What Is Going on with ICO? Major trends and ICO market in 2017–2018
2017 was a landmark year for the digital currency industry and possibly the most remarkable year since 2008. Whereas 2008 was momentous due to the financial crisis, 2017 will be remembered for the birth of the ICO phenomenon which ushered blockchain technology further into the mainstream. Let’s take a look at the progress made by the ICO market this year, and try to detect ICO trends for 2018.
Where Do We Start?
First of all, we must find out how the factors that influence the success of an ICO have changed. What is actually a “successful” ICO? Most of us imagine something like this:
Of course, an ICO’s goal is to raise enough money to fund a specific project; (1) raising funds is the first step towards (2) creating a cool product and (3) satisfying contributors interests. In this article, let’s try to determine at least those factors, that affect step (1) — successful fundraising.
We divided the factors that contribute to an ICO success in two groups – external and internal.
The following factors are external:
- How much money are large and small contributors willing to fund?
- What is the ratio of active ICOs to Available Capital?
Meanwhile, the quality of the project and its risks belong to the internal influencing factors.
Let’s take a look at each of these groups, starting with the external factors.
External Factors of ICO Success
As we can see, the number of projects being launched each month continues to grow at a tremendous pace, even as the amount of funds collected by each project has slowed down. December was the only month when there was an increase in global contributions. The reasons, why it happened, may include:
- projects’ founders wanted to complete their sales before the end of the year
- wildly successful projects, such as Hdac (258M) and Sirin Labs (158M), took as much as 25% of the funds collected in December, causing a growth that month
In January, there was a seasonal decline as many teams had rest and celebrated the New Year.
In general, such seasonal situation on ICO market is reminiscent of a Black Friday sale. A huge number of projects appear on the market. There are some good ones, there are some terrible ones, and all of them want to get funding. As the market was flooded with a higher quantity of projects than could be served by contributor demand, the average amount of funds each ICO raised has fallen almost threefold since the middle of the summer.
In other words, the number of projects on the market is growing rapidly while the amount of available capital for contribution increases slowly.
To make it even more clear, let’s look at the median raised capital rather than at the average value.
If you place every ICO in one row – from the largest one to the smallest – then the ICO that is found exactly in the middle will hold the median value. The median value of raised capital for an ICO fell even more than the average value did.
The majority of the user-generated funds go to the top few projects, while more than a half of ICOs launched receive almost nothing. It means that if there are hundreds of projects running at a given time, in the best case scenario only 20% of them will succeed. So, just in case your ICO raised only $1M instead of planned $100M — don’t be upset, the situation could have been even worse.
To figure out where this money comes from and how the role of large and small contributors has evolved, we should determine changes to the average contribution amount.
Between August and November, the average check increased significantly. The reason is that in August 70% of the funds were collected by small contributors.
This proportion gradually changed until we arrived at a point where almost 90% of all collected funds were collected from so-called whales, contributing more than 50k at a time.
There are still a lot of smaller individual contributors, but they are divided amongst many different ICO
Though, projects should pay attention to large contributors who are serious about the selection of each project they chose to fund.
Internal Factors of ICO Success
The role and importance of internal components have also changed under the pressure of the external factors.
It is difficult for a project to stand out from the crowd. Most of the funding that a project receives is from competent and thoughtful stakeholders. It makes it difficult to raise money for the next “Facebook-killer based-on-blockchain.” Contributors prefer projects that create real blockchain solutions, develop new protocols, change existing industries, eliminate intermediaries, and contribute to decentralization.
It may have once been possible to launch an ICO without hiring a lawyer, but those days are long gone.
Since 90% of all contributions now come from whales, does it make sense to spend hundreds of thousands of dollars generating traffic for your landing page? Why not work with large contributors and funds more directly?
As the cost of purchasing traffic grows, it becomes more difficult to attract funding. Building a high-quality team that participates in the promotion of the project and maintains communication with major contributors will soon be a requirement for ICO hopefuls.
We believe that all of the changes that the ICO landscape experienced in 2017 are extremely positive. As the industry becomes more refined, high-quality projects will become more bountiful. As we enter 2018, we have confidence that this is just the beginning, and the most interesting is yet to come.