Thread by @SamGSK

0/ #RESEARCH PAPER Review

Digital Tulips?
Returns to Investors in Initial Coin Offerings

Hugo Benedetti/Leonard Kostovetsky
Boston College

Draft Date: May 20th, 2018

#ICOs #cryptocurrency #BTC #LTC #ETH #EOS

poseidon01.ssrn.com/delivery.php?I…

1/ From a dataset of 4,003 executed and planned ICOs,
which raised a total of $12 billion in capital, nearly all since January 2017.
Average returns were 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days.

2/ Even after imputing returns of -100% to ICOs that don’t list their tokens within 60 days and adjusting for the returns of the asset class, the representative ICO investor earns 82%.

HODLING generated average buy-and hold additional returns of 48% in the first 30 trading days

3/ the returns to ICO investors have declined over time, people are learning from prior offerings about market demand for different kinds of platforms. Pre-sales have gotten more popular over time they also act to reduce underpricing.

4/ TWITTER to estimate that the survival rate for startups after 120 days (from the end of the ICO)

Only 44.2%, assuming that all firms inactive on Twitter in the fifth month did
not survive.

5/ 83% of the 694 ICOs that don’t report capital and don’t list on an exchange are inactive after 120 days.

For the 420 ICOs that raise some capital but don’t list, this figure falls to 52% and for the 440 ICOs that list on an exchange, only 16% are inactive in the fifth month.

6/ Result: in crypto markets, company announcements (as measured by Tweets) are good news, while no news is bad news. Daily market returns of tokens go up by about 0.3% for each Tweet that day and are also somewhat positively correlated with previous day’s Twitter intensity.

7/ RETURNS: 1st day’s returns range from 14% to 16%,

30-day avg returns range from 41% to 67%,

180-day avg returns range from 150% to 430%.

ICO to listing, token prices continue to drift higher (relative to the asset class) in the first six months after the listing date.

8/ Fun Facts:
Only 26% of ICOs have listed their tokens on an exchange
The average (successful) ICO raised $11.5 million
The median value raised is only $3.8 million
Listed ICOs raise about 3x as much,on average, compared to non-listed ICOs

9/ Fun Facts:
The average capital raised by successful ICOs has gone up over time from
$7.9 million (before July 2017)
to $11 million (in the second half of 2017)
to $14 million (in 2018)
Most investors choose a low ICO token price, with a median value of $0.30

10/ Fun Facts:
The hardcap, the maximum amount of funds that the ICO is allowed to raise,
is approximately $43 million for the average ICO
(median value is $23 million), and the average percent of all tokens that are sold during the ICO is 60%.
40% of projects hold a presales

11/ Location: the country of registration or incorporation is usually chosen for
legal and tax reasons, which is why noted havens like British Overseas Territories,
Singapore, Switzerland, Cyprus, and the Baltic States, especially Estonia, are
overrepresented

12/ the average firm putting out 2.1 tweets per day in the six months before the start of the ICO
(median firm tweets 0.7 times per day).
This only rises slightly to 2.7 tweets per day (once per day for the median)
during the ICO.

13/ WEN EXCHANGE?
The average time between the end of the ICO and the first day of trading is 31 days, with a median time of 16 days.
44 were listed prior to the end of the ICO. The median ICO price for this
sample is $0.14), median opening price is $0.19) suggesting 26% gains

14/ Calculating a rate of return where ICO price and opening (and closing)
market prices are available yields an average rate of return of 246%
(median rate of return of 21%) to first open and
273% (median rate of return of 29%) to first close.

15/ 1st days MCap averages $54.7M vs $17.2M avg capital raised.
Avg daily vol in the first month is $2.5M (per day)
distribution is highly skewed with a med value of $140,000.
A Large proportion are illiquid,10th percentile having an avg daily vol of $5000 in the first month.

16/ 416 ICOs that went on to list, in less than 60 days, The average of equalweighted returns to investing in listed ICOs is a statistically significant 179% and 167%(in Bitcoin), with a very similar 173% and 162% (in Bitcoin) value-weighted average. 50% Discount to market value

17/ Conclusion
ICOs. Tokens are sold in ICOs at a significant discount to their market price (and at a much greater discount than IPOs),

generating at least an 82% average abnormal return for the representative (i.e. weighted by capital invested) ICO investor.

18/ Conclusion pt2
token returns after the asset is listed on an exchange, and find that
prices continue to drift higher, generating an abnormal return of approximately 50% in just the first 30 days.