Initial coin offerings have become the stuff of legend among speculators seeking quick windfalls, yet most people are more likely to lose money investing in digital tokens following the sales.
While more than $3 billion has been raised this year by technology startups using the method to circumvent traditional ways of raising capital, a closer examination shows that gains are often fleeting if the tokens are purchased after the offerings. The Bletchley Ethereum Token Index, which tracks 25 of the largest tokens, including Bancor, Civic and OmiseGo, has dropped by half since June.
The index includes tokens when they are at least a month old, have a market capitalization of about $90 million and trade on prominent online exchanges. It doesn’t include returns some select investors realize right after an ICO, or tokens that have tiny market caps.Of the top five ICOs by amount raised, three have gone down significantly since the offerings. EOS, which raised $185 million, is down 45 percent. Bancor, which garnered $153 million, is down 47 percent, and kin, with about $100 million raised, is down 27 percent.