No More Wild West on the ICO Front
You have heard about the Useless Ethereum Token (UET), my smart friends, haven’t you? I'm sure you have. You can’t have missed the news about “The world's first 100% honest Ethereum ICO” that “offers investors no value”? The guy who invented it must have a really good sense of humor, because thousands of people invested in the UET and currently it has a market cap. of more than $50,000. BTW, have you seen the UET logo? By all means, look if you have not yet, and enjoy a good laugh. I, the old Curmudgeon, who remembers long before the dot com bubble and its bust, know that the market does not like jokes. It never forgets, it never forgives and it has an ugly sense of humour. It won’t tolerate the scores of “next generation platforms” that are developing “the most decentralized blockchain” for a “community of millions of users” for long. It may be fun to read about Insanecoin, Unobtainium, Pandacoin and the like, but it would be foolish to think that the whole of the ICO market is just for fun. On the contrary, it is dull and boring and is becoming even more so as the big money of institutional investors gradually begins to pour into it. The Wild West period of the ICO market is over. Although it may not yet be fully integrated into global financial markets, it is coming to look more and more like a traditional market, where big money rules. We all saw this 20 years ago, when in the same way Internet startups were integrated into big business and the more traditional global markets. Let’s have a look at the list of the industries most preferred by investors in 2017 (according to ICORating). In first place, and by a large margin, is Blockchain Infrastructure. The financial sector is also generously represented in the top-10 by several categories: Banking and Payments; Financial Services, Investment and Prediction Markets. The other five industries that found their way in the top-10 are Computing & Data Storage; Internet & Telecommunications; Gaming & VR; Exchange & Wallets, Business Services and Consulting. So far so good The top-10 comprises blockchain infrastructure (including exchanges and wallets), the financial sector (one of the first to understand the potential of blockchain technology), IT and Gaming. And now let’s have a look what the list of industries most preferred by investors looked in the second quarter of 2018: Financial Services Blockchain Infrastructure Banking & Payments Internet & Telecommunications Drugs & Healthcare Social Media & Communications Investment Trading Computing & Data Storage Business Services & Consulting The top-10 is heavily dominated by the financial sector, and blockchain infrastructure is holding its position - same old, same old. However there is something new. Gaming has lost its place in the list to Drugs & Healthcare, which proudly claims fifth place. Does this mean that the gaming industry has lost interest in the ICO market? Nothing could be further from the truth. Gaming and VR places third in the top-10 by number of projects, trailing only Financial Services and Investment. However, according to ICORatings, Gaming & VR is not even in the top-20 by mean hardcap, while Drugs & Healthcare is the seventh among the top 20. (BTW, look at the projects that are now listed by the Cryptonomos marketplace. It is rather revealing.) There is another trend, identified and described by ICORatings, that should be disturbing to those sectors that are steadily losing ground in the ICO rankings. In Q2, 55% of all ICOs failed to complete their crowdfunding. There were 827 successful deals, and just 204 of those projects managed to raise more than $100,000. The percentage of ICOs which could not raise $100,000 has increased from 13% in Q1-Q2 2017 to over 50% in Q1-Q2 2018. What could better demonstrate that the Wild West days are long gone for the ICO market. Serious investors have come to this market: hedge funds, family offices and other investment funds. And I, old Curmudgeon, like it. Yes, there is no room in this, now more mature, market for projects that help geeks feel their own self importance. It also means that talented projects with real potential to change our lives for the better have more of a chance to raise financing than a year ago.