ICOs are still an attractive way to raise funds for planned projects. A Boston College Carroll School of Management study has shown that the majority of start-up companies so funded do not have a long life span. After four months of handing over the token to the buyers, they are considered dead.
Even if the big hype seems to abate, newly formed rating agencies show that initial coin offerings are still very popular. The Boston College Carroll School of Management has now investigated what happens to the projects funded under its ICO. The study, published on July 5th, used more than 4,000 ICOs for the study. The graduate student of finance Hugo Benedetti and assistant professor Leonard Kostovetsky led the study.
According to the Ethereum World News, the ICO volume for the first half of 2018 exceeds 2017 throughout 2017. However, according to the ICO study, over 1,000 cryptographic projects must be considered dead or dying. The resulting worthless coins can still be traded on stock exchanges with real value. Accordingly, the market is flooded with “coin corpses”.
To pinpoint the exact extent of this phenomenon, the study looked at the lifecycle of ICO-funded companies. For this, the researchers analyzed the intensity of tweets from the Twitter accounts of startups. In this way, the activity and thus the existence of the companies was derived. The researchers said that only 44.2 percent of startups still existed 120 days after the end of their ICOs. Similarly, approximately 56 percent of crypto startups who have raised money through token sales die four months after their ICO.
Young companies and startups have become more cautious in pricing in their ICOs. In addition, more and more people invest in ICOs, so that returns have declined over time. Thus, according to Kostovetsky, the profits of those who sold their coins on the first day of the listing fell by four percentage points per month. Accordingly, the Coin purchase and sale on the first day is the safest investment strategy. However, many private investors do not have this option. As a result of the study, he concludes that all investors should sell within the first six months. How sustainable this assessment is in a market that is constantly changing, however, would have to be reviewed regularly.
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