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Hands Coins Gathering Gold

Report: ICO Founding Teams May Have Profited Nearly $13 Billion

Reading Time: 2 minutes by on January 17, 2019 Business, ICO/IEO, Investment, News, Regulation

BitMEX Research in partnership with TokenAnalyst has unveiled their latest report on ICOs on January 16, 2019. It attempts to track the $24 billion of tokens that ICO makers had issued to themselves. These tokens are currently worth only $5 billion. The report also highlights the lack of lockup clauses or vesting schedules, resulting in many initial coin offering (ICO) projects remaining incomplete post-funding.

ICO Tokens Worth $24 Billion, Now Just $5 Billion

The latest report from BitMEX research in collaboration with TokenAnalyst focuses on the treasury balances of the ICO tokens.

The report indicates that nearly $24.2 billion was raised by issuing ICO tokens until the end of December 2018. However, only $5 billion remains currently with the ICO teams, based on the illiquid spot prices.

Founding teams are attributing this massive depreciation in value to factors like the fall in the market value of the tokens as well as transfers away from team address clusters. Among them, the reduction in the market price of the tokens is said to account for almost 54% loss.

US$ billion

Value of ICO coins allocated to token teams

21.5

Issuance to team post-ICO

2.7

Total issuance to team-controlled wallet

24.2

Coins leaving the team address cluster (Perhaps sales)

(1.5)

Profits/(losses) due to token price changes

(12.0)

Net impact of Noah (token burn)

(4.4)

Net Impact of EOS

(1.2)

Current team holdings

5.0

    Team-controlled token holdings (Own tokens) – summary data: Source BitMEX Research

The peak valuation of the team holdings of their own token’s (based on the individual price peak for each coin) is more than $80 billion. This could mean nearly $70 billion in losses from this ‘peak’ value.

Massive Profit Opportunity for Founding Teams

There are typically two ways by which the ICO Teams make profits as per BitMEX report: The first is by selling the newly issued tokens, often in exchange for Ether; the second method is by issuing themselves their own tokens.

BitMEX combined the figures from their report for both these scenarios and noted that ICO teams seem to have profited by almost $13 billion from this ICO process. The detailed breakup is as shown below.

ICO team profits

US$ billion

ICO process

Ethereum Raised

5.4

Own tokens issued to founding teams

24.2

Total raised

29.6

Changes in coin price

Ethereum profits/(losses) – Mostly realized

0.8

Own token profits/(losses) – Mostly unrealized

(17.6)

Total profits/(losses) post issuance

(16.8)

Total ICO team profits

12.8

                             (Source: BitMEX Research, TokenAnlayst, )

Investors losing out in the Free Fundraising Market

BitMEX notes that the ICO markets have turned out to be a great opportunity for founders to make profits. They simply need to drop their brand-new tokens to the market in exchange for ETH, driving up the price of their tokens, resulting in gaining access to more ETH that could be held or cashed out later.

BitMEX highlights the fact that unlike traditional markets, there are no clear restrictions, lockup clauses, and vesting schedules for ICOs in the free fundraising markets. This means that the ICO founders are able to make profits even without developing the technology or solution that was promised to the investors. The investors have thus ended up at the losing end of the deal.

Ironically, in spite of the huge decline in the value of the ICO market, the ICO teams “still appear to own around US$5 billion of their own tokens, money they essentially got from nothing”.

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