By
Temitope Olatunji
April 18th, 2024
In this article, we will be exploring the main reasons why IEOs may, in fact, drive a flock of new investors into the crypto market.
Attracting new investors into the cryptocurrency market is not an easy task. Initially, we had Initial Coin Offerings (ICOs) as the main method of investing in blockchain projects and this proved to be a short-lived success in bringing people into the community. As time went on, people discovered that a large number of the ICOs being marketed online were actually scams and a large number of investors lost their money. The distrust of ICOs still exists to this day.
To plug the perceived gap in regulations and to keep the money of investors safe, we then had Security Token Offerings (STOs). Initially, these were seen to be the savior of the cryptocurrency market, by encouraging more cautious investors into the cryptocurrency market.
Despite this, they haven’t quite achieved that, with many believing that conforming to the securities regulators in various countries is both expensive and defeats the purpose of investing in cryptocurrency projects in the first place. Indeed, jumping through all of the red tape and hiring lawyers to help navigate the regulatory minefield is not a cheap task. Despite this, there are still a number of businesses that are succeeding in the STO space.
There are also new cryptocurrency projects seeking to combat the issue of coin volatility in the market, these are stablecoins. Despite the potential of stablecoins to provide stability of pricing, there are also other issues such as lack of investment potential due to the aforementioned price stability. There are some projects that are working to rectify these issues.
From this, we have now achieved a new middle ground in Initial Exchange Offerings (IEOs). These new offerings are provided on the platforms of cryptocurrency exchanges, rather than being hosted by the offering company itself. Due to this, many have begun to speculate that IEOs may be the perfect way to bring new investors into the cryptocurrency market where STOs have failed to do so.
They Are Safer Than ICOs
One of the main reasons that investors quickly fell out of love with ICOs is that lots of people were starting to get scammed in the early stages. Of course, there was very little that an investor could due to ensure that the project they were investing was legitimate. This created a large stigma around ICOs and cautious investors decided not to take part in the latest “bubble”.
This is where IEOs come in. Due to the fact that exchanges will only list an IEO if they feel that it is a legitimate business opportunity with good prospects for growth, they will complete their due diligence on the project before agreeing to launch the offering. This can include confirming the identities of the project founders through their Know-Your-Customer regulations. This is in contrast to ICOs, where an Ethereum address was all that was needed.
Furthermore, investors can be safe in the knowledge that the proprietors of a fraudulent offering would not be likely to go through all of the red tape and regulatory procedures to be hosted on an IEO launchpad. This perceived safety may have a key role to play in bringing the more cautious investors back into the cryptocurrency market, by providing them with a safe platform to invest their money.
Fierce Competition Means More Likelihood of Commercial Success
Another point to consider is that due to the sudden increase in popularity of IEOs, the various exchange launchpads that host the offerings themselves cannot cater for all of the individual projects that want to be listed. This means that sometimes, cryptocurrency projects will have to pitch their idea and their services to the exchange itself in hopes of being selected for an IEO. This is is similar to the way in which startups who are looking for seed funding will have to pitch their idea to an outside investor.
Due to this fierce competition, the cryptocurrency exchanges are likely to only host the projects that they believe are going to be large-scale commercial successes. This means that when it comes to actually hosting IEOs, the projects themselves are likely to be presented to the public in a way that is appealing to potential investors and fills them with confidence that their investment will pay off.
Furthermore, in knowing that the places for an IEO on exchanges are incredibly limited, investors are also likely to know that the exchanges themselves would not list a volatile project that has a high likelihood of failure. This confidence by investors that the project will not fail shortly after an investment is made may seriously help the cause of bringing more investors and more money into the market.
It’s Easier to Find an IEO to Invest In
Cryptocurrency exchange launchpads provide a great platform for investors to find high-quality projects for investment, in an incredibly easy fashion. If an investor follows all of the popular cryptocurrency exchange platforms regularly and keeps themselves abreast of all of the upcoming sales, they will have no shortage of projects that they could invest in that seem set for success.
Previously, if a new crypto investor wanted to find an ideal project to invest in, they would have to scour the internet for various pieces of information on the exchange which might not be readily available to them. This process can take a long time if the investor is wanting to create a comprehensive list of investment opportunities that are available.
IEOs help investors to cut down on the valuable time that may be wasted on researching a potential ICO opportunity, which may then have already completed its sale or has still not set a date for the launch itself. With the IEO launchpads, they will provide information on when the sale will take place as soon as the IEO details are finalized, meaning the investors can also quickly make notes on key dates and times.
All of these factors come together to make it easier for investors to actually find projects that they can invest in.
Investors Do Not Need to Be as Technical
Cryptocurrency exchange launchpads also have the potential to bring in a pool of investors who may not have previously participated in cryptocurrency project investment due to the fact that they are not familiar with how smart contracts and ICO procedures actually work. The reason for this is that the process of investing in an IEO through an exchange’s platform will be a lot more intuitive for a new user than traditional smart contract interactions would be.
There is some discussion about whether or not this will be a complete advantage for the businesses that are listing through an IEO. The reason for this being that whilst their customer base will expand as a result of less technical expertise being needed, they may also end up attracting investors who are indifferent to the long-term future of the project and the cryptocurrency, so long as they make their return.
Conclusion
From the points that we have looked at, we can clearly see that one of the main points about IEOs that should drive new investors to the crypto market is the fact that IEOs and their launchpads offer a safer platform for investors to put their money into than traditional ICOs do.
Despite this protection, IEOs are still not as restrictive and as expensive to set up as STOs are, this helps to provide a lower barrier of entry to good projects which may not have the financial power to launch an STO. This creates a safer environment, with more product choice to choose from.
Secondly, investors can be safe in the knowledge that the companies that they are investing in are likely to succeed commercially due to the fact the exchanges would not list them if they had little chance of succeeding.
Investors can then easily scour the launchpads of the most popular exchanges, quickly find an IEO project that they would like to invest in and then quickly make their investment when the offering goes live. It makes the process easier and more efficient for investments.