The next ICO boom is coming — and it will be better than 2018

In 2018, the Initial Coin Offering (ICO) market experienced a frenzy reminiscent of the Wild West. Venture capitalists (VCs) indiscriminately invested over $7 billion in ICOs, with minimal concern for thorough evaluation or background checks. Many investments were made following impulsive conversations at cryptocurrency events, rather than through rigorous research and due diligence. The most memorable outcomes of this period are the numerous ICO scams that have tarnished the reputation of ICOs as legitimate investment opportunities.

The Bitconnect scheme, which was notably notorious among these, lured investors with promises of extraordinary returns, causing the value of its token (BCC) to surge to $400. However, it ultimately resulted in losses amounting to a staggering $2.4 billion for investors. Given this past experience, it’s only natural that there remains skepticism towards ICOs as the new bull market emerges.

Although there’s been heightened caution, it’s clear that a new surge in ICOs is imminent. Evidence of this is emerging, with the monthly number of token sales hitting a two-year peak, as reported by CryptoRank. Additionally, RootData reveals that venture capitalists allocated 52% more funds to crypto projects in March than in February.

Currently, we are at a pivotal moment in the world of digital asset fundraising. The busy event season is upon us, and I anticipate a surge of new launches in the upcoming months, resulting in increased activity for Initial Coin Offerings (ICOs).

The next ICO boom is coming — and it will be better than 2018

The previous ICO craze was fueled by an Ethereum (ETH) development surge. Now, real-world asset tokenization, innovations like decentralized physical infrastructure and artificial intelligence, and advancements in decentralized finance including layer-2s and zero-knowledge rollups will be the main drivers of the next fundraising wave. Additionally, increasing institutional involvement will bring about new infrastructure projects, security solutions, and off-ramp providers. According to CryptoRank, $2.3 billion was raised through 422 funding rounds during Q1. It’s reasonable to anticipate this amount increasing tenfold by the end of the year.

In light of the lessons we gained in 2018, funding campaigns this year will encounter increased scrutiny from investors and regulatory bodies. Consequently, there will be a higher proportion of successful projects and fewer financial losses. The upcoming ICO surge is expected to bear more resemblance to the structured world of Wall Street than the unpredictable Last Chance Saloon atmosphere.

A boom that’s coming our way might not be inherently ethical. But don’t be surprised if things are more structured and regulated this time around. The carefree days of presenting a business idea on a napkin to potential investors are long gone. Today’s venture capitalists demand more than just a good idea. They want a detailed whitepaper outlining the token economics, solid financial data, and realistic revenue forecasts before considering an investment.

The events of 2022, such as the collapses of FTX and Celsius which seemed trustworthy at first, left deep scars on the crypto industry. Consequently, there’s a hesitance to jump back into another reckless fundraising frenzy given the recent painful experiences.

In contrast, various governments have introduced regulations particular to cryptocurrencies, like MiCA in the EU, and stricter regulation is anticipated. The SEC’s increased focus on determining the status of numerous altcoins has brought the crypto market under close examination once again.

Focusing on preventing Bitconnect-like scams is expected to discourage similar schemes in the future. The recent trial and conviction of Sam Bankman-Fried, FTX founder, who was sentenced to 25 years in prison for crypto fraud, serves as a stark reminder that the law will not tolerate such activities lightly. This severe punishment is intended to deter other potential scammers and send a clear warning as crypto fundraising gains momentum.

In the current ICO market cycle, things will vary significantly compared to 2018. The focus will shift towards thorough investigation, adherence to regulations, providing opportunities for investors, and ensuring dependable returns. However, just like in 2018, there is a risk of increased scams and rug pulls as the bull market gains momentum. The difference lies in the methods used for such activities – the meme coin craze we’re experiencing now might lead to more financial losses.

In the realm of ICOs, the situation will resemble that of the conventional financial market more closely. This implies a rise in the number of experienced investors, such as major financial players like BlackRock and Fidelity, who have recently been allocating substantial resources towards cryptocurrencies.

In the evolving ICO marketplace, there is a predicted surge of return for launchpads. These platforms serve as bridges, providing investors with opportunities to engage in ICOs while ensuring thorough examination of prospective projects. With increasing regulatory intricacy and lingering concerns regarding risks, the importance of launchpads in guiding investors through this landscape cannot be overstated. This refined ecosystem will ultimately aid investors in distinguishing promising projects from less viable options.

An additional noteworthy shift is occurring in the demographic of average ICO investors. Rather than just speculative individuals aiming for exponential asset growth, it’s increasingly probable that we’ll see business-savvy individuals stepping in. These investors are eager to back the next successful exchange like Binance or Coinbase, and they are prepared to invest substantial funds.

As we move into this time of year, there’s an influx of fresh initiatives, increased achievements, and greater financial gains on the horizon. Let’s also aim for a significant decrease in deceitful schemes like Ponzi schemes.

Lucas Kiely is a guest author for CryptoMoon and the chief investment officer for Yield App, where he oversees investment portfolio allocations and leads the expansion of a diversified investment product range. He was previously the chief investment officer at Diginex Asset Management, and a senior trader and managing director at Credit Suisse in Hong Kong, where he managed QIS and Structured Derivatives trading. He was also the head of exotic derivatives at UBS in Australia.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of CryptoMoon.

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2024-04-18 00:39