With the ICO craze well behind us, and STOs being as out-of-reach for regular investors as traditional venture funding, cryptocurrency exchanges have found a new source of next-big-thing hype: the IEO.
Initial Exchange Offerings are essentially ICOs that are managed and supervised by exchanges, with hand-picked tokens that are — at least in theory — less likely to be scams. Participating in them often requires holding the exchange’s native token, a requirement that has led to bull runs for several exchange tokens as investors scramble to get in on the ground floor of promising-looking IEO projects.
But are IEOs actually delivering the kinds of 10x and 100x profits that ICO investors reaped during the heady days of 2017’s crypto bull run? We took a look at data from Coincodex, a site that tracks IEOs and IEO tokens, to find out.
Specifically, we looked at the USD prices of tokens that ended their IEOs in the first half of 2019, and that were being currently and actively traded as of Sept 2, 2019, not including tokens with an IEO cost of less than US$0.000001. We found a total of 77 such projects on Coincodex. Two-thirds of them have dropped in value from the already-low prices IEO investors paid, with median ROI percentage of -81.4%.
That already sounds bad, but the reality is probably even worse — we counted only coins that are still being actively traded, so these statistics don’t include any projects that have already shut down operations or dropped to zero. How many such projects there are is unclear.
Moreover, even the projects that have provided positive returns haven’t exactly “mooned.” Among the one-third of projects with positive ROI, the median positive ROI was just 64%. Average positive ROI was higher (178%), but that’s mostly due to a few outliers. Most projects with positive returns still haven’t even doubled their investors’ money.
That’s a pretty terrible return given that investors could have simply parked their money in Bitcoin and seen returns of nearly 3x over roughly the same time period (January to September 2019). Only four IEO projects among those we analyzed have posted better returns than Bitcoin, which means that investors in 95% of IEOs would have been better off putting their money into Bitcoin.
If there’s good news for investors, though, it seems to be that apparently not all exchanges are created equal. With the caveat that our data set was limited and that token performance doesn’t necessarily have anything to do with exchange quality, we saw huge disparities in the median ROI that IEOs from different exchanges generated in Coincodex's data.
Below, we’ve charted the median ROI percentages for exchanges that had at least four IEOs end during the first half of 2019 (bubble size corresponds to the total number of projects each exchange had).
The best of the bunch was quite clearly Binance, with a median ROI of 203% across its four projects. Gate.io, Huobi, and OKEx also had positive median ROI percentages. On the other end of the spectrum, there were exchanges with median ROIs below -90% — investors who put $100 into their projects during this time period could count themselves lucky if they walked away with $10.
It’s worth pointing out that more IEOs may be sound investments on shorter timescales. An analysis by PAData, for example, found that many IEOs open up from their IEO price on their first day of trading.
In the big picture, though, the Coincodex data seems to suggest that IEOs — much like ICOs before them — are more fool’s gold than real gold. But there are a few diamonds in that rough, and at least from our admittedly limited data set, it seems some exchanges may be better at picking them than others.
Update: This article was updated on 9/6/2019 to remove refererences to one exchange that disputed the accuracy of the data on Coincodex.
