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IEOs Raise Half a Billion, Keep Fundraising Alive for Blockchain Startups

Last Updated March 4, 2021 2:35 PM
Gerelyn Terzo
Last Updated March 4, 2021 2:35 PM

By CCN.com: There’s a new fundraising sheriff in town in the maturing cryptocurrency space. While initial coin offerings (ICOs) were all the rage during the last bitcoin bull run, initial exchange offerings, or IEOs, have muscled them out of the way. If it weren’t IEOs, the market would have likely found another mechanism, but these appear to be the deal of choice for now.

Funds that previously flowed to ICOs in 2017 are now being redirected into wiser IEOs, as evidenced by the rising trends. IEOs have attracted $518 million across more than five-dozen projects year-to-date, according to TradeBlock data  cited in the Wall Street Journal . The rebound in crypto prices has seemingly made the market too intriguing for investors big and small to ignore.

And while it’s not a repeat of the frothy ICO-mania that spread at the height of the token boom, it keeps fundraising alive. This time around, the crypto wheat is increasingly being separated from the chaff, which is helping to remove the stigma that was previously attached to the ecosystem.

initial exchange offering chart
Fundraising via IEO is the new ICO. | Source: TradeBlock/Wall Street Journal

Are IEOs the New King?

In order for IEOs to be crowned king of fundraising in the crypto space, however, the early excitement surrounding token prices and utility needs to last. Otherwise, these emerging cryptocurrencies will be no different from the ICO tokens whose values have been battered to their launch price or lower.

CCN.com previously reported about the bullish performance of tokens that launched on Binance Launchpad, the results of which prove that Binance’ selection process has thus far been spot on. Initial exchange offerings do not remove the risk entirely. Investors will be reminded of the bitcoin hack that Binance suffered this year, though the exchange saw to it that investors didn’t lose any funds.

CCN.com tweet
  Binance Launchpad has a solid track record so far. | Source: Twitter

Meanwhile, Kik, which launched its token via an ICO, is mired in a lawsuit with the U.S. SEC over whether its Kin token should have been registered as a security. So while IEOs are on the rise, there is still a murky regulatory framework by which blockchain startups operate. The SEC isn’t likely to ignore a deal it finds suspect just because it has a different name.

tradeblock tweet
  The SEC is still on the prowl. | Source: Twitter

Binance Launchpad

Leading cryptocurrency exchange Binance has put its brand on the line by hosting token sales on Binance Launchpad. So far, it is working in its favor, with the exception of some disgruntled investors who could get early tokens due to the supply/demand dynamics. Binance has since revised the format from “first come, first serve” to a lottery approach based on the number of BNB tokens an investor holds. The pace of deals is much slower than the original ICO generation, but that’s because exchanges have a higher standard for vetting deals. Investors are still urged to do their own research, as always. eToro Senior Analyst Mati Greenspan is cited in the WSJ as saying:

“People feel that since the exchange does not wish to be associated with a scam, they’re more likely to do their homework before becoming associated with any given project.”

Year to date, blockchain startups have raised slightly more than $1 billion across IEOs, ICOs and “private sales” combined, as per data cited in the WSJ. It’s a far cry from the multi-billion dollar totals that the ICO boom experienced, but perhaps crypto fundraising will be more sustainable this time around. At least it’s not DOA.