(Bloomberg) -- Checking for a pulse in the world of cryptocurrencies? Look no further than the ICO market.
About 70 companies are holding token sales, and another 17 as of last week were planning initial coin offerings, where startups bypass traditional venture capital venues by raising money directly from investors through digital-asset sales, according to data compiled by CoinSchedule.com.
While the market is a fraction of what it was in 2018, it’s still bigger than at the start of 2017, when ICOs first began to take off during the Bitcoin bubble. About $292 million was raised in January, or about one-tenth of a year ago’s $2 billion, according to CoinSchedule.
That companies continue to conduct ICOs could be viewed as surprising. Many tokens have tumbled 90 percent in value since the bubble burst and regulators cracked down on illegal activity. The U.S. Securities and Exchange Commission alone has more than 900 documents on its website relating to ICOs -- most of them explaining which offerings should register as securities, or which ones it has stopped. Some 80 percent of ICOs conducted in 2017 were scams, according to token sale adviser Statis Group.
What’s changed now is mostly the venues and to whom the offerings are pitched. While many ICOs used to be launched from the U.S., an increasing number are taking place elsewhere, such as in Switzerland. The Swiss FINMA, for example, will review a startup’s plans prior to an offering and send a letter green-lighting the project.
In the first quarter of 2018, the U.S. hosted 22 completed token sales -- about a fifth of the 113 sales globally during the period, according to CoinSchedule’s data prepared for Bloomberg. In the fourth quarter, the U.S. held 12 closed sales, while the rest of the world had 111.
While many North American investors have backed off from token sales, investors in other parts of the world are still buying. In Eastern Europe and parts of Asia, regulations are generally more lax, said Lex Sokolin, global director of fintech strategy at Autonomous Research. Startups there may have fewer ways of accessing capital, and investors -- fewer ways to invest.
“The global geographic distribution of crowdfunding investors through social media that put money into new technologies through blockchain-based platforms is out of the Pandora’s box,” Sokolin said.
The latest crop of ICOs may also have more mature projects. Unlike a year ago, many projects raising funds through tokens actually have a product, and can even have millions of existing users.
"These days, people are looking for both vision and signs of good execution," said Justin Sun, who owns BitTorrent, which just issued its BTT token. The file-sharing service has 100 million monthly users.
Many companies are simply marketing their offerings differently, with projects such as BitTorrent and Polkadot calling them "crowdsales."
“The ICO model is not going away,” said Jack Platts, a spokesman at Web3 Foundation that will be running a Polkadot sale later this year. “The ability to raise money from anyone globally in a pseudo-anonymous way is still compelling to a lot of projects, and some version of it will be used long into the future."
That would still suggest investors need to be wary.
"What boggles my mind is that token holder pressure hasn’t prevented entrepreneurs from wanting to avoid this sector," Sokolin said. "Imagine having thousands of upset traders yell at you on social media all day long."
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