ROI challenges: The IEO struggle is real
The initial exchange offer (IEO) is an obvious analogue of the initial coin offer (ICO), which peaked in 2017, but then fell sharply due to the number of fraudsters in the area and the lack of investor confidence.
According to analyst Larry Chermak, more than 5,600 ICOs were conducted in the world, during which it was possible to attract projects, according to various sources, from a modest $ 14 billion to a record $ 64.5 billion. At least 89% of ICO tokens showed negative profitability. The peak of the ICO bubble fell at the end of 2017-beginning of 2018 along with the growth of the crypto market.
IEO is different from ICO. In IEO, the cryptocurrency exchange that IEO conducts is partly responsible for the obvious connection with fraudsters. The idea is simple: if this is a large crypto exchange with a worldwide reputation, then he is not interested in being noticed in the marketing advertising of any scammer. Exchanges also guarantee coins after IEO, which allows you to quickly withdraw coins to start trading.
After the stagnation of 2018, the IEO as a method of attracting finance gave a second wind to many projects, especially those related to blockchain and cryptocurrencies. It all started with the overwhelming success of the initial BitTorrent exchange offer on the Binance Launchpad platform, where the token sale was completed in 18 minutes, during which 59.4 billion BTT tokens were sold and about 7.2 million dollars were raised. Binance was followed by other large crypto exchanges, which launched their own platforms for IEO. But there was no boom, as happened with the ICO: perhaps investors do not trust crypto exchanges enough to choose related projects, perhaps they do not trust projects and are waiting for a breakthrough in the industry. One thing is clear - there is no hype around IEO and there are no easy prospects for new projects.
“Taking into account that at least 89% of all ICOs have negative returns in USD and that IEO is starting to show the same trend, it seems that the vast majority of all ICOs are unable to keep the value in the long term. This means that the winners can get a big jackpot,” concludesLarry Chermak.
According to data from Longhash, the average return on investment (ROI) from IEOs, running this year on the top 11 IEO platforms, was minus 80 percent. That means the average investor who put in $1,000, is now left with just $200.
The biggest offender was crypto exchange Coineal. It had the largest number of failed IEOs with an average ROI around minus 60 percent. The most disappointing platforms were Probit and p2pb2b, with average ROIs below minus 90 percent. And this analysis doesn’t even include all those IEOs that already flatlined or shut down before the period surveyed.
Recently Binance has announced its next initial exchange offering (IEO), and it’s the Band Protocol. This time around, investors will have to have held BNB for an average of 30 days prior to the IEO. However, given that the last launch held on the platform, Perlin, brought insignificant returns, it may not be worth holding BNB in order to participate in future IEOs.
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At the most basic level, Security Token Offerings (STO) are relatively similar to Initial Coin Offerings. Basically, an investor is issued with a token that represents their investment. But, in an STO,…