A recent report published by the Boston College Carroll School of Management on 20 May has found that the average returns an initial coin offering (ICO) investor can expect is 82%.
”Significant ICO underpricing”
The report, titled ‘Digital Tulips? Returns to Investors in Initial Coin Offerings’, emphasized what is described as ”significant ICO underpricing”.’ The 54-page report utilizes a dataset of over 4,000 planned and realized ICOs, nearly all since January 2017, and with a combined total worth of USD 12 billion.
The analysis found that from the initial token sale price to the first day listed on a cryptocurrency exchange, average returns for investors were 179%, with the holding period in this time averaging merely 16 days.
Problems were found to arise, however, if issuers failed to get the token listed on an exchange site within 60 days. While the representative investors were still found to be able to nearly double their money in this circumstance, the researchers found an average -100% returns on these tokens.
All results considered, the average ICO investment was concluded to provide 82% gains.
Opportunities and obstacles
The report indicates that investors who hold their tokens for a period beyond 180 days will benefit from the highest returns, described as somewhere between 250% and 430%.
Cryptocurrency tokens were noted to be able to “continue to generate abnormal positive average returns”, but with the possibility of this being ”an indication of bubbles”.’ Nonetheless, profits were found to be also ”consistent with high compensation for risk for investing in unproven pre-revenue platforms through unregulated offerings”.
Addressing the issue of fraudulent ICOs, the paper suggests ”scams, while plentiful in number, are not as important in terms of stolen capital because investors are shrewd enough to spot (and underfund) them”.
This is a particularly significant conclusion given the SEC’s crackdown on scam ICO sites, even creating and launching their own to try and educate investors by imitating red flags used by fraudsters.
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