The Current Shifting State of the ICO Markets

in crypto •  last year

Competition is about to increase in crypto, with institutional money flooding in and governments perking up to the idea. Instead of relatively small amateurs trading against the backdrop of an aggressive bull market - institutions will be trading against each other. Squeezing the potential returns over time.

Sands are shifting

As this transition occurs and evolves we'll see more ICO's start going down the route of Basic Attention Token's ICO. With sale finishing in 2 blocks. The only participants...huge whales, those more technically inclined and others willing to risk 5 ETH to have a transaction go through on the first block.

The markets are already taking steps towards this in the ICO space with pre-funding of large initial amounts with full identity verification. For example with Civic (Vinny Lingham) and a $50,000 minimum.

Furthermore in my opinion we're also seeing the caps being raised on popular ICO's to higher and higher more overvalued levels. We're also transitioning down the slippery slope of allocating a much lower % of tokens in ICO's. Such as in the case of the irrationally exuberant reverse dutch auction for Gnosis where 4% of the tokens were released with an imputed value of $300,000,000.

A spanner in the works?

During writing this post, Bancor released their ICO terms - one interesting aspect they mention is an 'uncapped 1 hr window' 

 Bancor is about democratizing value creation and exchange, we want to make sure everyone who wants to participate has a chance to do so. For this reason, we’ve decided to allow a short, “minimum time” — 1 hour — during which all contributions will be accepted regardless of the cap. After the first hour, the fundraiser will have a hidden cap that will be revealed only if the collected ETH reaches 80% of the limit. If funds collected in the first hour reach or exceed the cap, the fundraiser will end immediately thereafter. 

The implications are that 'whales' are 'potentially' disincentivised from completely dominating the market with high fees and an enormous control of the supply...as we have seen in BATS and Gnosis

Bancor is all about 'the long tail' - you can see why they have picked this route. Smaller investors will hopefully be able to get involved in this 1 hour window.

This is something I expected to eventually happen - although the 1 hour window could be an issue - due to the ETH network being hugely crowded during these ICO's. I would have personally raised it to 4 hrs or a day to give investors enough time to make a more rational decision and not FOMO, YOLO into pushing it up to an absolutely insane amount raised. 

This ICO congestion has real consequences. When I got involved with the Mysterium crowdsale on the 1st minute it took around 25 minutes to actually show up as sent. Is 1 hour enough?

Conclusion

We're seeing these shifts, 'special cases' and continual adaptations to the ICO markets - what they're signalling is the massive demand given cryptos recent rise and relatively few places to invest. As this graph shows from coinmarketcap.com.

The ICO market is just the tip of the iceberg when it comes to irrationality in crypto. When it gets to the point where you can buy almost anything in crypto and make money - you have to question how sustainable it is and how to protect yourself in bear markets.

In my next post I'll compare and contrast fund style cryptos such as Iconomi and Taas with passive crypto indexes and DIY actively managed index portfolios.

Images from Coinmarketcap and Pixabay

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I share much of the same concerns and tell you the truth I am very skeptical about the entire process. Ethereum as it came to be, is nothing but an elaborate crowdfunding gimmick so far. It makes tokens. Nothing else really. This creates a lot of vaporware money for meme companies that I am not sure how they will end up actualizing their promises.

They only "safe" strategy in these "wild west times" is for one to diversify as much as possible and as far I am concerned, get in as many icos as possible even if they are bullshit. It will be vital to hold as many tokens as possible. Like you said, it will become very hard for the average crypto guy to even touch future icos so at least these will hold some value.

One thing I am sure. There is no bubble. We are no where near one yet. It just feels like that to us because we have been around for quite sometime.

Looking forward for the post about index tokens. I am really interested in those.

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I think the congestion in the crowdsales is a big red flag for ETH as a network. One of the issues with many of the crowdsales being done in ETH is that a lot of the actively traded supply in ETH is being held to fund them.

Many of these tokens are just 'holding companies' for ETH. It's setting the precedent for a huge correction unless we start tweaking these ICO parameters above, or go to even more ridiculous valuations off the bat.

Which is why I'm looking more into funds - you get what you pay for, rather than valuations that have no reflection of the value of the token other than they are holding ETH.

Thanks for the comment, appreciated.

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Couldn't agree more

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You might think tokens are a 'gimmick' and many today very well might be; Ethereum powers many other financial applications today so I would not be so quick to call it an elaborate gimmick.

Oh think we are in a bubble alright, just a micro bubble after this summers chaos I expect. This pump is far from over I agree.

TaaS and some of the other index tokens or things like ShapeShift's prism have quite high fees at the moment. Might be worth it for diversification but I might stay away until there is more competition. I am more than capable of holding my own diversified portfolios.

To read more about Prism or how I feel about the crypto bubble, check out my posts from last week!

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I think you're right about staying away and building your own portfolios. For me they are easy enough right now to get exposure without the effort of properly maintaining a portfolio.

That being said I've been developing my own actively managed portfolios recently.

I'll certainly check out your posts :)

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I think I would certainly want a portion of my holdings more actively managed than I have the time. I might let more competition from groups like Iconomi to hit the market.

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I bought some TaaS with ETH when it was around $30. So yeah, I guess I could have managed my own portfolio better by just holding. Ha.

In hindsight, I agree, there will be many competitors and it will be better to shop around.

For beginners, Exodus makes it relatively easy to manage a diversified portfolio. They seem to be vetting each coin they add to their wallet extensively, so if you aren't an expert (like me) I feel mostly diversified holding some of each coin they offer (plus STEEM obviously, and a couple others).

Here is their roadmap for coins to add:
http://woobull.com/exodus-wallet-roadmap-a-list-of-upcoming-asset-support/

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Well I wouldn't base my investment on Exodus including a token. That is one of the worst things you could do.

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OK, thanks.

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In terms of portfolio management I use cryptocompare and blockfolio

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will do

Welcome to the new world of the token economy. In a plolychain future, with trustless connections between every blockchain imaginable, this new ICO market really is just the tip of the iceberg. Maybe not completely full of irrationally - just a lack of quality investments at this time.

This is just like the internet bubble - you have .com in your name you get a million or two. We are going to see this happen again with these ICOs and crypto in general. The bubble is hardly over though.

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I wholeheartedly agree with your reference to the internet bubble. Certainly parallels here, except its not .com its blockchain, decentralised and ETH token.

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2017 - the year of the ICO.

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Certainly so :O

Personally I liked the reverse dutch auction that gnosis ran. Although they should of started the auction at a near infinite valuation and I think people would of understood it better.

It did lead to the project getting a ridiculous valuation but that is the problem buyers and freedom to make decisions is freedom to make bad decisions.

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It's an amateur market, people don't really understand whats going on. Gnosis is in no way shape or form worth what it is now. They don't hold much eth compared to market cap.

I really have no idea what will happen with bancor, I'm hoping markets will be a little rational. Maybe it doesn't matter though? It'll certainly be an interesting twist.

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I agree. Reverse Dutch would be great if everyone was informed investors. This is not a market that is ready for that type of scrutiny without succumbing to FOMO.

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You know what your talking about, followed.

Yea, I agree with you. I have only participated in one ICO project. I like that the market is growing, but growth is an understatement here.

This post received a 6% upvote from @randowhale thanks to @wingz! For more information, click here!

I made YouTube videos about bitcoin back in 2013. I saw the influx of money to this market during that time but I was scared to go all in. What we are seeing today IS a bubble, but like all markets, it will cycle again.

This entire market reminds me of the dot com bubble. It WILL crash but this time I will be ready for the next bubble.

During this bubble, I am using my money as if I were a venture capitalist or angel investor. I am backing teams that I believe will be the next Web 2.0 of crypto

wow, interesting distribution by bancor, this might become a wild one.

I'm really interested now in how EOS will go forward with this.

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EOS is another one I have no idea how it will pan out. Its a question of dodging the irrational exuberance in the first weeks and hoping the crypto markets as a whole don't go completely insane in the meantime. I'll certainly be skipping the first few distributions to get a gauge on the market.

Great and informative

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Glad you enjoyed it

Yeah the BAT ICO was crazy. Was checking which block Ethereum was on and the site crashed when i refreshed it a few second after block ....639 came up. The Official BAT site showing the countdown also couldn't handle the traffic. I was in Block ....644 but that was already too late. 196 people coughed up the 35 million $.

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I even had the parity wallet making a scheduled transfer... didn't even end up showing on the blockchain :(

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Ya you really needed like 9ETH in fees to get into this one lol..

That BATS "ICO" was a fiasco, gone in the blink of the eye with no real community involvement. I hope that was not the intention from the developers of Brave. Now that it is available on at least one market, I am in. I like the idea and the technology behind it and hope it has a profitable future.

Crypto is still the Wild West: be cautious.

Great post, man!

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thanks mate :P

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