The next ICO boom is coming — and it will be better than 2018

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The ICO boom of 2018 was an absolute disaster. It was a Wild West that saw venture capital (VC) funds throwing money at the wall to see what stuck with little regard for due diligence. More than $7 billion was funneled into ICOs in 2018, often based on little more than a drunken conversation at a cryptocurrency party. But the stories that stick are the monumental disasters that have made ICOs synonymous with fraud.

Perhaps the most prominent of these was the Bitconnect Ponzi scheme. After promising sky-high returns and seeing the value of its token (BCC) rocket to $400, it soon left investors nursing losses of some $2.4 billion. So it’s understandable that as a new bull market gathers pace there is still a degree of caution around ICOs.

Despite increased caution, though, there is no question that a fresh ICO boom is just around the corner. Already, we are seeing tentative signs of this. The monthly number of token sales has reached a two-year high, according to CryptoRank, while RootData reports that VCs allocated 52% more to crypto projects in March than in February.

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We now find ourselves at an inflection point in the digital asset fundraising landscape. With the event season firmly underway, I expect to see an acceleration of new launches in the coming months, leading to a resurgence in ICO activity.

Monthly number of ICO fundraising rounds (green) and total cash value of sales (blue) from December 2022 through March 2024. Source: CryptoRank.io

The last ICO boom was driven by a burst of development activity on Ethereum (ETH). This time around, it will be advancements in real-world asset tokenization, innovations like decentralized physical infrastructure (DePIN) and AI, and new developments in decentralized finance (DeFi) such as layer-2s and zero-knowledge (ZK) rollups, that will lead the surge in fundraising. Growing institutional interest will also ensure that new infrastructure projects, security solutions and off-ramp providers come to market. According to CryptoRank, a total of $2.3 billion was raised across 422 funding rounds in Q1. We could easily see this number grow 10-fold before the year is out.

However, the lessons we learned in 2018 mean that the projects fundraising today will face much greater scrutiny from both investors and regulators. As a result, we will see a much higher survival rate and fewer monetary losses. The next ICO boom is going to look a lot less like a Saturday night in the Last Chance Saloon, and a lot more like Wall Street when JPMorgan took over.

It is perhaps foolish to expect this coming boom to be ethical, per se. However, we will certainly see much greater organization and stricter due diligence policies. Gone are the days when a project could approach an investor with a business plan scribbled on a napkin. The VCs of today have become far more discerning. They require a full-blown whitepaper with well-fleshed-out tokenomics, strong numbers, and reliable revenue projections before they commit their capital.

In part, this has to do with the experiences of 2022 where many high-profile investors lost money in projects like FTX and Celsius, which appeared legit on the surface. The wounds the crypto industry suffered during 2022 are still too fresh to launch headfirst into another irresponsible fundraising boom.

Instead, we have seen crypto-specific regulations rolled out across several jurisdictions, such as the Markets in Crypto Assets (MiCA) in the European Union, and there is only more regulatory scrutiny on the horizon. With the Securities and Exchange Commission (SEC) firmly focused on the regulatory status of a raft of altcoins, the crypto ecosystem is well and truly in the spotlight this time around.

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This focus will likely deter future Bitconnect-like schemes. Indeed, as we saw with the trial and conviction of FTX founder Sam Bankman-Fried — who received 25 years in prison — the law is unlikely to be lenient towards those committing crypto crimes. His sentencing was certainly designed to scare off other would-be fraudsters and will act as a warning as crypto fundraising begins in earnest.

So this cycle’s ICOs will be very different from what we saw in 2018. This time around it will be about due diligence, compliance, investor accessibility, and reliable returns. That is not to say that we will not see a rise in scams and rug pulls as the bull market accelerates. There will simply be different vehicles for this. Indeed, the meme coin frenzy we are witnessing right now closely resembles the ICO craze of 2018, so perhaps that will produce more of the losses this time.

When it comes to ICOs, however, we will see a landscape much more akin to the traditional financial ecosystem. This means more sophisticated investors, including large institutions like BlackRock and Fidelity, which are already making increasingly large commitments to digital assets.

We will also see a resurgence of launchpads, which are designed to help investors gain access to ICOs. Here, there will also be a greater emphasis on due diligence to ensure that each new project has been fully vetted before being presented to investors. With growing regulatory complexity around ICOs and ongoing fears around the potential risks, launchpads will play a key role in helping investors navigate these. This new, more sophisticated ecosystem will help investors sort the wheat from the chaff.

In addition, the profile of the typical ICO investor is arguably changing in this market. It will no longer be “degens” hoping to grow their assets 1000%. It’s more likely to be smart entrepreneurial types looking to support the next Binance or Coinbase, and they will be willing to invest big bucks.

We are entering the season of “more.” More new projects, more success and more money. And, hopefully, far fewer Ponzi schemes.

Lucas Kiely is a guest author for Cointelegraph and the chief investment officer for Yield App, where he oversees investment portfolio allocations and leads the expansion of a diversified investment product range. He was previously the chief investment officer at Diginex Asset Management, and a senior trader and managing director at Credit Suisse in Hong Kong, where he managed QIS and Structured Derivatives trading. He was also the head of exotic derivatives at UBS in Australia.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.


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