Some investors are hedging their bets and pulling out of the crypto market in response to the recent slump. Seasoned traders, meanwhile, spot an opportunity to scoop up tokens at bargain prices.
Bitcoin dips below $10,000; Decentralized Finance (DeFi) assets tank hard; only 14 out of 178 Ethereum tokens increase in price – these are the headlines of early September. Such stories can turn even seasoned traders squeamish. But they all have one thing in common: they ignore the big picture.
The actual big news of the year is that, after a dismal pandemic-induced first half of 2020, the crypto market is finally getting back to speed. Despite last week’s price correction, there are signs that the post-COVID economy is finally entering a period of substantial growth. Every day we see more and more market entrants, new start-ups looking to finance their revolutionary projects. Each day we’re breaking market capitalization records.
Even DeFi – a somewhat controversial crypto movement – is continuing to gather momentum after the recent market turmoil. Binance and Ethereum are doubling down on their bets, and are putting in more resources to ensure the industry’s success. Professional traders anticipate an imminent bull run – and view the latest drop in price as an opportunity to stock up on many sought-after tokens.
IEO – the new gold-standard.
But, according to forecasts from experts, future trends point towards the conclusion that the anticipated crypto expansion will come through Initial Exchange Offerings (IEOs).
Ever since the second quarter of 2019, exchange-based token offerings have exploded in popularity. Since then IEOs have swiftly replaced Initial Coin Offerings (ICOs) as the financial instrument for crowdfunding crypto projects.
The growth of IEOs has demonstrated that a good idea, combined with a passionate team of developers and a vibrant community is no longer enough. Retail investors feel far more at ease (and projects raise far bigger sums) if the token offering is facilitated through a reputable third-party cryptocurrency exchange.
That’s why, despite the somewhat slow second half of 2019 for all token offerings, IEOs have still experienced an overall strong growth in adoption. Meanwhile, the institutionalization of crypto offerings and the standardization of regulatory processes is bound to push projects towards IEOs further still.
Latest IEO industry insights
- According to a 2020 spring report by PwC, the global crypto ecosystem has reached a year-to-date peak market capitalization of approximately $370bn in June, 2019.
- The report shows that more than 380 token offerings have been completed in the first ten months of 2019, raising a total of $4.1bn. Of that, $1.7bn were raised through Initial Exchange Offerings (IEOs).
- The highlight of the year came in May, which saw Bitfinex’s sell $1bn-worth of LEO tokens in its IEO.
- According to another report by SMC Capital and bigX, the most popular IEO exchanges of 2019 were Latoken, ProBit, p2pb2b and ExMarkets, conducting nearly 300 projects in total.
- The best performing market sectors were Protocols and Blockchain Services. Meanwhile, Internet-of-Things (IoT) sector delivered the worst ROI.
- The United States, Singapore, Hong Kong, and the United Kingdom are still the leading crypto hubs worldwide, measured by funding volume and the number of completed offerings.
- Nevertheless, despite their relatively small domestic financial markets, British Virgin Islands, Cayman Islands, Estonia, and Lithuania continue to exert outsized influence in the crypto economy, and are recognised as extremely attractive token offering locations.
ExMarkets is at the forefront of the coming revolution. Our IEO launchpad is gathering more and more speed. PayAccept, a European crypto payment processor, has just raised $485,000 in its August’s IEO. CoinMargin, a South-East Asian crypto exchange, has already sold $767,000-worth of MKS, the project’s native token, even though the IEO is still ongoing. Meanwhile, CAT.Trade Protocol, a set of trading automation tools available via decentralised oracles, has chosen ExMarkets as the primary exchange for its CATX coin listing.
Don’t get Hooked on the Wrong ideas about IEOs.
There are plenty of rumours and misinformation online surrounding IEOs. Some compare the latest increase in market traction to an ICO-era craze. That is simply wrong, as the IEO crowdfunding mechanism is superior in almost every regard.
Advantages of IEOs over ICOs.
In essence, IEOs differ from ICOs in that the token offering is facilitated through a reputable exchange. Although that might seem like a slight distinction, it actually makes all the difference.
First, there is significantly less risk of funds being siphoned off. Exchanges are selective. After all, they’re putting their reputation on the line. Due diligence is thus taken very seriously. Security too usually meets and exceeds all regulatory standards.
Compared with ICOs, IEOs are not famous for petty scams or Ponzi schemes. Investors can rest assured that smart contracts had not been compromised. Price manipulation is also rare – massive sell-offs immediately after the IEO are relatively uncommon.
Additionally, for the project’s developers, outsourcing the logistics of fundraising frees up resources to pursue the vision. Exchanges usually have large teams of business strategists, security professionals and marketing specialists. From the get-go, projects who choose to conduct an IEO enjoy access to a large pool of potential investors, attracting the attention of existing exchange members. Most platforms also choose to sponsor projects and conduct marketing campaigns on their behalf.
The fees in most cases are relatively low, compared with the savings on the cost of marketing, as well as other operational and security-related expenses. Exchanges already have the infrastructure necessary to facilitate the sale of tokens, and to collect Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) information. Most platforms also offer consulting services.
Lastly, IEOs tend to reward and encourage projects to adopt a robust business model, based on long-term success and delivering users genuine value. A successful IEO often lays a path to a smooth listing. For many crypto projects, listing is usually an extremely burdensome procedure which can take months. But projects which have chosen to conduct an IEO already meet the requirements and can thus be easily listed on the same exchange in a matter of weeks.
A New Beginning
Over the past couple of years, IEOs have become the new gold-standard in the world of crypto. IEOs have mitigated the risks associated with fraudulent ICOs, and thus acquired genuine credibility in the cryptocurrency market. They have also streamlined the token offering process, offering projects a straightforward and hassle-free fundraising experience.
In essence, the growth of IEO as the primary crypto fundraising model is a testament of a maturing industry, ready to overcome its deceitful past and get back its integrity. Armed with this information, you can see that the latest swings in prices only reflect attempts to scare amateur investors away from the market. Instead of succumbing to fear, bet long – that’ll prove all the critics wrong.
Join the action through ExMarkets IEO launchpad!
About The Author
Gytis Trilikauskis aka VIziris is the Head of Content at ExMarkets Cryptocurrency Exchange & IEO LaunchPad
ExMarkets is a digital asset exchange platform powered by the state-of-the-art, in-house trading engine. On the exchange, ExMarkets users can trade the most popular cryptocurrencies as well as participate in the token sales of the most promising blockchain and crypto projects through ExMarkets IEO launchpad.