ICOs Printed $13 Billion Out of Thin Air: BitMEX, TokenAnalyst Research

Colin Muller

Nearly $13 billion may have been “made incredibly easily, with very little work, accountability or transparency,” BitMEX’s research arm concluded in a post yesterday. BitMEX utilized data compiled by TokenAnalyst.io on funding of initial coin offerings (ICOs) conducted late 2017 and 2018, in order to understand how the ICO teams themselves handled their raised funds.

BitMEX arrived at the $13 billion figure by calculating how much ICOs originally raised in 2017-18, and then adjusting for how much prices have declined since then. But they are keen to also point out that “there are many inaccuracies and assumptions involved in producing the [TokenAnalyst] data.”

Printing Money?

One of the main upshots of the report was that the ICOs issued themselves a vast amount of their own tokens, in addition to selling their tokens to the public. And by virtue of selling tokens to the public, the tokens that ICOs issued to themselves gained a market value.

In fact, according to the data, not even 20% of the initial raises consisted of funds actually sold to buyers - with the vast majority instead consisting of such self-issued tokens. The sales, typically sold for Ethereum, only had the effect of defining a market price of the projects’ tokens.

BitMEX estimate that ICO teams may still own $5 billion worth of their own tokens - again, with that figure having dropped significantly in the past year - and also may have already profited $1.5 billion by selling proprietary tokens.

Qualifications of the Report

The entire report is qualified, as mentioned above, by the disclaimer that the data are somewhat preliminary, or rough.

For those tokens are still held by ICO teams, BitMEX point out that their liquidity is often very low - meaning their paper market value could quickly change if teams tried to sell any of the tokens.

They also point out that the identification of development teams' wallets was conducted with machine learning, and that data have not had the human touch of individual inspection. Because of this, BitMEX reckon that parts of the data are "likely to be inaccurate at individual project level.”

Finally, BitMEX did not read every single whitepaper to determine if there was some caveat in the handling of development funding, that they were unaware of.

Arthur Hayes, BitMEX’s outspoken founder and CEO, summarized the entire report with his characteristic glibness by saying “When you create poo poo out of thin air, gravity is a bitch.”

Little-Known Cryptocurrency Pumps 500x in Four Days. Are Altcoins Back?

Colin Muller

Micro-cap altcoin Opyn yCurve Insurance (OCRV) saw a monstrous surge last week, evoking reminders from bygone eras of the cryptoasset industry.

chart.pngSource: Livecoinwatch

Between May 19 and May 23, cryptocurrency price trackers registered a price jump from $0.0055 to $2.84—or about 500x—on OCRV. The cryptocurrency appears to only be trading on the decentralized exchange Uniswap.

The unreal price fluctuation seems to have been caused by “shilling” of the coin on 4chan. OCRV itself is a token powering the Opyn platform’s DeFi insurance system.

Altcoins Return?

Such dramatic events in the altcoin space may be signalling strength in the alt market. Generally speaking, high levels of investment in altcoins signals increased risk-taking in the crypto markets, and is a sign of confidence.

rising altcoins -- still?BTC chart by TradingView

We have seen a general increase in altcoin market share since about September 2019, depicted above. This trend took a big hit in February and March of 2020, as the coronavirus spread around the globe and hit financial markets—including crypto markets.

In a general sense, the trend seems to have remained intact, consistently rising from 5 to 8% in the six months depicted. The flip side is Bitcoin's dominance, which if rising signals a reluctance for risk taking (and often a falling Bitcoin price). This had been consistently ebbing since last September, but now seems stuck in the mid-60s.

In a decimated global economy, nobody quite knows what to expect from the cryptoasset industry. With some hints of altcoin strength, though, the prospects remain interesting.

Featured Image Credit: Photo via Pixabay.com