Anticipated Surge in ICOs: A Shift Towards Rigorous Due Diligence and Institutional Interest
Summary:
The article discusses the foreseeable resurgence of Initial Coin Offerings (ICOs). It provides a comparison between the ICO boom of 2018 and the expected surge, noting that the upcoming boom will likely involve stricter due diligence, regulated policies, and increasingly institutional investors. The rise is anticipated in response to advancements in asset tokenization, artificial intelligence, and decentralized infrastructure. Emphasis on increased scrutiny for fundraising projects from both investors and regulators is mentioned, aiming for safer investments and fewer financial losses.
The upsurge of ICOs in 2018 was unequivocally calamitous. It resembled an uncontrollable environment where venture capital funds were haphazardly allocated with scant attention to proper checks. Over $7 billion was recklessly thrown into ICOs in 2018, based on insufficient grounds, more often than not stemming from an inebriated chat at a crypto gathering. The most unforgettable outcomes were egregious disasters that have equated ICOs with deceit; Bitconnect Ponzi scheme conspicuously stands out. After offering high promises of returns and driving its token (BCC) value to $400, it quickly dwindled, leaving investors at a loss of about $2.4 billion. Hence, it's not striking that as the new bull market emerges, there remains a level of skepticism around ICOs. Regardless, it's undeniable that an impending ICO upswing is happening. Already, the monthly count of token sales has hit a two-year peak, as indicated by CryptoRank, whilst RootData notes an increase of 52% allocation from venture capitalists to crypto projects in March compared to February.
Currently, we are at a significant juncture in the digital asset fundraising sphere. With numerous events lined up, there is anticipation for new ICO launches in the forthcoming months, signaling a revival of ICO activities. The last ICO growth was fuelled by a sudden surge of development activity on Ethereum. However, this time, the catalyst will be progress in tangible asset tokenization, inventive concepts like decentralized physical infrastructure and AI, and new decentralised finance (DeFi) developments such as layer-2s and zero-knowledge rollups.
Furthermore, increasing institutional interest will contribute to the market introduction of new infrastructure projects, security solutions, and off-ramp providers. CryptoRank reports that a total of $2.3 billion was garnered across 422 funding rounds in Q1. This number could balloon by the end of the year. Nevertheless, the bitter lessons from 2018 would result in today's projects undergoing stricter checks from investors and regulators alike. Therefore, we should anticipate a more considerable survival rate and fewer financial losses.
This upcoming ICO surge will bear less semblance to reckless spending, and reflect more of a strategic move similar to when Wall Street was dominated by JPMorgan. While we should not necessarily label this boom as ethical, there will certainly be a greater level of orderliness and stricter regulation of policies. No longer can a project woo an investor with a makeshift business plan. Today's investors require an in-depth whitepaper, well-designed economic models, solid numbers, and dependable income estimates.
Regrettably, the mistakes of 2022 where sizeable investments in schemes like FTX and Celsius faced major losses are still fresh. As such, it has informed the introduction of crypto-specific regulations in multiple regions, including the Markets in Crypto Assets in the European Union, and the anticipation of increased regulatory inspection. With the SEC paying closer attention to several altcoins, the crypto world is under greater scrutiny.
As a result, future schemes similar to Bitconnect would likely be deterred. For instance, FTX founder Sam Bankman-Fried, who was convicted and given a 25-year sentence, serves as a deterrent to potential wrongdoers, signaling that the law would not take lightly to such offenses. Therefore, future ICOs will place a premium on diligent checks, compliance, investor communication and dependable returns.
That said, we are likely to witness an increase in scams as the bull market accelerates. However, these will take a different form. Currently, the meme coin frenzy mirrors the 2018 ICO obsession which could be the source of losses this time.
On the other hand, ICOs will reflect more of the traditional financial ecosystem, which means a more tech-savvy investor. Large institutions like BlackRock and Fidelity, which are already making considerable ventures into digital assets, will be included. Furthermore, we can expect resurrection of launchpads designed to aid investors in accessing ICOs, with substantial due diligence to ensure comprehensive vetting before being presented to investors. Despite the growing regulatory complexities around ICOs and persistent concerns about potential risks, launchpads will play a significant role in assisting investors to navigate these challenges.
This improved ecosystem will benefit investors in distinguishing good projects from poor ones. Also, the profile of the typical ICO investor is changing. Rather than risk takers hoping for a 1000% increase in their assets, we will see more savvy and entrepreneurial individuals looking to back the next big companies, ready to invest a significant amount. "More" is the anticipation for the season, more projects, more success, more money and hopefully fewer Ponzi schemes.
Published At
4/18/2024 12:33:42 AM
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