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The evolution of the ICO market: Cumulative number of ICOs (lhs) and ICO proceeds (rhs) since January 2017. Three major ICOs in terms of ICO volume during my sample period are shown as vertical lines (Tezos, Filecoin, and Hdac). The total number of ICOs in the sample is 2,131. Thereof, estimates of gross proceeds are available for 501 ICOs.
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This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid opportunities thanks to...
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Context 1
... about 37% of the total ICO proceeds in 2017 were made by only 20 ICOs. For a more comprehensive overview of the evolution of the ICO market, I plot the number of ICOs and the volume of ICO proceeds in Figure 1. 16 [Place Figure 1 about here] 16 See https://cointelegraph.com/news/post-ico-review-what-happens-to-the-tokens-of-the-largest-icos. ...
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Citations
... Empirical studies focus on the determinants of ICO success (e.g., Fisch, 2019;Masiak et al., 2020), subsequent short-term and long-term performance (Benedetti & Kostovetsky, 2021;Fisch & Momtaz, 2020;Lyandres et al., 2019Lyandres et al., , 2022Momtaz, 2020Momtaz, , 2021b, characteristics and motives of investors (Fahlenbrach & Frattaroli, 2021;Fisch et al., 2021), determinants of token liquidity (Howell et al., 2020), or regulatory and geographical aspects (Cohney et al., 2019;Huang et al., 2020). ...
The tokenization of financial assets using blockchain technology is a transformative process that allows for the fractionalization of ownership, thereby creating more accessible investment opportunities compared to traditional financial assets. Recent research has shown that token offerings are subject to moral hazard and fraud. In response to these challenges, we propose a novel token design that is compliant with the legal framework of Switzerland. Our design is characterized by its flexibility and can represent any yield or dividend-bearing asset, such as stocks, bonds, or rental income from real estate. Further enhancing its compatibility, the token conforms to the Ethereum ERC-20 standard, enabling seamless integration with existing decentralized finance solutions. Another contribution of our token design is its innovative approach to dividend distribution. Unlike traditional models that distribute dividends based on ownership at the time of payment, our token design distributes dividends based on holding times. This distinctive approach promotes smoother asset prices between dividend payouts by eliminating the need for compensation payments. Our token prototype represents a potential starting point for future research on leveraging the opportunities of decentralized finance.
... Previous research and technical studies have largely used simple measures like the Sharpe ratio to analyze the performance of cryptocurrencies, which adjusts returns for total (specific and diversifiable) risk. Furthermore, the cryptocurrency market is evaluated using buy-and-hold returns (Momtaz 2020(Momtaz , 2021Vidal-Tomás 2023a). Because cryptocurrencies are volatile, this statistic may understate outcomes (Wasiuzzaman and Rahman 2021). ...
This paper explores the state of the art in the cryptocurrency literature, with a special emphasis on the links between financial dimensions and ESG features. The study uses bibliometric analysis to illustrate the history of cryptocurrency publication activity, focusing on the most popular subjects and research trends. Between 2014 and 2021, 1442 papers on cryptocurrencies were published in the Web of Science core collection, the most authoritative database, although only a tiny percentage evaluated ESG factors. One of the most common criticisms of cryptocurrencies is the pollution derived from energy consumption in their mining process and their use for illicit purposes due to the absence of effective regulation. The study allows us to suggest future research directions that may be beneficial in illustrating the environmental effect, studying financial behavior, identifying the long-term sustainability of cryptocurrencies, and evaluating their financial success. This study provides an in-depth examination of current research trends in the field of cryptocurrencies, identifying prospective future research directions.
... Second, markets for tokens are relatively integrated in terms of the startup life cycle stage of the entrepreneurial ventures seeking financing. ICOs nevertheless vary in size, ranging from micro-cap ($0.1 million or less) to mega-cap (several billions) funding rounds Bellavitis et al., 2021;Momtaz, 2020). ICO ventures also differ, at least in part, in their life 1 cycle stages during the ICO, which we conceptualize as ranging from ideation to profitability. ...
... In a token offering, or ICO, startups raise capital by selling tokens to investors (Fisch, 2019;Momtaz, 2020). 1 Tokens are cryptographically protected digital units of assets that provide value to investors through a utility, currency, or security function (Howell et al., 2020;Ofir and Sadeh, 2021). Utility tokens are voucher-like assets, which give access to a service or product the issuing venture promises to provide in the future, and are the most frequently issued token type in ICOs Momtaz, 2020). 2 ICOs represent an innovative entrepreneurial finance mechanism that has evolved from crowdfunding by way of blockchain technology to issue stakes in startups (Belitski and Boreiko, 2021;Fisch, 2019;Howell et al., 2020;Huang et al., 2020;Li and Mann, 2018;Momtaz, 2020). ...
... In a token offering, or ICO, startups raise capital by selling tokens to investors (Fisch, 2019;Momtaz, 2020). 1 Tokens are cryptographically protected digital units of assets that provide value to investors through a utility, currency, or security function (Howell et al., 2020;Ofir and Sadeh, 2021). Utility tokens are voucher-like assets, which give access to a service or product the issuing venture promises to provide in the future, and are the most frequently issued token type in ICOs Momtaz, 2020). 2 ICOs represent an innovative entrepreneurial finance mechanism that has evolved from crowdfunding by way of blockchain technology to issue stakes in startups (Belitski and Boreiko, 2021;Fisch, 2019;Howell et al., 2020;Huang et al., 2020;Li and Mann, 2018;Momtaz, 2020). ...
What role does the selection of an investor and the timing of financing play in initial coin offerings (ICOs)? We investigate the operating and financial performance of ventures conducting ICOs with different types of investors at different points in the ventures' life cycle. We find that, relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit poorer operating performance and fail earlier. However, conditional on their survival, these ventures financially outperform those that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with our theory of certification arbitrage; i.e., institutional investors use their reputation to drive up valuations and quickly exit the venture post-ICO. Our findings further indicate that there is an inverted U-shaped relationship for fundraising success of ICO ventures over their life cycle. Another inverted U-shaped relationship exists for the short-term financial performance of ICO ventures over their life cycle. Both the fundraising success and the financial performance of an ICO venture initially increase over the life cycle and eventually decrease after the product piloting stage.
... According to the authors, those who find enjoyment in gambling are likely to be drawn to cryptotrading, as are members of comparable demographic groupings. Betting for Manchester City and investing in other cryptocurrencies after recent price drops, on the other hand, look to be wiser choices (Momtaz, 2020). However, there are several possibilities for individuals to make inflated predictions about the impact of their own knowledge and ability on outcomes and to underestimate the weight that luck and chance are likely to have in these endeavours (Delahaye, 2016). ...
Purpose-Investment in extremely volatile digital assets based mostly on blockchain technology is what defines cryptocurrency trading, a phenomenon that is increasing quickly. In this paper, author review the cryptocurrency characteristics and its impact on psychological wellbeing of human beings' behaviour. Method-The research examines the psychological processes that we suggest are unique danger factors for excessive crypto trading, such as: illusion of control, preoccupation, social learning, social reinforcement, fear of miss out and a form of gambling. The study is primary and descriptive in nature. The sample size of the study was 150 investors residing in Delhi/NCR. The responses from the respondents obtained from structured questionnaire. Findings-In order to keep people safe while letting them profit from advances in blockchain technology and crypto-currency, the study calls for greater in-depth study of the mental impacts of frequent trading, individual variations, and the nature of decision-making. Originality-While day trading and online sports betting have certain parallels, there are also key distinctions that need attention. Trading is available around the clock, the market is really worldwide, and factors outside the financial statements have a significant impact on the direction of prices. Social implications-When this new activity grows and attracts a larger proportion of retail or community investors, the article explores various protective and instructional techniques that may be employed to shield novice investors from potential damage.
... 2 Smart contracts refer to computer protocols that automatically execute the exchange of investors' pecuniary contributions to venture projects and entrepreneurs' tokens that represent claims on products or services yet to be developed. Therefore, token-based crowdfunding, also known as Initial Coin Offerings (ICOs) or token sales (e.g., Adhami et al., 2018;Bellavitis et al., 2020;Bellavitis et al., 2021;Colombo et al., 2021;Fisch, 2019;Howell et al., 2020;Lyandres et al., 2022;Momtaz, 2020), rely on smart contracts to reduce the degree of intermediation in entrepreneurial finance markets to a minimum. ...
... In a token offering, or initial coin offering (ICO), ventures raise capital by selling tokens to a crowd of investors (Fisch, 2019;Momtaz, 2020). Tokens are cryptographically protected digital units of assets that provide value to investors by way of a utility, currency, or security function (Howell et al., 2020;Ofir and Sadeh, 2021). ...
... Tokens are cryptographically protected digital units of assets that provide value to investors by way of a utility, currency, or security function (Howell et al., 2020;Ofir and Sadeh, 2021). Utility tokens are voucher-like assets, which provide access to a service or product the ICO-implementing venture promises to provide in the future, and represent the most frequently issued token type in ICOs Momtaz, 2020). 3 During an ICO, investors can buy these tokens at a pre-defined price directly from the issuer. ...
Crypto Funds (CFs) represent a novel investor type in entrepreneurial finance. CFs intermediate Decentralized Finance (DeFi) markets by pooling contributions from crowd-investors and investing in tokenized startups, combining sophisticated venture-and hedge-style investment strategies. We compile a unique dataset combining token-based crowdfunding (or Initial Coin Offerings, ICOs) data with proprietary performance data of CFs. CF-backed startup ventures obtain higher ICO valuations, outperform their peers in the long run, and benefit from token price appreciation around CF investment disclosure in the secondary market. Moreover, CFs beat the market by roughly 2.5% per month. Their outperformance is persistent, suggesting that CFs deliver abnormal returns because of skill, rather than luck. These performance effects for CFs and CF-backed startups are driven by a fund's investor network centrality. Overall, our study paves the way for research on what some refer to as the "crypto fund revolution" in entrepreneurial finance.
... This stream encompasses two sub-streams: "ICO investment returns and investors" and "ICOs as an alternative asset class". While ICOs deliver an average of 8.2% on the first trading day, 40% of ICOs destroy value on the first listing day (Momtaz, 2020). ...
This study reviews initial coin offerings (ICOs) based on 80 empirical studies from 2018 to 2022. We apply a blend of bibliometric and content analysis to consolidate ICOs’ prior findings, track the evolutionary impact, and explore the semantic discourse and underlying theories in entrepreneurial finance. The content analysis concludes with five main streams that extensively explain the advent of ICOs, main features, embedded technologies, pricing, valuation, regulatory frameworks, frauds, and scams. It contributes to a better understanding of the ICOs hype under the following contexts: benefits versus challenges, decentralised system versus market stability, speculative behaviour and herding versus market efficiency, and geographical spread versus systematic risk. The study is beneficial for portfolio managers, hedgers, wealth managers, investors, policymakers, regulators, and entrepreneurs.
Plain English Summary
ICO Boom and Bust: What is Next? The study fosters the knowledge of ICOs as a new financing avenue. It consolidates prior empirical studies and extracts valuable findings from different perspectives: benefits versus challenges, decentralised system versus market stability, speculative behaviour and herding versus market efficiency, and geographical spread versus systematic risk. This study reviews initial coin offerings (ICOs) based on 80 empirical studies from 2018 to 2022. It impacts portfolio managers, hedgers, wealth managers, investors, policymakers, regulators, and entrepreneurs.
... Unsurprisingly, researchers have noted pervasive fraudulent practices in ICOs (Hornuf et al. 2021). For instance, a study found that 40% of all ICOs destroyed investor value on the first day of trading (Momtaz 2020). ...
... Crypto-token purchasers have a right to vote on future decisions related to a project (Dickson 2017); however, unlike in an IPO or an ECF, they do not own a part of the company. Thus, crypto-token holders cannot often control and influence the directors' actions. 2 As noted above, ensuring crypto-venture regulatory compliance is even more important due to a high degree of fraud proneness in ICOs (Hornuf et al. 2021) and because many ICOs destroy investor value on the first day of trading (Momtaz, 2020). All of these underscore the importance of regulators in monitoring ICOs. ...
As prior researchers have suggested, a firm’s success in an international market depends on how well its strategy fits the nonmarket environment, such as formal institutions. This paper examines the determinants of formal institutions around new areas of economic activities. Specifically, we propose a framework for understanding how the quality of formal institutions in promoting entrepreneurship drives the focus of such institutions concerning initial coin offering (ICO), which is emerging as a popular fundraising method. The paper uses inductive analysis to examine how nonmarket factors—such as a jurisdiction’s tax haven nature, regulators’ perceptions of ICOs as threats to national or political interests, and trade and industry associations—might moderate the relationship between the quality of institutions and the focus of such institutions regarding ICOs. One of this study’s key findings is that an economy’s quality of entrepreneurship-related institutions, perceived threats to national/political interests, and tax haven nature lead to different policy orientations. Consequently, regulators assign different importance when promoting crypto-entrepreneurship and dealing with associated risks. Regulators focusing mainly on promoting crypto-ventures have taken measures to enrich the blockchain ecosystem and provided tax and non-tax incentives to attract such ventures. Regulators focusing mainly on dealing with crypto-venture risks rely on a regulatory sandbox and close regulatory monitoring of such ventures.
... Crypto asset development and initial distribution are usually called Initial Coin Offer (ICO). The majority of the researchers, who wrote about the ICO, agreed on the following definition-Initial Coin Offer (ICO) is, based on blockchain technology and smart contracts, a list of actions that entrepreneurs use to attract external funding by issuing tokens without intermediaries [16][17][18][19][20][21]. They agreed that in correlation with Initial Public Offer (IPO)when a private corporation first offers its shares to the public, the Initial Coin Offer (ICO) result is the increased capital of the company issuer. ...
... The majority of the researchers [16][17][18][19][20][21] believe that Initial Coin Offer is a set of actions, one of which is the issuance of crypto assets. They mentioned the attraction of external funding to the entity that made an Issuance (Issuer) as the purpose of this Issuance. ...
The authors assess the manufacturing of smart city products, fully or partially formed by crypto-assets. The initial issuance of the crypto assets was usually addressed as an Initial Coin Offer, or through the process of increasing the issuer’s capital. The authors assess the Initial Coin Offer, and address it, like manufacturing to produce products for sale. The authors classify all milestones related to the crypto-assets’ issuance, distribution, and revaluation, and assign incomes and expenses to each milestone. Additionally, the ICO-based production costs and revenues were classified according to crypto-asset types, as defined by European Economic Area legislative acts.
... The analysis focused on the crypto market since 2018 because cryptocurrency funds reveal distinct characteristics in the post-ICO (initial coin offering) bubble period [33] and the market has generally become more mature following the ICO bubble [34]. Crypto markets starting from 2018 can be distinguished as the post-ICO bubble period [33], and ICOs, along with ICO-related events, such as regulatory bans, are observed to cause sensitivity in the market [35]. ...
The cryptocurrency market is understood as being more volatile than traditional asset classes. Therefore, modeling the volatility of cryptocurrencies is important for making investment decisions. However, large swings in the market might be normal for cryptocurrencies due to their inherent volatility. Deviations, along with correlations of asset returns, must be considered for measuring the degree of market anomaly. This paper demonstrates the use of robust Mahalanobis distances based on shrinkage estimators and minimum covariance determinant for observing anomaly scores of cryptocurrencies. Our analysis shows that anomaly scores are a critical complement to volatility measures for understanding the cryptocurrency market. The use of anomaly scores is further demonstrated through portfolio optimization and scenario analysis.
... Therefore, we believe that I4.0 could also evolve by relying on alternative sources of capital. Another source of funding could come from ICO, which is defined as involving "smart contracts based on distributed ledger technology" (DLT or blockchain) and is designed to raise external funds by issuing coins or tokens (Momtaz, 2020). In S4, which is characterized by the development of blockchain technology, we note that an ICO could democratize access to financial resources for companies of all sizes (SMEs and start-ups). ...
The transformations generated by Industry 4.0 (I4.0) are interwoven with digitalization. I4.0 involves the digital turn of manufacturing companies, changing the way they operate, their business models, and by extension, their interaction with digital players. Nonetheless, the future of I4.0 regarding its interaction with digital players and the phenomenon of uberization has scarcely been examined. Thus, this research adopts a participatory and systemic foresight approach to explore the trajectories of I4.0 in the face of uberization. The study was conducted with a working group of 22 members from academia and practice. Four scenarios and related action plans were produced. The results emphasize that uberization is not necessarily a process to be endured by manufacturers, but it could be chosen or even co-constructed with different actors if manufacturers address key challenges such as rethinking their business models and adapting their factors of production. The scenarios indicate the dynamics of uberization as contingent on technological developments and on industrial policy choices, changes in consumer behavior, and access to multiple funding sources. Finally, the study provides practical implications regarding the dynamics of collaboration between SMEs and large groups, on one hand, and between manufacturing companies and digital players, on the other hand.
