Raising Money But Loosing Value
The biggest problem with ICO was that it is not monitored by any third parties. Basically, anyone could launch an ICO, as long as you have a white paper to convince investors to put funds to your company.
In the beginning of the year entrepreneurs were flocking to a new way to raise money with digital tokens called initial exchange offerings, amid a broad rebound in the price of bitcoin and other cryptocurrencies. Comparing to ICO, the risk of IEO is much lower for both the project team and contributors as to maintain trust with its customers, the exchange must carry out a comprehensive assessment of the project before launching the IEO. This provides an extra layer of protection to contributors. With all the scams and frauds out there, an IEO was no doubt a better model to the contributors/customers. Despite more processes required for both project teams and contributors for the token sale, the extra protection offered was worth the cost.
Critics said the new deals don’t necessarily solve the problems that of ICO failures and give more freedom and value to many crypto exchanges that are not regulated by the goverment. As we have seen this year many platforms have had troubles with hack attacks, security lapses, fake trading volumes or fraud.
“It’s like ICO 2.0,” said Michael Conn, a managing partner at Quail Creek Ventures in Los Angeles, who deals with investing in digital assets. “Frauds are waiting to happen. A lot of people got burned in ICO land and I think a lot of people are going to get burned in IEO land.”
In crypto derivative exchange’s update on the investment performance of IEO projects reveal that all eleven of those projects have declined significantly in price since May 2019. Relative to the first traded exchange price of these IEOs, their performance to date has been “poor,” with almost all the tokens down over 80%. There's only one exception to this and that’s Matic, a Binance IEO.
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