Do you remember the Dutch Golden Age tulip mania?
It seems the History repeats itself, according to the title of a Boston College research paper about the initial Coin Offerings (ICOs): Digital Tulips
Digital Tulips finds that less than half of these ICOs survive over 120 days after their tokens offers to the public.
They discovered just 44.2% of them were all the while tweeting after that four-month time span and presumed that whatever is left of the ICOs had passed on.
The research in a glance:
“ICOs, sales of cryptocurrency tokens to the general public, have recently been used as a source of crowdfunding for startups in the technology and blockchain industries.
We create a dataset on 4,003 executed and planned ICOs, which raised a total of $12 billion in capital, nearly all since January 2017.
We find evidence of significant ICO underpricing, with average returns of 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days.
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%.
After trading begins, tokens continue to appreciate in price, generating average buy-and-hold abnormal returns of 48% in the first 30 trading days.
We also study the determinants of ICO underpricing and relate cryptocurrency prices to Twitter followers and activity.
While our results could be an indication of bubbles, they are also consistent with high compensation for risk for investing in unproven pre-revenue platforms through unregulated offerings.”
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