Cryptocurrency ICOs

BitMEX Report: ICO’d Tokens Kept by Company Lost Billion in Value

January 17, 2019
Giancarlo Roma


BitMEX Report: ICO’d Tokens Kept by Company Lost Billion in Value

A report published yesterday by cryptocurrency exchange, BitMEX, found the tokens that more than one hundred companies allocated to themselves during their ICOs (Initial Coin Offerings) or shortly thereafter have decreased in value by 54% due to a drop in coin prices.

BitMEX partnered with TokenAnalyst in order to research the report. Together, they inspected the treasury balances of the projects, selecting only ones that were built on the Ethereum blockchain. Their investigation, which employed machine learning technology, centered on interpreting smart contract data and transaction patterns.

In the report, BitMEX rightly points out that the staggering $24.2 billion of value the self-allocated ICO’d coins had upon issuance could not have been fully realized, since liquidity was too low. In other words, if all the company decided to sell their full supply of their tokens and effectively cash out, they wouldn’t have actually netted $24.2 billion.

Most of the losses incurred came about due to a decrease in the price of the tokens, largely as a result of the bear market the crypto market has found itself in for about twelve months. However, taking other effects into account — namely, token burns and what the report calls the “Net Impact of EOS,” an Ethereum competitor — the coins have lost in excess of 79%. That percentage rises even higher when the losses are framed in relation to the high value of the coins, which the report estimates was in excess of $80 billion.

It is not hard to deduce how BitMEX views the practice of allocating coins to one’s own company; the report refers to the $5 billion of estimated value of the initial $24.2 billion “money they essentially got for nothing.” This practice, they state, is based upon a lack of accountability and transparency that has made a significant amount of money for founders (despite the losses in value), while having the opposite effect for investors, by and large.

The report concludes with the following prediction:

“… the events of 2017 and early 2018 are not likely to be quickly forgotten. Entrepreneurs will remember the success (and keep trying to raise money) and investors will remember the pain. A repeat of this cycle within a few years is therefore not as likely as many may think.”