ICO Market Research Q1 2018

Transcription

1 1 ICO Market Research Q1 218 Primary Contact: Mikhail Mironov Head of Partnerships mikhail@ Amsterdam Secondary Contact: Steven Campbell Sales & Partnerships Manager steven.campbell@ New York City The Rating Agency for the ICO Market

2 2 About the Company ICORating is the global market leader for independent, nonaffiliated analytical research on ICO projects, conducting detailed evaluations and assigning them investment ratings. 5+ in-house analysts 2+ crypto funds 3 reviewed or rated projects $2B+ collective AUM of the crypto funds Our main aim is to create transparency in the market and provide investors with the tools they need to make informed and evidence-based decisions in order to bridge capital and transparent ICOs. Our team of over 5 analysts have 6 years of experience on average in companies including hedge funds, large investment banks, major consulting groups, and venture funds. Two years of analyzing the ICO market combined with this diverse set of skills and experience has enabled us to develop a unique multidisciplinary approach. We ve evaluated over 3 ICO projects for both private and institutional clients since we started doing business in September 216. Over 2 crypto-focused funds with a combined $2 billion AUM regularly receive our weekly newsletter featuring ICO projects that we ve analyzed. These funds rely on our analysis to decide which ICO projects are worthy of sending on to their in-house analysts for a closer look. Our detailed and unbiased reports evaluate ICO project technical elements, business models and tokenomics, teams, and other critical factors.

3 3 Welcome Message The report for Q1 of 218 is devoted to the most significant trends in the ICO world. We have tried to widen and deepen information on the market in order to give readers more understanding of current trends in the development of the industry. From the standpoint of a rating agency, we observe dynamic development in the industry, but the market is still at an early stage of its development. A significant number of projects still allow miscalculations in their business models and tokenomics; most importantly, they are approaching the analysis of consumer expectations very subjectively. Project teams often have a superficial approach to forecasting development scenarios. Many teams ignore the necessity and relevance tokens have for business models still under construction. A similar situation can be seen with projects based on operating businesses. Having a traditional business does not always rule out their use of blockchain with their products, however this can sometimes create some discord amongst the perceptions of entrepreneurs. From this point of view, the market for the last quarter is slightly different than in the second half of 217. A change in the role of profile funds and a significant increase in regulators attention to the industry cannot be overlooked. We see that the key market trend in 218 is a sharp increase in the share of institutional capital and a decline in the number of private investors. This actually leads to a situation where project requirements increase and the funds raised during an ICO depend on how well projects co-operate with investment funds. Sasha Kamshilov, Chief Executive Officer

4 Table of Contents ICO market review 9 16 Tokens and products Industry review of ICO campaigns 24 3 ICO geography Post ICO performance Crypto funds 38 4 Forecasts and comments 41

5 5 Review of Q1 $3,331,5,381 for the quarter is the total funds raised by 412 projects whilst $3,145,41,5 was collected in the fourth quarter of 217. Thus, there has been a 5% increase for the 1st quarter of 218. The total amount of funds raised by ICOs in the past year was $6,184,529,46. Of the total amount of investments for the quarter, only the raised funds of rounds that completed/passed in 218 were taken into account. Pre-sales, which were held in 217, are not taken into account. Only half of ICO projects were able to collect more than $1,. Along with this, the quarter ended with a decline in funding during March by half, in comparison with January and February. The funding during public rounds has started to noticeably lag behind the infusion of institutional capital. For example, amount of investments for the Telegram project (TON) (not included in the statistics) amounted to $1.7 billion; this is more than half of all raised funds for the last 3 months, compared to the results for the whole quarter.

6 6 Review of Q1 3 days 2 months The average duration of fundraising campaigns increases from 3 days to 2 months on average in comparison with the past year. However, considering the rate of fundraising amongst the top 2 ICOs for the current quarter, there are still projects that close their sale on the first day of their ICO. For example Zeepin, Neuromation and Arcblock. Legality problems Currently, many projects planning an ICO have problems with the legality of their campaigns; legal issues are the hottest topic of early 218. Despite this, a quarter of projects in Q1 of 218 (19 projects out of 412) had no legal entity at the time of their ICO. In comparison, 24% of projects had a legal entity in 217, which nevertheless indicates a positive trend for projects being more transparent to potential investors.

7 7 Review of Q1 Exchanges, Financial Services, Gaming, and Blockchain Infrastructure are the most popular industries for projects that decide to stage an ICO. Exchanges, Blockchain Infrastructure and Financial Services are also the leading industries for the amount of funds raised. It is interesting to note that the list of the most popular industries has not changed compared to 217: Blockchain Infrastructure, Financial Services, Gaming & VR, and Exchanges & Wallets. 46.6% 9% of the total number of projects in Q1 had no development before their ICO campaign, which is a negative factor for the industry in general. of projects had a functioning business before their ICO, which indicates interest from representatives of real business in the tokenization of their companies.

8 8 Review of Q1 $27.8 billion collectively are under management of 119 crypto funds. We notice that they have a low degree of transparency 4% of operating funds do not publicly disclose information on their asset management strategy or the names of their CEOs. The first quarter of 218 was also marked by news of the closure of 9 funds (Crowd Crypto Fund and Alpha Protocol amongst them).

9 ICO Market Review

10 1 Key Events in the 1st Quarter of 218 Jan Feb Mar Bitcoin & Ethereum The Bitfury Group launched their Crystal toolkit. Lightning Labs announced Lightning client. Vitalik Buterin announced Plasma. Exchanges Coincheck confirmed the theft of more than half a million dollars in NEM. BitGrail reported a theft of 17 m XRB. Circle announced their purchase of Poloniex. Legal Vietnamese national bank s decision on prohibiting the emission and use of illegal payment instruments. The Central Bank of Indonesia declared cryptocurrencies illegal. FINMA published recommendations for the staging of ICOs. The German Ministry of Finance signed an act recognizing Bitcoin as a legal payment instrument. The SEC sent out dozens of subpoenas to technology companies and specialists, including legal advisors in the ICO sphere. Jan Feb Mar

11 11 Key Events in the 1st Quarter of 218 Close public attention was paid to exchanges during the first quarter of the year. Forecasts from many experts regarding problems with hacker attacks on exchanges proved to be accurate. $67 million A conservative estimate was lost in this way during the quarter (adjusted for fluctuations in the exchange rate).

12 12 Main Figures for ICOs The figure shows the relation between: total number of completed projects for the first quarter of 218, the number of projects that collected at least $1, during their ICO, number of tokens listed on exchanges after the ICO. 412 ICOs staged were in Q have raised more than $1, able to list on exchanges. It takes 21 days on average from the completion of an ICO to the vesting of tokens for secondary trading.

13 13 Number of Successful Projects and Their Funding The graph shows the relation of total project funding during ICOs by month to the number of successful * projects by month. * A project is considered successful if a soft cap was reached or the project raised more than $.5 million in case of the absence of a soft cap. The average amount of funding fell by 2 times in March in comparison with January and February, which is primarily due to market correction (a decrease from $83 billion in January to $258 billion total market cap at the beginning of April) which continued throughout March and due to a decline in the declared hard cap for projects. Median hard cap fell from $22.5 million in February to $14 million in March. $15 m $12 m 8 $9 m 6 $6 m 4 Total funding for projects Number of successful projects Oct '17 Nov '17 Dec '17 Jan '18 Feb '18 Mar '18

14 14 Overall ICO Funding Amount Funds raised $1 15 m $5 1 m $25 5 m $1 25m $5 1 m The graph shows the distribution of ICO campaigns by the amount of funds raised. Most projects collected less than half a million dollars during their ICOs in Q1 218, which accelerates the trend for the 4th quarter of 217. The number of such projects amounted to more than 5% of all ICO campaigns in the 1st quarter of 218. This figure could have been even greater due to the fact that in March the organizers of ICOs hugely extended or postponed their fundraising campaigns (more than 3% of projects) to April or May due to the general market situation. $1 5 m $.5 1 m $.5 m Number of projects

15 15 Top 2 ICO Campaigns with Largest Amount of Funds Projects Mobius YGGDRASH Hurify Datawallet WePower Nucleus Vision Fusion Bloom Arcblock Lendroid Odyssey Leadcoin Celsius SwissBorg Crypterium Neuromation Elastos Zeepin Envion Bankera The chart shows the amount of investment attracted for the top 2 ICO campaigns in the first quarter of 218. On average, the highest funding in the first quarter is about $5 million, which accelerates the trend for the 4th quarter of 217. It should be noted that the current list did not include the ICOs of TON (Telegram) and HT (Huobi), since the companies did not have a proper public round for their token sales. We would also like to mark the DRG (Dragon) project as an interesting one due to its institutional funding of 3 million US dollars but the actual ICO raised funds amount is still not disclosed which is why the project is not included in the graph. Raised funds $5 million $1 million $15 million

16 16 Funding Amounts and Duration of ICO Campaigns The graph shows the relation between funds raised during ICOs and the duration of campaigns for the top 2 ICOs by amount of funds raised. Considering the rate of funding among the top 2 ICOs, we conclude that at a time when the active phase of industry development is about a year old, there are still projects that have been able to close their sale on the first day of their ICO. ICO duration in days Crypterium Bankera 4 3 Nucleus Vision Bloom SwissBorg Envion 2 Hurify Elastos 1 4 Mobius Fusion YGGDRASH, Datawallet WePower Arcblock Lendroid Celsius Odyssey Neuromation Leadcoin $39 m $4 m $45 m $5 m $55 m $6 m $7 m $1 m $151.8 m Raised funds Zeepin The median hard cap achievement time

17 Tokens and Products

18 18 Tokens and Products Having analyzed statistics from ICO campaigns, we determined: A B C What value and meaning organizers give to the token they aim to sell. Stage of development of the product offered to the market. How many projects are planning to tokenize an existing business.

19 19 Tokens and Products In the 1st quarter of 218, ICO organizers offered the following types of crypto asset for sale: Vote token Tokens which confer on a holder the right to vote and the ability to influence project development. Cryptocurrency New cryptocurrency (without additional exceptional properties). Security tokens Tokens secured by an obligation (here we include promises of dividend payment, receipt of company shares, credit tokens). Reward token Used to reward contributions of participants to the network. Service token Token as internal currency, used to pay for project services (can be replaced, for example, with ETH without damage to the product; this is evident when analyzing a project). Hybrid token Payment for services + bonuses for work performed). Utility tokens being tokens of the protocol itself (there is a real need for tokens being sold).

20 2 Token Types Found in ICO Projects The graph shows the distribution of projects staging ICOs depending on the type of the project s token. 1.7% Vote token 2.9% Reward token 3.6% Utility token 3.8% Cryptocurrency Regarding service tokens which alone can be used for the purchase of goods and services, we see some negative consequences, such as the inconvenience of using a large number of different tokens and the absence of a real need for the token as such. These are direct consequences of hype around ICOs. Vote tokens, or tokens that confer voting rights or some form of direct influence on the product, were one of the most unpopular types of tokens chosen by ICO projects in Q1. 9.3% Hybrid token 13.1% Security token 65.8% of tokens function only as a form of payment for project s services. Tokens which could easily be replaced with ETH, for example, without significantly affecting the product are included in this category.

21 21 Mean ICO Funds Raised by Token Type The graph shows the distribution of mean funds raised during ICO depending on the type of the project s token. While also considering the median raised funds by project s token type, the most profitable were the projects where tokens were implemented as either a Hybrid token or a part of the ecosystem (Utility token): 14,4, USD for Hybrid tokens and 1,45, USD for Utility tokens. The median raised funds of the projects with Security, Service and Cryptocurrency tokens were equal to. Token types Vote Utility Hybrid Reward Security Service Cryptocurrency Funds raised $5 million $1 million $15 million $2 million

22 22 Number of Unsuccessful ICOs by Token Type The graph shows the distribution of the number of unsuccessful * projects depending on the type of the project s token. * A project is considered unsuccessful if the project raised less than $.5 million. Token types Vote Utility Hybrid Reward Security Service Cryptocurrency Projects that raised less than $.5 million Overal number of projects 1 2 3

23 23 Development Stages of ICO Projects The graph shows the distribution of projects staging an ICO by development stage of the product at time of the start of their ICO * Only 37 of 412 projects had a working business before their ICO. * defined by the project s team 46.6% Idea 26.2% MVP 15.5% Alpha 11.2% Beta.5% Code About half of ICO campaigns did not have any development, which is a negative factor for the industry as such.

24 24 Industries Review

25 25 Industries Top 2 Project Industries by Mean Hard Cap Commerce & Retail Blockchain Infrastructure Computing & Data Storage Banking & Payments Gaming & VR Crowdfunding & Lending Recruitment & Crowdsourcing Real Estate Energy & Utilities Marketing & Advertising Social Media & Communication Identity & Reputation Data Analytics Prediction Markets Gambling & Betting Business Services Science & Research Financial services Mining Privacy & Security The graph shows the top 2 industries with the largest average hard cap. The X-axis shows average declared amount of funds for implementation of projects from particular industries. When calculating the average declared hard cap, only projects from the first quarter of 218 were considered. Leading categories in the 1st quarter of 218 are Mining, Privacy and Security. Mean hard cap $2 million $5 million $15 m

26 26 Top 1 Most Popular Industries The graph shows the top 1 industries by the number of projects belonging to these industries. The most popular industries are still Exchanges, Financial Services, Gaming and Blockchain Infrastructure. Industries Gambling & Betting Recruitment & Crowdsourcing Trading Comparing the most popular industries in Q1 218 (by number of projects staging an ICO) with results from 217, we see only minor changes. Commerce & Retail Social Media & Communication Drugs & Healthcare Gaming & VR Marketing & Advertising Blockchain Infrastructure Exchanges & Wallets Financial Services Number of projects

27 27 Top 5 Most Popular Industries Number of projects 1 January February March Industries Drugs & Healthcare The graph shows the dynamics of changes in the top 5 industries by number of projects that belong to these industries. 1 1 Marketing & Advertising In general, it is obvious that projects from the financial sphere are increasingly deciding to stage an ICO. In comparison, the most popular industries in Q4 217 were Blockchain Infrastructure during October and November and Financial Services in December Blockchain Infrastructure Social Media & Communication Financial Services Exchanges & Wallets 1 It can be seen that the largest number of projects in January and March was from the Financial Services industry. While in February the largest number of projects belonged to Exchanges & Wallets. 1 5 Gaming & VR Crowdfunding & Lending IT January February March

28 28 Top 1 Industries by Funds Raised During Q1 218 Industries The graph shows the top 1 industries by amount raised. Mining Leading industries for funds raised such as Exchanges, Blockchain Infrastructure, and Financial Services match the above-mentioned leaders in number of outgoing projects in their respective categories. IT Commerce & Retail Computing & Data Storage Marketing & Advertising Crowdfunding & Lending Exchanges & Wallets Blockchain Infrastructure Banking & Payments Financial Services Funds raised $1 million $2 million $3 million $4 m

29 29 Top 5 Industries by Amount Raised in Q1 218 by Monthly Overview Funds raised $25 m $1 m $1 m January February March $233.8 m Industries Financial Services IT The graph shows the dynamics of changes in the top 5 industries by number of projects that belong to these industries. $1 m $1 m Mining Recruitment & Crowdsourcing $1 m $2 m $1 m $25.6 m Exchanges & Wallets Banking & Payments Computing & Data Storage It can be seen that the largest total amount of funds raised in January was for projects from the Financial Services industry. In February, the leading industry in ICO campaigns was Banking & Payments. While in March, the leading categories were Blockchain Infrastructure and Social Media & Communication. $15 m $1 m $1 m $1 m $5 m January February March $87.2 m $69.4 m Crowdfunding & Lending Blockchain Infrastructure Marketing & Advertising Social Media & Communication Business Services

30 3 Number of projects Number of Projects Distributed by Industry The graph shows distribution of the top 2 industries selected by the total amount raised during their ICO, depending on the number of projects that belong to these industries. Exchanges & Wallets We note that the most popular and attractive industries in the first quarter of 218 are Financial Services and Exchanges & Wallets. Banking & Payments and Blockchain Infrastructure are less popular but still raised significant amounts. Financial Services 2 15 Gaming & VR Social Media & Communication Marketing & Advertising Commerce & Retail Blockchain Infrastructure Banking & Payments Recruitment & Crowdsourcing 1 IT Computing & Data Storage Investment Transport Internet & Telecommunications Identity Business Services & Reputation Mining Science & Research Energy & Utilities Crowdfunding & Lending Raised funds $5 m $75 m $1 m $125 m $15 m $175 m $2 m $225 m $25m $278.9 m $331.6 m

31 ICO Geography

32 32 Geographical Distribution for Projects Based on Country of Registration The map shows total investment amount and number of projects, depending on country of registration * Current leading countries for place of registration are the USA, Singapore and the UK, while in 217 the leaders were the USA, Singapore, Switzerland, Estonia and the UK. The USA $583.8 m 59 projects Canada $16.6 m 9 projects The UK $99.7 m 26 projects Netherlands $16.8 m 6 projects Estonia $122.6 m 16 projects Switzerland $268.2 m 14 projects Russia $2.8 m 13 projects Hong Kong $82.1 m 13 projects Cayman Islands $96.5 m 9 projects British Virgin Islands $158.5 m 5 projects Gibraltar $133.7 m 6 projects China $22.1 m 9 projects * Country of registration means the country where the company s legal entity is registered at the time of the ICO. If a project does not have a legal entity, it is not included in this map. Country of project registration is determined on the basis of open data, including projects official websites and open databases of registered companies. Singapore $468.1 m 34 projects Australia $3 m 6 projects

33 33 Geographical Distribution of Projects Based on Origin of the Project Team The map shows total investment amount and number of projects, depending on project country of origin * The leader countries for staging ICOs are the USA, China, Lithuania and Russia. A quarter of all projects are created by multinational teams. In 217, the leaders in staging ICOs were the USA, Russia and the UK. Canada $35.6 m 8 projects The USA $554 m raised 12 projects The UK $88 m 16 projects France $25.3 m 6 projects Switzerland $161.6 m 5 projects Lithuania $242 m raised 5 projects China $312.6 m raised 11 projects Poland $22.6 m 5 projects Slovenia $29.5 m 4 projects Ukraine $96 m 54 projects Russia $24.6 m raised 45 projects South Korea $76.6 m 4 projects India $28.7 m 7 projects Indonesia $35 m 1 project * Country of origin means the country where more than 5% of team members actually reside at the time of the ICO. If projects have an international team, they are not included in this map. Country of origin is determined on the basis of open information about the team, including official project websites and team members social media. Singapore $157.4 m 1 projects Australia $4.5 m 7 projects

34 34 Regional Project funding as a Percentage of the Total Amount of Funds Raised The map shows project funding as a percentage of total amount raised during the ICO depending on project region. Project region is determined on the basis of data for the country of project origin. Half of all funds raised are concentrated in projects from Europe. 46.6% Europe 1,54.6 m raised funds 32 projects 25,33% Asia $65.2 raised funds 136 projects 24,68% North America $589.7 raised funds 62 projects 5,84% Rest of the world $139.6 raised funds 33 projects

35 Post ICO Performance

36 36 Growth of Capitalization after ICO The graph shows the percentage change in market capitalization for projects listed on exchanges. Projects Zilliqa MyTrackNet Fortuna TravelChain Matrix Soc. Media Market Credits THETA Nucleus Vision Bluzelle TomoChain THEKEY Trinity OriginTrail Fusion Blockport GBX Arcblock Lamden Ethorse Token price Capitalization change exchanges 2% 4% 6% 8% 1,% 1,484% 3,457% $25 m $5 m $75 m $1 m $125 m $134.6m $326.5 m Raised Funds Current capitalization

37 ROI after ICOs of Q1 218 by Raised Funds The graph shows the distribution of amount of funds and ROI * According to results from the 1st quarter of 218, the median return from tokens is 49.32%. Among those listed on exchanges, 83% of tokens were traded below the ICO price. A large amount of funds raised do not guarantee a high return on investment. * ROI was calculated using the formula: (Current Value Beginning Value) / Beginning Value, where Beginning Value is the minimum price for 1 token at the ICO and Current Value is the closing price on March 29, 218. ROI 1,5% 3% 2% Raised funds $1 m $75 m $5 m 37 1% During the calculation, 89 tokens from projects of the first quarter of 218 which were listed on exchanges were considered. Coinmarketcap is the data source. $25 m Projects 1%

38 Crypto Funds

39 39 Number of Funds The graph shows the distribution of crypto funds by their status at the time of analysis. The 119 funds indicated collectively have 27.8 billion dollars under their management. 54.3% Live 35.2% Development 8.1% Closed 2.4% No info 119 of the 219 crypto funds analyzed are actively operating. Only 6% of the declared 119 funds currently operating reveal information on their CEO and strategy.

40 4 Distribution of Crypto Funds for Investment Objects The diagram shows the distribution of crypto funds for investment objects at time of analysis. Around 27% of the funds invest in ICO campaigns. 2.4% Crypto, Blockchain Startups 6.7% ICOs, Blockchain Startups 4.3% ICOs 34.3% Cryptocurrencies 26.7% No information 14.8% ICOs, Crypto 9.5% Blockchain Startups 1.4% Crypto, ICOs, Blockchain Startups

41 41 Forecasts and Comments Funds are ready to invest in ICOs but they are often deterred by teams negligence regarding organization of KYC and AML. These procedures need to be in place, and organized to a high standard, to reduce legal risks. Projects considering staging an ICO without any initial development should not attempt to do so, in case of legal issues. Post ICO performance is inferior to results from 217. This is largely due to the lack of value of assets being sold (tokens are not really needed for the system) and their direct correlation with BTC (in 7% of cases). Median ROI of tokens in the 1st quarter of 218 fell by more than 1% compared to ROI of tokens in Q4 217 (from 6.67% to 49.32%). The current market correction will significantly affect the perfect performance and huge profitability of crypto funds shown during 217. Many funds may be closed, due either to inefficiency or legal problems with regulators. According to results from the first quarter of 218, the closure of at least 9 funds has already been confirmed. (Crowd Crypto Fund and Alpha Protocol included).

42 42 Have a question or want to learn more about market dynamics? Contact us. Primary Contact: Mikhail Mironov Head of Partnerships mikhail@ Amsterdam Secondary Contact: Steven Campbell Sales & Partnerships Manager steven.campbell@ New York City You can also subscribe to our weekly market updates at and receive fresh market info every week. The Rating Agency for the ICO Market