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ICO investors.
Rüdiger Fahlenbrach1,2, Marc Frattaroli1
1Swiss Finance Institute @ EPFL, Quartier Unil-Chamberonne, Extranef 211, 1015 Lausanne, Switzerland.
Financial Markets and Portfolio Management
|November 22, 2021
Summary
Successful initial coin offerings (ICOs) attract many investors, but most contribute small amounts. Despite lacking investor protections, ICO participants see positive average returns driven by cryptocurrency value increases.
Area of Science:
- Finance
- Cryptocurrency Studies
- Blockchain Technology
Background:
- Initial Coin Offerings (ICOs) have emerged as a novel fundraising mechanism in the digital asset space.
- Understanding investor behavior and outcomes in ICOs is crucial for assessing their viability and risks.
- Traditional investor protections are often absent in the ICO market.
Purpose of the Study:
- To analyze the characteristics and investment strategies of participants in successful Initial Coin Offerings (ICOs).
- To evaluate the financial returns and risks associated with ICO investments.
- To compare ICO investor protections with those in traditional early-stage financing.
Main Methods:
- Detailed analysis of investor data from successful Initial Coin Offerings (ICOs).
- Examination of contributor numbers, investment amounts, and token holding periods.
- Assessment of returns at 9 months post-ICO, considering cryptocurrency market dynamics.
Main Results:
- Successful ICOs typically involve an average of 4700 contributors.
- Median participants make small contributions, with many selling tokens pre-product development.
- Large presale investors often engage in short-term token flipping after the ICO.
- Average returns 9 months after ICOs are positive, largely due to Ethereum's price appreciation.
Conclusions:
- ICO investors exhibit diverse strategies, including short-term speculation.
- The lack of traditional investor protections in ICOs poses significant risks.
- Positive average returns are heavily influenced by broader cryptocurrency market performance, particularly Ethereum's value.
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