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Price predictions

IEOs underperformed as investors record massive loses

31 Dec 2019   #Ethereum

The last two years have seen the unprecedented rise of Initial Coin Offerings (ICO), where many companies sprang up in a bid to raise capital. However, that craze did not last long as so many investors lost almost all they had.

The fundraising schemes crippled a lot of investors, and global regulators had to step in to wash off the market with stringent rules and regulations.

Now, Initial Exchange Offering (IEO), touted as a better alternative, took center stage in 2019. However, BitMEX, a popular margin trading portal, revealed in a research that the craze did not end well. Yet again, many investors lost almost all their investment as they pursued the investment and profit-making promises of these IEOs, according to BitMEX.

From the research, some investors lost as much as 98 percent of their investment. Interestingly, most of these IEOs have either folded up or are battling with regulatory issues currently.

Story So far for IEO

After the craze for ICO died out last year, many thought IEOs would become an improved alternative. The IEO allows small token issuers to raise funds for their projects by selling tokens through a specific trading platform.

The method is an advantage to both the exchanger and the token issuer because investors are confident that the transactions take place in a secure and regulated environment. But investors thought wrong. If the funds are secured, as the investors thought, they wouldn’t have recorded the massive amount of losses from IEO this year.

The majority of the IEO investors have lost almost all they’ve invested in the respective IEO that caught their attention, BitMEX reported.

Recently, BitMEX released a research report that gave some insights into the activities of some of the major IEOs this year. In the report, BitMEX noted that all the 11 IEOs they reviewed dropped value to a considerable level, despite Bitcoin’s recent bullish trend. Since May, Bitcoin has appreciated, but within that period, the 11 IEOs have dropped significantly in value.

However, BitMEX picked out Binance’s Matic IEO as the only exception that did not drop in value during this period. It experienced a bullish trend a few weeks ago, only to witness a massive drop in value within a few days. Even after the huge drop, Matic is still trading above its initial valued price. Unfortunately, the same thing cannot be said about the other IEOs BitMEX has reviewed.

The poor performance of IEO will discourage investors

According to BitMEX, Matic is still standing above the initial value of the IEO when it was first launched. It means investors have not lost their investment since the token is still doing relatively above the initial price. However, other tokens have dropped massively, with most of them down by 80%.

The poor performance of these tokens will leave investors feeling betrayed by market sentiments and market trends. It will be difficult to convince them to trade in their cash again for an IEO. Instead, they would prefer looking at another direction for a rebranded fundraising scheme.

Author: Ali Raza for

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