It is just the beginning of the coin offering market. In this article we, Block X Bank, an investment bank focused on blockchain, will explore using the best data available the past, present and future of the Initial Coin Offering (ICO) market.
Total potential market size
Private Equity Assets under management are valued in total to about $2.5 trillion USD. A Private Equity investor is typically locked in for 7 to 10 years. In general, the investment is difficult to value during that time. And the investor receives back their payment at the time that is solely at the discretion of the fund manager.
Imagine a world where most crypto-coins are regulated securities trading on regulated securities exchanges. And these coins are backed by shares in companies, cash flows, dividends, interests, notes, and other existing proven financial products.
Crypto-coins and initial coin offerings have in fact even more advantages: Initial coin offerings enable companies to not only raise money but to also get a set of initial customers and to build a community. This community will then also act as marketing agents and soft influencers to help promote the company and product as they have a vested interest in them being successful.
Per data from ICO Raises (www.icoraises.com) ICOs have raised approximatively about $3.494 billion until Dec 15 2017.
The general rule of thumb is that the average crypto holder will likely diversify into riskier and potentially higher return tokens about 5% to 10% of their portfolio.
As of December 19th 2017 according to coinmarketcap.com the total value of the tokens held by crypto market participants (in other words the market cap) is roughly $600 billion USD.
Therefore, we expect that about $30bil to $60bil in value is available for Initial Coin Offerings and other high-risk high-reward investments in the crypto space.
Some of these $30bil will probably be used for day trading and highly speculative pump-and-dumps or similar “business ventures”. We assume that a significant percentage , perhaps 20% of it at least, will still be used for Initial Coin Offerings.
Therefore, Block X Bank estimates that about there is additional demand for $3 to $5bil in ICOs as of December 2017.
From business-plans only to revenue-generating companies
The Initial Coin Offering market started with funding very early stage companies who only have a business plan. We have already noted that in the second half of 2017 the ICO market is now trending more towards companies with existing revenue, customers and working products. Early stage companies are still successful but only if they have a famous investor who puts their seal of approval by investing in the project first.
Basic economic cycle
Despite this move towards more established companies the Initial Coin Offering market also goes through the standard economic cycles.
The well know cycle of human emotions as applied to market cycles:
ICO Market timing
Using data from www.icoraises.com we have plotted the following ICO market raise chart:
As you can see the amount of money raised in ICOs is following roughly the theoretical cycle mentioned above.
Here is more data to confirm the chart above:
I believe the initial coin offerings market cycle timings were as follows. Here is a chart showing in our opinion the timings of these different cycles:
In our analysis the coin offering market is expected to be of maximum opportunity between June 2018 and December 2018.
We believe that both companies and investors moving forward will seek to work only with ICOs represented by credible investment banks with a proven track record and who are themselves investing their own funds in the companies they take to ICO.
In full disclosure, I am the founder and Managing Partner of Block X Bankwhich is such an organization.
We believe that crypto-coin offerings will become a major financial product and we are just at the beginning of this path.
George is the Managing Partner of Block X Bank, Co-founder and CEO of Lampix, and the Founder and Editor-in-Chief of Lending Times.
George has obtained 3 Master’s Degrees: a Master’s of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master’s in Nanosciences from Paris XI University. His scientific career led to 10 publications and patents.
George is an advisor for FirstBlood, an eSports gaming platform, and Chairman of the Board of Advisors for Gatecoin, a bitcoin and ethereum token exchange based in Hong Kong. Previously George was a partner at LunaCap Ventures, a hybrid early stage growth capital fund. George also advises over a dozen companies in finance.
George had a successful exit from Boston Technologies (BT) in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the foreign exchange spot, precious metals and CFDs space company. BT was listed in the Fastest-Growing Private Companies in Massachusetts by the Boston Business Journal in 2011. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270), and Boston Business Journal included George in the top 40 under 40 in 2012 in recognition of his business achievements.
Over the last 10 years, George founded multiple companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal, etc. George advised 30+ early stage start-ups and served as a mentor for MIT’s Venture Mentoring Services and Techstars Fintech in New York.
George is originally from Romania and grew up in Paris, France. He currently lives in New York City.