Cryptocurrencies are gradually becoming an integral part of the global economic landscape and it doesn’t appear that governments will be able to close the lid on this proverbial Pandora’s box anytime soon. Bitcoin and Ethereum are the two biggest cryptocurrency projects in the market – both are innovative developments solving real-world economics and business problems. Bitcoin for instance, facilitates speedy, near-anonymous, and cheap transfer of funds across borders. Whereas Ethereum is a platform for building DApps and creating smart contracts.
Beyond, Bitcoin and Ethereum there are more than 1700 altcoins and tokens in the market. Some are unique in their propositions, some are wannabes, and some are still struggling to find or articulate their use case. Most new coins make their debut in the market through the instrumentality of an initial coin offering or token sale. This piece provides insight into why Wall Street investors are still skeptical about investing in ICOs.
Source: securityxt.com
Cryptocurrency Is Outperforming Stocks
When considering ICO vs IPO investing, the returns on ICOs have consistently dwarfed the returns from IPOs within a comparable period. For instance, the best-performing IPO of 2017 was AnapstyBio (NASDAQ:ANAB), which delivered 666% gains by the end of the year. In contrast, the lowest performing ICO was TAAS delivering 734% gains while the best-performing ICO, QTUM delivered 14,627% returns. Nonetheless, traditional Wall Street investors are wary about investing in cryptocurrencies because of a myriad of debilitating factors.
The lack of liquidity is one of the key factors that makes ICO particularly high risk for traditional Wall Street investors. Alessandro Pecorelli CEO of Vertex.Market observes that “the cryptocurrency markets require the right kind of liquidity to facilitate the optimal market dynamics of demand and supply. Too much liquidity will cause the market to overheat and too little liquidity will make it somewhat difficult for some promising projects to get the liquidity they need.”
Vertex could be the catalyst to bring the right amount of liquidity to the cryptocurrency market by creating a platform that offers a disciplined approach to vetting ICO projects properly. Vertex will remove the information bottleneck that slows people down from investing in ICOs with a one-stop shop where you can find carefully vetted ICO, at fair prices before they are listed on an exchange using its native VERT tokens. One of the key value propositions of Vertex is that the ICOs that will be featured on its platform are vetted by an experienced team of professional business managers using a multi-layered six-step filter process.
The Performance of the top 5 ICOs (based on the funds they raised) in 2017 have consistently outperformed stocks even though one could argue that stocks have more solid backings in terms of existing real-world businesses than cryptocurrencies that are still being birthed. For instance, Zimbabwe Industrial Index was the global top-performing stock market of 2017 with gains of 165.9% while other big stock indexes such as S&P 500, NASDAQ, and Nikkei recorded less than 30% in gains. In contrast, Bitcoin was up more than 1,420% and Ripple was up by as much as 23,000% in the same period. Amazingly enough, the ROI of the top crypto ICOs in 2017 was around 136,000%
Filecoin (FIL) is biggest ICO of 2017 having raised $257 million in its public crowd sale. The coin started trading around $11.47 on December 13 and it went all the way to a $29.59 by January 28. However, the coin has since followed the market to give back its gain as it currently trades around $5.76.
Tezos (XTZ) was the second biggest ICO of 2017 –it raised $232 million in its token sale. From an initial trading price of $1.66 on October 2, the coin surged all the way to a high of $9.73 on December 17, 2017. Tezos has suffered a mix of internal conflicts and inability to execute on their promises, now the coin trades marginally under its ICO price at $1.59.
EOS is the third largest ICO of 2017 as it successfully raised $180 million even before it’s product went live. From an ICO starting price of $1.03 in July 2017, the price of the coin soared all the way to $21.46 in April this year. EOS has also suffered from the general bear trend plaguing the cryptocurrency market and it trades around $5.80.
Bancor (BNT) is the fourth biggest ICO judging by funds amount raised – the company, domiciled in Israel raised $153 million during its token sale. Starting from a trading price of $4.49 on June 22, Bancor enjoyed an uptrend that took it all the way to $10.06 in January. Bancor has also suffered some management mishaps and its coin is currently trading around $1.80.
The fifth biggest ICO by amount raised is Status (SNT), which succeeded in raising $108 million from its crowd sale. SNT started trading around $0.061 on June 28, 2017 and the coin rode positive investor sentiment to soar as high as $0.60 on January 4, 2018. Status has since lost much of its trading price but it still trades about its starting ICO price at $0.0477.