Last year has been a fateful one for the crypto industry. No one has or could have predicted such an explosive growth. So what to expect this year — “the feast continuation” or “the strong hangover”? Market forecasting is not a trivial task, especially when it comes to the ICO market because at this moment the industry is in the active development stage.
With the last year events, it is now evident that ICO as a financial instrument has become a part of our lives. The fact that initial coin offerings made investments easier, in a way more democratic and accessible to non-professional investors contributes to the impressive ICO success a lot.
Until recently the early stage investments demanded the involvement of the venture capital and business incubators. Not every startup is ready to go all the way just to become visible to these institutions. With that ICO has become a worthy alternative to these traditional options for investment seekers.
But according to the regulators of many countries, the catastrophe waiting to happen is hidden right in this “democratization”. The majority of the legislators are urgently taking steps to call to order the young and developing market.
Nevertheless, the ICO investment mechanism suits startups very well. Of course, it is yet not clear what surprises 2018 has for us. After all, in 2017 every month was accompanied by a rapid change in favors. Still, it is clear that the market is about to experience a dramatic change and certain influential trends could be observed already today.
The government regulation will be the key ICO market trend this year. If at the beginning of 2017 almost everything was possible, in 2018 it is about to change under the market regulators watchful eye. The first shot that has ended the ICO Wild West period, was the U.S. Securities and Exchange Commission (SEC) press release on the July 25th. The commission after the long-rumored Dao case investigation has declared, that the Dao tokens, which in fact promised investors the passive income, resembled the similarity with the traditional investment schemas and are the subjects to the securities regulations. The approach was taken over immediately by other countries. Chinese government went even further and has banned ICO at all, naming it a fraudulent and highly dangerous instrument.
At this moment in almost all the countries, dedicated workgroups are developing the legislative frameworks to regulate ICOs and cryptocurrencies. Sometimes the expert opinions are bouncing from “ban for good” to “allow it all”. The financial regulators in the United States, Singapore, Hong-Kong, Canada and Russia are discussing, whether the ICO should be included in the securities laws; or not.
Other countries, most probably, will follow, demanding the token sales to be in compliance with the provisions of the finance-related legislation. The ICO mechanism standardization, regulations implementation and new financial instrument literacy growth efforts contribute to the process of making ICO market legal and fair.
The changes in pricing
In 2017 many ICOs were expected to raise mind-blowing figures: from 10 to 100 million dollars. And many of these expectations were met. Nevertheless, the latest trend shows that with the number of ICO campaigns growing, the portion for each startup is expected to decrease. That is indeed a healthy set: previously many have reasonably raised the question, why would startups need such outstanding sums if their products’ development costs are covered with much more modest amounts even with top experts remunerations. Additionally, the governments are striving to limit the one transaction amount, which non-qualified investors can place to the startup development, together with putting the quota on the number of people, who can participate in the ICO.
Contrary to last year, when startups were surpassing records reaching the hardcap in just a few minutes, leaving investors with regrets for not being fast enough to participate in so rapid crowdfunding campaigns, this year the investors are taking the power over the market. Instead of raising enormous investments, the startups will be left with an absolute minimum or less. The most of them will raise from 2 to 10 million dollars. At the same time with the traditional financial market gaining interest in the ICO, many will focus on attracting unlimited opportunities from the institutional investors participation, in this manner satisfying capital appetites.
The ICO instrument acceptance distribution
The more countries will decide on their position towards the ICO and implement restrictions and rules for compliance of token sales to the taxation rules, the easier the ICO launching process will become. This will lead to the competition increase among territories and jurisdictions. It is even feasible that there will be some kind of competition for the ICO most friendly jurisdiction, as the ICOs stream is expected to be followed by foreign investment capital, investors attention and groundbreaking technologies development. With everyone seeing the value in the new instrument advantages, new and new participants will join the market, which eventually will contribute to the tech and finance market liveliness.
Additionally, in the wave of ICOs growth, the service industry tuned for its needs will start to flourish, especially scoring and standardization services. The community will be in need of the ICO knowledge base enlargement. Consequently, the market will experience the growth in the number of educational initiatives and qualified professionals with matching the demand competencies and skills, and the expert communities will progress.
Traditional investors will stream into ICO
Venture capital firms have already directed their attention towards ICOs in 2017. A substantial amount of venture funds has been already invested in startups. A reasonable question could be asked: could ICO replace traditional IPOs? At the moment there is no clear answer for that, but in 2018 it will become evident that the venture capital interest in the ICO is more than just a seasonal trend.
Several major players have already added the cryptocurrency to their portfolios, and VC-startup investors, like for example Andreessen Horowitz are actively investing in the ICOs. The venture capital inflow will give the ICO market a serious impulse for the development. Additionally, the need to rise to the level that matches the VC requirements will significantly increase the quality of circulating documentation, developments and other ICO features, moving the focus from marketing to the product itself.
Marketing, in general, is expected to play a less important role in future ICO campaigns. With institutional investors coming to the market, the project presentations will be made not with PR methods but within the centralized road shows organized for major players with capital.
One of the potential consequences of this trend could be that in PR campaigns itself there will be much less space for early investors rewards, and the size of these rewards will, most probably, be significantly reduced.
The appearance of the specialized platforms for ICO launch
The leading role will take the organization of the ICO launching process. As a result of the growth in the number of ICO campaigns, not a single investor will be able to oversee all the diversity of the projects. Inevitably the platforms will be created to filter the projects with preliminary checks and provide the necessary infrastructure.
The Descrow platform, the ICO of which is approaching its closure date in 3 days, features the universal infrastructure for ICO launching. The platform is focused on uniting the most promising and profitable ICO launching projects.
The main focus of the platform is the investor safety: with the novel unrivaled instrument, decentralized escrow, the startups will receive the funds not at once after the ICO closure, but in tranches upon the delivery on their promises to investors. The escrow role is carried by the personal investor accounts, where funds are held in the frozen state waiting for the next collective decision organized in a form of majority voting. Therefore, in case of the project failure, the investor is not losing the money but has an opportunity to return up to 100% of the invested funds within the platform functionality.