It’s getting clear for more and more people that the only winning party during an IEO is the exchange that launches it. And it turns to be a zero sum game: it’s not just that projects and investors could have been winning more, they are actually getting screwed:
Projects – since the exchange can lock the raised funds for whatever time period it wishes; force them to spend hundreds of thousands USD on ‘approved’ market makers; force them to rewrite their token metrics in a way that will mostly incentivize IEO participation at the expense of project long term goals and fair pre-sale token distribution.
Investors – IEO participants must lock massive amounts of their funds into exchange tokens just to be eligible to participate, butthere is no guarantee whatsover – in most cases they are either forced to compete with scripts during FCFS sale or have to participate in the lottery with a 0 chances to get full allocation – you are lucky if you ‘win’ a chance to buy as low as 20% of your allocation, most people don’t even get that.
Exchanges promote IEO as hard as they can, luring people to the launchpad by indirect promises of 10-15x ROI. The only people who can actually get this ROI are the whales with massive amounts of exchange tokens bought/received on the lowest price.
This is totally unsustainable way of crowdinvesting, just like ICO were and it will end the same way. If think of participating in the IEO – think again and look for other options.
If you’ve followed the Crypto-Space, Initial Exchange Offerings or (IEOs) are not a new term. Whether you like them or otherwise, you just can’t ignore them. For the less familiar, IEOs are a variant on the ICO model with the tweak that a cryptocurrency exchange launches the token offering on its platform and following the token sale lists the project’s token on its exchange.
Back in 2017, there were fewer than a dozen IEO projects in total and hardly any IEO launchpads. Come 2019, there are over 100 IEO projects and at least two dozen IEO launchpads. Crypto speculators and traders have a new favorite – out goes the ICO and in comes the new kid on the block, the IEO. Are IEOs just repackaged ICOs? Do people really care? Is there investor interest?
For starters, IEOs have surpassed ICOs in 2019
For better or worse – the shift from ICOs to IEOs is already in motion, and the winds of change are blowing strongly towards the IEO. In 2019, IEO projects managed to raise ~$375 million more than ICO projects did during the same time frame, akin to over 25%!
Funds Raised by IEOs during 2019
*Total funds raised includes $1 billion raised by Bitfinex. Not represented in the graph
A grand total of $1.6 billion has been raised by IEO projects, of which $1.4 billion was raised during 2019 while ICO projects raised $1.1 billion in 2019. So did people make money on the IEO tokens?
One of the reasons why IEO projects gained so much traction with the Crypto investor is because following the token sale, listing on that exchange is the norm. The average ICO wasn’t listed leaving jaded investors no avenue to trade the worthless tokens.
So these tokens were listed? How have they fared?
ROI of IEO tokens
The best performing IEO tokens are Matic and BitTorrent – both launched on Binace’s platform – adding to the largest exchange in the world’s credibility (or cementing the notions of detractors!). This ROI is calculated using the IEO price Vs current market price. Matic Network leads the pack with an ROI of over 1000% on its IEO price. How does this compare against ICOs? One of the most famous ICOs, Tron, has a current RoI, ~2 years after their ICO of 1500%. Clearly, this appears to be high-risk high-return (which sounds ridiculous in the crypto space!)
So let’s observe another metric. The average token sale time of ICOs Vs IEOs.
Average sale time IEO Vs ICO
For IEOs the average token sale time is just 5.5 days, while for ICOs this is as high as 97 days. What does this convey? That IEO project tokens are selling out like hot cakes – clearly there seems to be a high demand? But does that necessarily mean this is a better investment?
Only 30% of IEO projects have an MVP during token launch
MVP or Minimum Viable Product is a product development technique employed by startups in which a basic product with just enough features to satisfy early adopters is made instead of making a full fledged final version. An MVP helps shape the final product to better suit prospective clients and create a pipeline for product development while at the same time generating revenue.
In the ICO space, only 26% of projects had an MVP at the time of their token sale! Shockingly, almost 95% of failed ICOs did not possess an MVP (source).
So what about IEO projects?
Breakdown of IEOs
Only 30% of IEO projects possess an MVP at the time of their token offering, slightly better than ICOs but not enough to move the needle. It seems like the IEO learnt nothing from ICOs that failed. Unless, IEO projects turn to development ASAP, they too may go the ICO way.