ICOs have exploded into the mainstream market over the last couple of years, leading to a massive growth in the crypto markets. There are now more than 800 different cryptocurrencies available for investors to this date and this number is continuing to grow.
In simple terms, ICOs are fundraising means in which a company attracts potential investors looking for the next crypto score by releasing their own digital currency, in an exchange, typically for bitcoins. ICOs started out as an alternative means for funding new infrastructure and protocols in the crypto universe.
The rise of ICOs in 2017
There is no doubt that 2017 was a monumental year for ICOs, with an equivalent of $4 billion being raised and bitcoin reaching its peak of $19,000 during the month of December.In 2017, Governments around the world also saw the greater potential of blockchain technologies and held a pro-government stance towards the crypto market.
With many experts predicting what 2017 would hold for the ICO - nobody seemed to come up with the right answer. Some thought that the cryptomarket was a ‘bubble’ about to burst, whilst others predicted that it would have a huge increase, more than it did when it reached its peak.
ICOs are ideal for anyone that wants to heighten capital quickly. This is due to the speed that money can be raised for a project that exists solely as a vision. The fact that the crypto market is largely unregulated also makes ICOs attractive, as this is associated with few/no duties and cost for compliance. Another reason why ICOs are so appealing is due to the ease in which cryptocurrencies can be created, used in transactions and the extent to which they can expand on technical growth.
Whilst ICOs and cryptocurrencies exploit fundamental flaws of traditional funding methodologies they are able to bring justice and equality to projects and don’t tend to rob founders shares whilst going through this process.
The future of the ICO
Looking at the future of the ICO market, there are many arguments as to whether or not they will carry on being successful.
As 2017 provided examples of Blockchain-based real estate investment, loyalty programs, supply chain management and intellectual property rights management, some say we are sure to see this continue into 2018 with applications of blockchain and ICO presenting endless possibilities, due to the accelerating pace they grow at. This will see ICOs becoming even more mainstream than in 2017, and begin to transform other industries from retail to logistics and medicine.
As retail investors primarily pushed the price of bitcoin in 2017, future markets and options could reduce the risk profile, allowing institutional investors to jump in. It has also been said that various central banks will begin to embrace the blockchain and ICO market, where they will be using their digital assets as a means of exchanging value on blockchain securely and in real time. The original founder of Ethereum, Vitalik Buterin predicted that around 90% of ICOs in 2017 would crash. However, with banks and large-scale institutional companies beginning to embrace the crypto market, there could be a string of new products being released in the near future. These products will make it easier for larger sums of capital to flow into the system.
With a few odd bans on the creation of virtual currencies, regulators have struggled to keep up with the rapid pace of the ICO market. It is therefore expected that over the next year, authorities will clamp down on fraudulent players within the ICO space. There may also be clearer guidance and possible eventual enforcement actions from some regulators. Along with clamping down on fraudsters, regulators could also clamp down on ICO advisors and those advising investors to buy into the ‘crypto’ space. With a further demand for validation and transparency, ICOs will become aligned with other traditional venture fundraising which will make it difficult to raise money off just company information and a technical whitepaper - which they are currently doing.
With this in mind during the next year, ICO project holders will be expected more than ever to demonstrate they are reliable for any potential investors, in order to convince them investors. Companies can implement rating agencies such as the ICO Truxt and ICO Charter to help this. Both will help to provide future investors with maximum guarantees on ICO projects, particularly focusing on their transparency.
Europe is still within the exploration phase for regulation, however some recent signs show that ICOs will become more active in the next year. For example, central banks in Germany and France have expressed their plans to begin reigning in on cryptocurrencies and this could potentially lead to heavy corrections amongst ICOs and bitcoin rates.
Will 2018 see the ICO explode even more?
This year we have seen corporate companies such as Telegram and Kodak launch their own cryptocurrencies. This looks set to continue throughout 2018 with businesses issuing their own coins in a bid to become modernised in their technology and economics. There is also set to be a continued stream news around ICOs in 2018, as essentially they have transformed the venture capital sector.
2018 is set to be an exciting year for the ICO marketplace as more projects are planned just within the first few months of the year. Whilst 2017 brought cryptocurrencies into the limelight with prices raising to tremendous heights, 2018 is expected to see new currencies and platforms emerging. Financial and experienced investors will begin to move into the market and regulators will take their stance. Ultimately, raises the question of could 2018 be the year that cryptocurrencies become embedded within the traditional financial system.
Whilst, the industry is thriving and increasing in popularity, there are also risks associated with this type of fundraising. If you are looking to invest in an ICO or are worried about what the future may hold, it is advised that you seek professional consultation and advice from an industry expert before putting your money in a project that might not be quite viable.
Laurent Leloup, Founder and CEO of Chaineum
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