Cryptocurrency investors are lothario a fast-growing volume of money by using a new vehicle called Initial Exchange Offerings. Replacing Initial Coin Gifts, the formerly popular means of raising money, IEOs are designed to circumvent regulatory pressure and continue to meet the professedly insatiable demand for digital gold. About $180 million has been raised in 23 offerings in recent months, concerting to crypto data tracker CoinSchedule.com, as reported in a detailed story in Bloomberg.
Initial Exchange Offerings
- $180 million hoisted
- 23 offerings
- Big demand from users and token teams
Source: Bloomberg
ICOs Bubble Bursts
As opposed to ICOs, which put up digital tokens directly to investors, IEOs involve a crypto exchange, which serves as a middle man. Crypto interchanges act as underwriters, and take as much as 10% of the total sales proceeds. “It has the potential to be larger than the ICOs of 2017,” articulate Bill Shihara, chief executive officer of Seattle-based exchange Bittrex, which recently held its first IEO, per Bloomberg. “We are seeing critical demand both from our users and token teams.” By contrast, proceeds from ICO offerings have fallen from $5.8 billion in June of survive year to $208.6 million last month, per Bloomberg.
IEO Risks
IEOs have helped support a resurgence in the digital conceive space, which has experienced significant volatility over the years and especially with the crash of bitcoin in 2018. But IEOs also win a significant amount of risk due to factors such as an inability to standardize vetting across exchanges, as well as continued regulatory uncertainty, per a number of industry experts.
Zach Fallon, a former securities lawyer with the SEC, warns that the newly popular way of nurture funds in the digital asset space takes “everything from an ICO and makes it worse.” He told Bloomberg that the cosmos of IEOs, in which many exchanges force issuers to raise funds via exchange-specific tokens, make the funding typeface more vulnerable to regulatory scrutiny. Other issues, including fraud and lack of due diligence, also put IEO investors at danger.
Nonetheless, tokens issued by exchanges themselves are skyrocketing. Jeff Dorman, partner and portfolio manager at Arca Funds, intends tokens issued in IEOs are up an average of 200%.
Looking Ahead
A surge in IEOs comes as crypto prices are looking overbought, at one time again, according to the Bloomberg Galaxy Crypto Index, which tracks many of the largest digital currencies. The index finger is still down nearly 80% from its record high even though it has risen around 25% since the day one fo this month, per Bloomberg.