PwC, in collaboration with Crypto Valley, has released a report titled ‘Initial Coin Offerings: A strategic perspective‘ that analyzes ICO activity from 2013 through June 2018. The report found that 2018 has shattered the yearly ICO volume record, with USD 13.7 billion raised in 2018 so far.
In 2017, only USD 7 billion was raised by ICOs, and from 2013 to 2016 less than USD 300 million was raised. Since the introduction of the ICO around 2013, approximately USD 21 billion has been raised by 1,158 ICOs.
This year, there have been 537 ICOs so far, a rate of about 100 new ones per month. There is still six months to go in 2018 but already it is near the total amount of 552 ICOs in 2017. The ICO market has been rapidly accelerating as it has become a lucrative way to raise capital, creating a new paradigm of fundraising that is outside of the normal financial system. They are disrupting the venture capital industry to the point that venture capitalists have taken the perspective that if you can’t beat them join them, as hybrids of ICOs and venture capital fundraising are becoming common.
The study found that the United States, Switzerland, and Singapore are the hubs for ICO activity on their respective continents, but the United Kingdom and Hong Kong have seen a quick acceleration of such activity. Hong Kong is in a particularly favorable situation since China has banned ICOs but Hong Kong has an autonomous government, so Chinese companies that want to do them are flocking there. The Cayman Islands and British Virgin Islands, territories of the United Kingdom, actually hold the worldwide records. Gibraltar, Malta, and Liechtenstein are creating laws friendly to these in an attempt to become ICO hubs in the future.
By far, the biggest ICOs are EOS at USD 4.1 billion and Telegram at USD 1.7 billion. Other top-ranked ICOs don’t come close at USD 320 million or less. In total, there have been 3,470 ICOs announced, but only 1,158 ICOs have successfully closed their funding rounds.
Legal difficulties due to rapidly increasing government regulations are the primary reason that many have failed. The United States has declared that almost all ICOs are securities and have to get permission from the Securities and Exchange Commission. Other countries with high amounts of ICO activity have a regulator in charge of reviewing them to protect investors.
Overall, the study found that ICOs have become more mature and established in 2018 after going through a less structured hype cycle in 2017. The study says the best practices are transparency, lock-up periods for tokens, interactive purchasing protocol, careful adherence to regulations combined with proper registration and a minimum of aggressive promotion. Other good strategies include combining with venture capitalist funding, structuring fundraising rounds according to actual capital needs, cybersecurity, staggering the release of funds to the development team over a period of time, and a focus on building the community and ecosystem.
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