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Initial Coin Offering: The Wild Wild West of Cryptocurrency Market

Associate Professor, Finance , ESCP Europe Business School
May 19, 2018 6:19 AM 4 min read

ICO stands for ‘initial coin offering’. Many of us know this. But, to me, it may as well stand for ‘incredible commercial opportunities’ or ‘incredulous and crazy offerings’.


The 'Kodak Moment'


A couple of weeks ago, I posted an article that shows how some companies’ share prices jumped as a result of merely announcing the development/deployment of blockchain. For example, the chart below shows the stock performance of Kodak. On the 9th of January this year, the company’s share price shot up by more than 300% when it announced a forthcoming ICO with the aim of creating a “photo-centric cryptocurrency”. I have always known that technology would eliminate my job as a corporate finance professor. And I think my time has come: instead of value being created through the proper management of a company’s finances, all it now takes is to say that you are doing something with ICOs and blockchain.


Initial Coin Offering: The Wild Wild West of Cryptocurrency Market
Source: Kodak Stock Performance during ICO announcement


A recent survey by TokenData on last year’s ICOs finds that out of 902 events it tracked, 142 failed before funds were raised, with an additional 276 failing after fundraising. This represents a failure rate of 46%. But there’s more. The survey also finds another 113 projects that it calls ‘semi-failed’ because their teams dropped off the radar or their community withered away. Now, if you think that is crazy, wait until you delve deeper into what some of the cryptos do – or don’t do.


First, some coins don’t even bother to link themselves with the blockchain. For instance, there was a crypto issue that carried the (noble) intention of raising money to build the new satellite city of New Dubrava in Russia. The whitepaper on the RSC coin (don’t ask what it stands for as the paper never bothers to mention it) is six pages long and comes in the form of a letter pleading for help. It doesn’t mention any business model, growth strategies or anything that can help investors understand how the funds raised will be used. And blockchain? What blockchain? According to information shown on TokenData, it did not raise a single cent.


Other cryptos have much more realistic objectives. Wu-Tang Coin is just using ICO to raise the money needed to buy a limited-edition recording by the hip hop group Wu-Tang Clan. And that’s it. Reading its five-page whitepaper is, therefore, easy, as it makes it clear that it is a gift and nothing else. Amount raised: $954.


At least it managed to raise that amount though. A quick count on TokenData reveals that 19 ICOs received less than $500. Most interestingly, 15 of these were within the past seven months. This probably reflects the fact that investors are becoming warier of ICOs and are increasingly being aware of their pitfalls.


Make Our Country Great Again

Initial Coin Offering: The Wild Wild West of Cryptocurrency Market

My exploration into the wild land of ICOs was rewarded with some interesting finds. For instance, I discovered that PutinCoin exists (market value: $1.65M). According to its whitepaper, it is "a cryptocurrency coin [its description] created to pay tribute to the people and the president of Russia. It was created and developed with the intention of supporting the vastly growing Russian economy, the market around it and even the economy across the Russian boarders [sic]”. As you could perhaps guess, there is also a TrumpCoin (market value: $379,000). As far as I can tell, it was created to support his election campaign. And, of course, there is the MACRON coin (market value: $767,500). The purpose of this coin is rather telling: “MACRON was created in support of (then) French Presidential candidate, Emmanuel Macron (who eventually went on to win the elections).” Crystal clear.


Praise The Lord


Jesus Coin, on the other hand, seems to have much bigger drawing power. With a market value of $1.40M, its website claims that “It’s Time to Decentralize Jesus”. It is “the currency of God’s Son. Unlike morally bereft cryptocurrencies, Jesus Coin has the unique advantage of providing global access to Jesus that’s safer and faster than ever [sic] before.” I must admit that I love the fact that the team behind this coin is considerate enough to also provide the whitepaper in Latin.


Apparently, commercial opportunities aren’t confined to coins alone. This year sees the debut of Virtual Currency Girls (Kasotsuka Shojo) in Japan. It is formed of eight female band members, each of whom wears a character mask representing a crypto. Between them, they show Bitcoin Cash, Bitcoin, Ether, NEO, NEM, Ripple, Mona and Cardano.

Initial Coin Offering: The Wild Wild West of Cryptocurrency Market
Virtual Currency Girls

There are so many things about cryptos that you didn’t know you wanted to know. And now you know. Given the way things are going, I am sure newer ‘value creation’ ideas will emerge. It is going to be a fun, interesting and entertaining ride from here. I am cancelling my Netflix subscription.


A big Thank to Zoran Dordevic, CEO of Tolar for informing of the existence of the Jesus Coin. No, he is yet to buy one of these.


This article was originally published here.