The amount of money raised in initial coin offerings (ICOs)
in the first quarter of 2018 has blown past the amount raised throughout all of 2017, according to data from Coindesk. In the first three months of the year, a total of $6.3 billion raised from digital coin offerings represented 118% more than that of last year's total, suggesting that despite increased scrutiny on the cryptocurrency space, ICOs aren't going anywhere soon.
ICOs have been a major source of controversy in the cryptocurrency space as regulators struggle to combat illegitimate business and protect investors against buying into the frenzy without proper consideration. Since just about anyone can create digital currency: Over 15,000 cryptocurrencies have been launched. Often, the means by which crypto-related startups raise money is by selling virtual coins as an alternative to raising stock. Regulators have tried to crack down on the surge in fraudulent ICOs, which prompt many to buy in due to false advertising and other schemes. Many investors have also fallen victim to "FOMO," or fear of missing out, getting into crypto-investing simply because others have bought in, and not in response to the actual details of the startups that they are funding.
Digital Token Projects Continue to Gain Popularity
Of course, not all ICOs are schemes, and many are legitimate. On Wednesday, Basis (formerly Basecoin), landed $133 million in an ICO, with participation from high-profile investors such as Alphabet Inc.'s (GOOGL) GV, Andreessen Horowitz, former Federal Reserve governor Kevin Warsh and billionaire hedge fund manager Stanley Druckermiller. The funding round marked the first time that venture capital firms Bain and Lightspeed had ever bought a digital token.
In 2018, the size and speed of ICO funding rounds have also accelerated, according to the Coindesk report. Q1 saw 59% as many ICOs raise capital as all of 2017. The report noted that without Telegram's record-breaking $1.7 billion token sale, ICOs in the first three months of 2018 would amount to $4.6 billion, or 85% of last year's total. Coindesk notes that given most ICOs in Q1 have garnered less than $100 million, "a number of projects are still eager to sell tokens, despite the regulatory risk." The report pointed to a recent ruling from the Securities and Exchange Commission (SEC), which acknowledged some ICOs as securities offerings and required that they be registered with the agency.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrency.