Tuesday, June 22, 2021

Initial Coin Offerings Are Claiming IPO Market Share

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There was a time when an initial public offering (IPO) was considered to be the hottest ticket on Wall Street, but that excitement is giving way to a funding strategy known as initial coin offering (ICO).

Similar to IPOs, companies that develop cryptocurrencies are using ICOs to fund their operations, and prospective investors are very excited by this strategy. The way ICOs work is somewhat similar to how IPOs are placed; investors are targeted by means of marketing and advertising with the promise that they will get digital tokens off a blockchain before they are listed on a currency exchange market. 

The Appeal of ICOs for Investors

Investors and traders like IPOs because they offer an opportunity to get in early on the action at lower prices that may result in future profits. With ICOs, investors get tokens in exchange for providing valuable startup capital. Similar to IPO shares, ICO tokens could rapidly increase in value; this much has been proven with the meteoric rise of Bitcoin since that time when someone an American currency holder paid 10,000 bitcoins for delivery of a couple of pizzas.

One of the most exciting ICOs in was EOS, a tech startup that has transformed the blockchain into a platform for software development. EOS was contemplating an IPO; however, executives decided to issue digital currency tokens off the blockchain they had already developed. With this ICO, the company was able to raise $185 million in less than a week. EOS retained a few investment banking firms to help with placing the ICO; it is interesting to note that these firms are experienced IPO promoters, and thus it made perfect sense to leverage their Wall Street experience to attract investors. 

Even though ICOs are unregulated financial strategies, they are being closely watched by Wall Street investors who usually follow the IPO market. The same enthusiasm that is usually associated with IPOs is being multiplied in the ICO market; legendary boxer Floyd Mayweather took advantage of the media frenzy surrounding his fight against MMA fighter Conor McGregor so that he could promote an ICO he was backing. 

Financial analysts who follow cryptocurrencies believe that ICOs, along with the blockchain, are the most important developments to come out of the bubble conditions that this market has been experiencing over the last few years. Being able to fund a financial infrastructure with a distributed ledger and away from Wall Street is a development that is gaining support among many circles.

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