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Research Firm says ICOs aren't selling their war-chests

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jrcornel
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12 days agoBusy3 min read

Apparently all the selling in the crypto markets is not being caused by the ICO boom of 2017.

There was rampant speculation that the recent slide in 2018 was caused at least partly by all the ICOs from 2017 and early 2018.

The thought was that they had been selling all the funds raised in order to protect what little value they had left as prices continue to slide lower and lower just about every week.

That way they at least have some capital to build out their projects.

Backstory:

ICOs saw record inflows in 2017 and then again in 2018 and the vast majority of those inflows were priced in Ether.

The theory was that bitcoin was sold for ether by investors in order to invest in ICO projects.

The Ether collected by the ICOs was then held for a bit as prices continued to climb and climb, giving projects even more capital to develop their projects with.

However, at some point that Ether would need to be converted into fiat in order to fund development.

The theory was that was a big part of the selling we are experiencing recently.

However, research firm Diar says not so fast.

According to the research Diar compiled, ICOs are still holding roughly 40% of the funds they raised via ICOs:

(Source: https://www.ccn.com/icos-arent-cashing-out-their-cryptocurrency-warchests-yet-research/)

Yikes!

So, if they are still holding 40% of the funds raised initially what does that mean going forward?

If you are an investor in Ether, it likely doesn't mean anything good.

You see, those funds are going to have to be sold at some point to develop those projects. Which means that 40% represents unsold Ether that is likely to weigh on prices for many months to come.

It also means that the selling we are seeing is not likely coming from ICOs but other sources.

First it was tax related selling, then it was ICO related selling, now it is looking like much of the selling is just from whales that found themselves holding lots of bitcoin valued 10x-100x more than where they mined/received them.

The head analyst at Diar, Larry Cermak, had this to say about the findings:

“Obviously, a lot of the ICO companies will continue selling ETH to cover operating expenses and to fund their businesses. It’s important to realize that the majority of these projects isn’t generating any revenue. And most likely never will. This in turn creates ETH selling pressures, which are unlikely to go away any time soon. The price is affected not only by the ETH mining issuance but also by ICO companies liquidating to cover their expenses.”

(Source: https://www.ccn.com/icos-arent-cashing-out-their-cryptocurrency-warchests-yet-research/)

The worst not over?

Unfortunately it looks like there may be more selling to come for Ether holders.

Will this affect the rest of the markets? Not likely, but it does represent significant supply remaining.

In the case with Ether, what goes up, must come down.

A big part of the reason Ether ran so much in the first place was due to the ICO craze of 2017.

Stay informed my friends.

Image Source:

http://cryptoincome.io/ultimate-mega-guide-make-millions-cryptocurrency-icos/

Follow me: @jrcornel

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