The ICO market is undergoing a rapid growth spurt. More and more companies conduct their ICOs, collecting the amounts of money virtually on par with big-time IPOs. This development is causing the demand for ICO campaigns to rise exponentially.
Back in July Global Advisors raised more than $1 billion for creation of the world’s first regulated Bitcoin and ICO investment fund to offer investors a reliable fiduciary responsible for making well-considered investment decisions.
A month later blockchain startup Blockstars announced its decision to team up with VCs to launch $25 million Blockstack Signature fund backed by Lux, OpenOcean, VersionOne, RisingTide, and Compound. This clearly demonstrates emerging trend of seeing ICO as a promising investable opportunity.
According to Nick Evdokimov, a co-founder of ICOBox, the world’s first SaaS solution provider, their company receives over 50 ICO requests per day, and they believe that this is just a fraction of the demand.
If we were to observe successful campaigns, we will clearly see that the proceeds are growing, setting new records with every passing day. But the alarming trend is that while the market capitalization is growing, its stability is not improving.
When just a few projects attract hundreds of millions of dollars through their ICOs, any issue affecting any one of these companies can cause the drastic decline in demand, which could put into question the viability of the ICO technology itself.
For instance, if a company successfully collects a significant amount of money but fails to detect an error in its business model or smart contract (which is irreversible), this can cause serious losses for token holders and make market participants quickly fall out of love with the technology.
This is why the stabilization of the ICO market should be the top priority for any of the industry’s many companies. This can be accomplished by increasing the quality and the quantity of the market players. Many startups by now have heard about ICOs and are eager to give the technology a try.
But many of them are not aware of all the moving parts that go into conducting a successful water-tight ICO, and so they commit blunders, including those that can cause some serious trouble. As the recent SEC decision in the case of the DAO shows, legal compliance is becoming the market’s number one concern: ICOs issuing tokens which have the nature of securities are subject to strict securities market regulations which may not be brushed aside. So from now on the projects seeking to conduct their ICOs will need to pay much greater attention to their token concept development to improve the quality of their projects.
In terms of quantity, as ICOBox’s Nick Evdokimov points out, “The more new companies enter the market the more stable it will become. Imagine a stool with hundreds or thousands of legs instead of the traditional four. If one of its legs snaps, the stool will not collapse because the other 99999 legs will continue supporting it. This is the picture of a stable market.
He continues: “Our duty is to increase the number of thriving ICOs which meet the technical criteria and comply with the law. We accomplish this primarily by lowering the cost threshold, which allows a much greater number of talented projects to enter the market. The conceptual and legal quality is determined by the quality of services the new projects were provided in conducting their ICOs.”
The key to success is in ensuring the greater variety of interesting ideas and the perfect legal compliance. Ideally, to stabilize it, hundreds of new companies would be entering the market per month. Perhaps they may not be attracting hundreds of millions dollar, “just” tens of millions dollars – but their tokens will be backed up by the high demand for the products and services which are paid for and created with the help of their ICOs.
A stable market cannot be created with just a couple of dozen of superstar-startups. It requires hundreds or thousands of projects. Preparing and launching new ICOs is not an instant process – like any baby, it needs time to grow organically.
But once the new ICOs start coming in, they will not only help solve the issue of attracting capital but will also promote the user acquisition, bridging the gaps in the market. Hopefully, they will also bring together the blockchain community and the consumers of the startups’ products or services, noticeably broadening the blockchain market.
With this strategy, it is very likely that the ICO technology will take the lead in the very near future.