Big risks in ICO market: flawed token valuations, unclear regulations, heightened hacker attention and congested networks

Blurred taillights on a highway

  • “Fear of Missing Out” (FOMO) drives token valuations without any connection to market fundamentals
  • Investor demand for initial coin offering (ICO) projects remains high, but the ability to reach fundraising goals has been declining since mid-2017; down to 25% of projects in November from 90% in June
  • Speed and size of market draw hackers’ attention with 10% of ICO funds lost or stolen

A lack of fundamental valuation and the due diligence process by potential investors is leading to extreme volatility of the initial coin offering (ICO) market, according to new research published by EY. The research also found that in some cases ICO investors are contributing capital at an average rate of over US$300,000 per second.

The EY research, which studied 372 ICOs around the world, also found that the offerings raised US$3.7b1 in funds, twice the volume of VC investments in blockchain projects. Furthermore, the US is leading the race with the highest volume of ICOs originating from the country (over US$1b). Russia and China follow, with each over US$300m.

Read the full press release here.

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