3 minute read
TRENDS IN THE ICO MARKET
Written by: Oren Bahari
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Figure 1: The progress of ICOs so far
ICO’s have truly erupted in 2017. Their trajectory is better than casual linear and even exponential trends seen in other emerging industries. Comparatively, another megatrend, Machine Learning and AI Automation of Industry, has only just broken free of its linear bound. The dynamism of ICO has been fuelled by the mainstreaming of Bitcoin and legitimisation of cryptocurrency at the forefront. As seen in the graph, the prospective trend of ICO count, the amount of businesses choosing a decentralised funding model, is continuously upgrading with changing sentiments. It seems as if the Bitcoin explosion gave significant asset potential to believers in the crypto-sphere, and they are searching, harnessing and exploring the next great potential spur. Notably, without both Bitcoin and Ethereums’ formation, none of this explosion in investment would be possible.
Even more interesting is the explosion in the cumulative size of projects. There was only a gradual development pre-2017 in the venture ecosystem. Note, The DAO, is an investment conglomerate that raised its funds through an ICO and has now had its tokes labelled a Security by the SEC. Investors in The DAO obviously anticipated the explosion and designed an decentralized organisation. The concentration of colours within the core displays the truly rapid expansion. It also details an almost unrealistically rapid pace, further enhanced by the monumental movement of cryptocurrency in 2017 Q4. Even the magnitude of investment towards purely decentralized networks (the circle size), is often enormous. Undeniably, some these projects have been overfunded. No company truly needs over 50 million in seed funding, so the concept that these companies are raising upwards of 250 million now is outrageous. Gigantic ventures like Filecoin and Tezos will begin in 2018 if regulation does not limit their fundraising bounds. Familiar companies like Telegram are hoping to hit 1 Billion in their future ICOs, a figure so seemingly absurd it brings disgust as much as it does awe. If demand is there, significant money will continue to follow.
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Figure 3: Magnitude VS Avg. Magnitude
Further importance must be place on the changing climate of ICOs. In 2015-2016, it was evident that ICOs were only for the brave few who could any magnitude of money. Now, a more general model and rubric about what composes has been hashed out. ICOs of the appropriate order of several hundred thousand are now unseen, and majority of ICOs of 2017 fall between the $5 and $20 million-dollar ranges. ICOs often also choose to fall within the middle of the year rather than the end. The dynamic movement of cryptocurrency over the Christmas and New Year’s period boldens the idea that volatility is expected. Another trend that can be inferred is the greater segmentation of the ICO funding available. Instead of only a handful of ICOs in 2017 like previous years, the spread of funding is flatter and more even with only several outliers. ICO in 2018 will then overpower all fundraising enacted in the past, with a large push in middle of the year.
A graph of the contributions to the cumulative size of ICO is display above. Some significant ICOs have had their names written down. It is apparent that there are two significant periods, where all projects raised significant amounts of money. The question is what caused the periodic clumping. The best explanation comes from the high correlation in the magnitude in weekly funding to ICOs and the percentage change (average growth per period) of Bitcoin. The variation in change of Bitcoins price explains the variation of Current Weekly Sum by 52%. Bitcoins personal Market Capitalization over the period examine was overpowering, and consequently could be viewed as defacto displayer of attitude to cryptocurrency investment. This reinforces the assistance Bitcoin has given to many projects, organizations and jobs. The cumulative gains are still driving forward and there are no signs if slowing down.
