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.”

Ether (ETH) Futures 'Likely' to Launch in 2020, Says CFTC Chairman

Heath Tarbert, the Chairman of the U.S. Commodity Futures Trading Commission (CFTC) has revealed he believes ether (ETH) futures contracts will be launched in 2020.

Speaking at a fireside chat during the first day of the DC Fintech Week, Tarbert revealed he believes ether futures contracts could soon launch, saying it’s “likely that you would see a futures contract in the next six months to a year.”

The CFTC, as reported, declared ether a commodity earlier this month and revealed the agency would be willing to approve ETH futures contracts. At the time, Tarbert said:

We've been very clear on bitcoin: bitcoin is a commodity. We haven't said anything about ether—until now. It is my view as chairman of the CFTC that ether is a commodity.

During the fireside chat, according to CoinDesk, Tarbert noted that to his knowledge no company has, so far, applied to launch ether futures contracts, even though the CFTC is open to approving such a product. Approval will, nevertheless, depend on the application itself.

Tarbert also revealed other cryptocurrencies may soon be seen as commodities, and there other crypto derivatives are coming soon. As there are thousands of cryptoasset out there, it’s unclear which he may have been referring to, if any.

The CFTC Chairman added that an asset can evolve from a commodity to a security and vice versa, although when asked he revealed there may not be a precedent to this happening. The Securities and Exchange Commission, he said, is the entity that determines when an asset is a security.

The SEC has notably been cracking down on initial coin offering (ICO) projects in the last few months, It recently filed an emergency action against Telegram for issuing its Gram tokens without registering with it, and earlier sued messaging app Kik for allegedly running an illegal securities offering that raised $100 million, in which it issued its KIN token.

Featured image by Chris Liverani on Unsplash.