With the larger cryptocurrency market resurging, a key innovation of 2019, despite milking millions in funding, is left in the back of people’s heads. IEOs were deemed to be the short-lived successor of the 2017-18 ICO market, with similar features, objectives, and parties involved. However, it won’t find the same fate as the token sale exodus.
Maintaining popularity during the 2017 bull run and the following crypto-winter of 2018, ICOs were the only silver lining as Bitcoin and the collective market crashed last year. Alas how the tides have changed. As US regulators pulled up their socks and deemed token sales equivalent to ‘securities offerings,’ the ICO market, at least in the United States is in decline, with initial exchange offerings [IEOs] looking to take its place.
A recent study by the Chinese cryptocurrency investment bank, CRC capital, stated that IEOs are in it for the long haul.
Exchanges are well and truly the main drivers of the recent IEO innovation, with new rules being introduced to lure investors. A growing trend in the market is the use of a lottery-based system, which according to the study, allows “more investors to participate in IEOs with lower individual caps.”
Binance via their Binance LaunchPad, introduced a token offering system where investors had to participate by means of a Binance Coin-pegged lottery system which resulted in periodic spikes in the price of the native token.
At the other end of the spectrum, investors in IEOs can benefit from high returns as well as holding the exchange tokens in question. The report read,
“As a result of the participation requirement of holding exchange tokens for certain time, IEO participants are taking both the risk of holding exchange tokens and participating in the IEO.”
The table below depicts the token offerings complete on Binance, Harmony, Matic, Huobi, Reserve, and Newton.
Unlike the ICO projects of yesteryear, which were seen as a static trend within the ever-changing cryptocurrency market, IEOs are less time bound. The report stated that investors who initially miss out on the token sale can still purchase the token offering, in case of an IEO, when the price dips.
From an ICO comparison to an IPO comparison, the study stated that the “IEO mechanism resemble IPOs in the traditional security market.” CRC Capital detailed the same citing cross-project valuations which were at similar or lower levels than a private sale, hence deeming the same similar to “down round IPO.”
CRC Capital charted the project stage valuations of five token sales on Binance, four on Huobi, and two on OKEx.
Not everyone in the cryptocurrency community attests to the longevity of the IEO market however. Speaking directly to AMBCrypto, Bobby Ong, Co-founder of CoinGecko, one of the largest data aggregators in the space, attested to the push for exchange offerings in 2019. However, he claimed that given its similarities between the ICO market of 2018, IEOs could play an imitation game, both in the hype and in sustenance.
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