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ICO/STO Analysis for Q3 2018

We use the same methodology and success criteria for all our reports. We do include STO in our reports.

Key Findings

  • The overall amount of funds raised in Q3 was $1,981M, dropping 17% from Q2 2018.
  • The total amount of crypto raised in Q3 was ETH 4M, an increase of 4%.
  • The total number of ICOs for this period was 272, 35% fewer than in Q2.
  • Only 22% of ICOs were successful.
  • The top 10 projects collected 51% of all funds.
  • 42% of ICOs did not report the amount of capital raised.
  • 90% of ICOs launched on Ethereum.
  • “Finance” is the leading category by the number of projects. “Blockchain Platform” is the most funded category.

Number of ICOs

35% fewer ICOs concluded in the 3rd quarter

This quarter witnessed 272 ICOs, which is a significant fall from Q2. This is mainly due to the record-low August, which saw only 73 ICOs conducted.

ICO success rate

Almost 80% of ICOs failed this quarter

Each quarter, there has been a small drop in the proportion of successful ICOs according to our criteria.

Market size in USD

The total amount of funds raised in Q3 was $1,981M

The market size fell by 17%

Successful ICOs collected 82% of the total funds. Unsuccessful* ICOs raised $356M, which is almost half as much as in the second quarter.

Despite the overall drop, the amount of funds raised by successful projects has remained stable. We see a decrease only in the funds raised by unsuccessful ICOs, which is good for the overall climate.

* We consider an ICO successful when the soft cap is reached and more than 50% of the hard cap is collected. See the full list of our criteria here.

The number of ICOs is dropping much faster than amount of funds collected

Recent trends have shown a decrease in the number of ICOs but a relatively stable amount of funds collected. This suggests that more mature projects are coming into the sphere.

Market size in crypto

The amount of funds raised in ETH increased by 4%

The amount of pure crypto raised, have remained stable this year. However, the ETH price, as well as other main cryptocurrencies, have dropped heavily, pulling down the entire ICO market.

Top 10 ICOs

50% of the total funds were raised by top 10 ICOs

The total funds raised by the top 10 ICOs was around $1B

Interesting facts about the top ICOs

London Football Exchange

It’s somewhat unexpected to see that the first place in our ranking was taken by London Football Exchange, with an enormously high $275M being raised. Actually, the initial information about $72M was not confirmed, and it turned out that most of the ICO trackers had once again mirrored the information from an unknown source. Near the end of the ICO, our analysts recorded an amount of more than $275M from the company’s website. This also does not guarantee reliability, but nevertheless, it’s an official source, so we decided to include it in our report.

This is also confirmed by the company’s representatives in the LFE’s Telegram channel.

About the project

London Football Exchange essentially implements a large-scale loyalty program that aims to encourage active fans and collectors. The idea is to make the LFE a one-stop-shop where clubs of any size can raise capital by selling shares and offering various social interactions and fan experiences to investors. Active consumers of sports entertainment are awarded tokens that can be exchanged for discounts or passes to closed venues.

tZero

The uniqueness of tZero’s fundraising is that the project attracted the majority of investments not through the sale of tokens but primarily through venture capital investments, including in its parent company Overstock.

Back in December 2017, the company collected about $100M on the very first day of its first STO round.

In August 2018, Chinese private equity firm GSR Capital announced that it was investing $270M in tZero in exchange for an 18% stake of the project.

GSR Capital also invested an additional $104.55M in Overstock.

The Chinese company will additionally buy tZero tokens in the amount of $30M, thus raising the total amount raised via token sales to $134M.

If the deal is finalized on December 15, 2018 as planned, the total investment will reach $404M, and the estimated valuation of tZero will be $1,500M.

Ironically, the $1.5 billion valuation of tZero makes the blockchain company, which hasn’t even launched its flagship product yet, more valuable than its parent company Overstock.com, now valued at $1.07 billion.

About the project

tZero is a subsidiary of the American e-commerce retail giant Overstock.com. It can be considered a pioneer in its attempts to create a regulated exchange platform based on blockchain technology, including for trading security tokens. With rich experience in fruitful interaction with the SEC, tZero is one of the top players in this field.

Funding amounts

Only 5 ICOs raised funds above $50M

The majority of successful ICOs raised funds under the $20M cap. There was only one successful ICO that collected under $1M.

There were very few successful low-capped ICOs

This month, only 6% of all ICOs were hard-capped at under $10M, with only 23% of them successful. Only 7 ICOs were hard-capped under $1M, and only one of them was successful.

The majority of successful ICOs were hard-capped under $20M, which is quite low compared to the hard caps set at the beginning of 2018. We foresee this low hard-cap trend as continuing in the near future.

Funding goal fulfilment

Only 36 ICOs (13% of all ICOs) raised 90+% of their hard caps, accounting for $785M. The 158 ICOs (58% of all ICOs) that raised under 10% of their hard cap collected almost $55M altogether.

ICO financial information

42% of ICOs have not provided financial information

The portion of ICOs hiding or not bothering to disclose financial information is rising steadily. This is not proof that they are scams, but it does raise questions about their success.

Blockchain type

The Ethereum blockchain is still the leading platform for ICOs

90% of ICOs were conducted on the Ethereum blockchain in Q3 2018. This number has been increasing throughout the year. Companies with their own blockchains have dropped significantly from the beginning of 2018. There are also almost no ICOs on alternative infrastructure protocols such as EOS, Waves, and NEO.

ICO categories

The Finance category is still dominating the market

However, “Blockchain Platform” is the most successful and the most funded sphere of the ICO market. Projects from this category raised about $450M.

ICO duration

ICO quantity by duration

The majority of ICOs lasted for more than two months. However, a long ICO does not make projects successful; rather, it’s the opposite. The longer an ICO lasts, the harder it is to close it successfully.

Funds raised by ICO duration

However, looking at the same categories in terms of the amount raised per period, we see that projects lasting more than two months raised the overwhelming majority of the overall funds.

Suspicious ICO cases

KitToken (KIT)

Even though KitToken has reported collecting $118M, we have to question this information. The overall impression of KIT’s media presence is poor. Their official Telegram channel offers information about five corporate investors who have made the main money infusion. The main discussions on social media are not related to the project itself but are instead more about post-sale token speculation.

KitToken has been excluded from our report on suspicions of fraud.
Alchemy (AFI), NEO Exchange (NEX), and Tutellus (TUT) were excluded earlier. You can check their case studies in our September report.

Conclusions

The Q3 report confirms our findings for September 2018. The ICO/STO market in its current form is falling and will continue to do so until coin offerings find new ways of compliance to remedy the current problems. Public coin offerings held within an unknown regulatory environment are too risky now. We should wait for more STOs (security token offerings) compliant with regulations, DAICOs and other forms of token-based investments.

The market potential of blockchain technology is huge. It is only a question of time when the industry will come up with new solutions capable of integrating into the traditional market.