Crypto Brief: The ICO market perspective

A brief overview of the ICO market as well as BTC and ETH trends
Lots of people have indulged in ICO. No wonder it’s surging: ICO market volumes have three times exceeded VC market during the first six months of 2017. However, in October most of new coins fell below offer prices soon after listing on exchanges. What will happen to the ICO market next?
As any crypto enthusiast, we have also tried to envision the future of ICO projects. Are they here to stay or pass by? To answer this intriguing question, we have conducted a comprehensive study of Bitcoin and Ethereum and ICOs funding since the beginning of 2017.

BTC & ETH market price & exchange turnover

First, let’s take a quick look at the BTC & ETH 2017 performance. Since January, the price of both currencies clearly skyrocketed to unbelievable heights. Opening the year at 997.72 USD, Bitcoin grew tenfold and exceeded 10,000 USD on November, 28. ETH was even more lucrative – due to the last week upsurge, it grew ~60 times from 8 to 480 USD.

BTC & ETH exchange rate (USD) and volumeHistorical prices source:
Both cryptocurrencies had their own price drops due to market reaction to certain events, such as technical decisions (e.g. BTC “forks”), attitude and policy changes towards ICOs and currencies in the leading countries (like bans and warnings issued by watchdogs). On the price graphs, we clearly see three remarkable peaks: two of them in June and August and the third that we have been witnessing this week.

As for the traded volumes of BTC and ETH, it’s worth to consider the circulating supply of both currencies (as for today ~16,7M and ~96M of circulating supply, respectively). If we compare the amounts of the two currencies traded per month, Bitcoin is showing a more stable performance. Since the upsurge in May, its monthly turnover didn’t fall below two thirds of the circulating supply. The Ethereum exchange turnover seems to be in decline if compared to the summer ETH trading volume. In October, the ETH turnover fell back to its winter amount approaching only half of the circulating supply. The ETH’s steep price drop and exchange turnover peak of July clearly indicate a cash-out activity of post-ICO startups and shows to which extent the currency is interrelated with the ICO market.

Looking for predictors of ICO funding amount

It is known that the dollar amount of funds raised by ICO projects in 2017 was largely driven by the market price of the cryptocurrencies in each given month. Tens of millions raised by such startups as Gnosis (12.25M USD), Aragon (24.75M USD), and Storj (29.22M USD) during springtime turned into hundreds of millions for the most successful ICOs of this summer, namely, Bancor (153M USD), Paragon (183M USD), EOS (185M USD), and Tezos (232M USD). But is there a way to predict the periods of the largest harvesting when booking an ICO date for a startup?

We decided to compare the BTC and ETH exchange volume with the amount of capital raised within ICOs, all measured in USD. As a result, we discovered high correlations between the time-series. ICO funding correlates with the turnover as follows:
  •  BTC Correlation 0.7358664691
  •  ETH Correlation 0.9124390694
  •  BTC & ETH Sum Correlation 0.8436220451

Total amount of ICOs raised capital and BTC&ETH market volume

ICO stats source: 

Based on these observations we can suggest that the exchange activities might have a certain impact on the potential of ICO funding. Since the ICO investments are much smaller than the amounts of BTC and ETH traded on exchanges, the impact of ICO funding on the trading volume can hardly be significant or persistent. It’s likely to be the other way round: trading activities may influence the ICO market. This may have caused the monthly delay between BTC and ETH volumes and ICO investments. The traded volume peaks of June and August were followed by the surge in the total capital invested in ICOs in July and September. One of the possible explanations for this is that after the periods of active trading, crypto-investors start looking for the means of portfolio diversification and turn back to ICOs.

Without making any conclusions, we suggest that local declines in BTC and ETH trading activities lead to a consequent increase of funds poured into ICOs. When we look forward as of today, when we are facing a new trading volume upsurge, we can expect that December is going to be fruitful for the total ICO market landscape, unless crypto-investors will have lost faith in the ICO market altogether.


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