Why ICOs are dying a slow and painful death

Initial Coin Offerings aka ICOs have been around ever since the blockchain was first developed. For those who don’t know, an ICO is a blockchain company putting their cryptocurrencies up for sale. This usually institutes thousands of traders buying as many coins as humanly possible from the company in hopes that the asset will increase in value after the ICO.

That is usually the case. Due to the sheer amount of demand that the coin gets during the ICO, it tends to bloat like a bubble within the first or second week of the offering. This gives initial investors the perfect opportunity to sell their investments for a hefty profit sometimes, but wreck the market completely in the process.

Some call this pumping and dumping, but that’s usually conducted within the company itself rather than on an open exchange accessible to everybody. Furthermore, pumps and dumps are not promoted to a similar degree as ICOs are, which gives the company more room to raise and lower the price of their coin within seconds, thus guaranteeing minimal collateral damage to anybody who tried to join the fun.

Although all of which I just described looks like an amazing investment idea, it’s been the reason so many people are now completely avoiding cryptocurrencies as a whole. You see, having more than 80% of ICOs in 2018 alone be fraudulent tends to drive people away from the markets, especially when they are one of the victims.

Things such as exit scams, pumps and dumps, useless coins and the lack of 2017 hype were usually the culprit of botched ICOs, but nowadays they’re untrustworthy by default.

Why rent an apartment when you can afford a house?

The downfall of ICOs started well after Bitcoin fell in 2018, but that was just the catalyst for what was to come.

You see, there were hundreds of companies that wanted to make an actual, useful product, but couldn’t risk calling it an Initial Coin Offering. It would immediately give them an untrustworthy look, and local regulators would be at their throats immediately.

There were many attempts to re-brand ICOs. Things such as funding rounds, crowdfunding and etc were used, but nothing stuck as much as IEO, aka Initial Exchange Offering.

Initial Exchange Offerings are basically new cryptocurrencies that are offered exclusively on one exchange only. What this does is tell the trader that the experts at the exchange have reviewed the company and their product, and have deemed them worthy of a spot on their exchange. Depending on the reputation of the exchange itself, the crypto companies would have a much easier funding process.

In fact, this phenomenon can be observed in other industries as well. Think of the IEO as a review from a credible source. Back in the day (the early 2010s) the financial industry was suffering from terrible PR. There were cases when several Forex brokers defrauded their clients and ran away with the money, which made marketing for legit companies that much harder.

Therefore, the corporations started relying on credible news websites or experts to give them a review. For example, this itrader review here is a prime example of what companies were referring to as a source of credibility in the past. The habit has stuck ever since the financial industry regained its reputation and is still living off-of affiliates and expert comments on the internet.

What makes an IEO so trustworthy

As already mentioned, a company doing an IEO already has a seal of approval from a cryptocurrency exchange. As long as the exchange itself is reputable, the company can expect to be a lot more popular among the crypto community.

Furthermore, the composition of the IEO also prevents any suspicion of personal interests from the crypto exchange themselves. For example, once the IEO is approved, the crypto exchange will have to agree on a lower fee from the coin’s transactions simply because the crypto company is agreeing not to list its coin anywhere else.

Therefore, we get a situation where it’s actually better for the crypto exchange to let the company do an ICO as they can charge more on the transaction fees. However, if the project is indeed good, then they can take the hit in lower fees but increased volume.

Whatever is agreed upon, it’s immediately obvious that an approved IEO means a trustworthy product with a reliable team behind it.