In the initial coin offering (ICO) market, investors have become more selective about which coins they would put their money on. In the past one to two years, most ICOs were able to reach investment targets, but 55% of the companies that pursued ICOs in the second quarter of this year failed to reach their targets.
A total of 827 blockchain companies attracted a total of US$8.35 billion in investments through ICOs in the second quarter of this year, according to a report released on August 12 by ICO Rating that analyzes ICO data. This is a more than a 2.5-fold increase from US$3.33 billion in ICO investment in the first quarter of last year.
The whole size of ICOs increased, but many companies failed to draw satisfactory amounts of investment. Among companies which had IPOs in the second quarter, only 45% reached their investment targets, while the remaining 55% failed to do so.
In the cryptocurrency industry, investors have been checking the quality of ICOs, experts say. Companies that do not suggest proper visions usually fail in ICOs.
"Until the beginning of this year, once a company began an ICO process, it could attract at least tens of billions of won in investment,” a cryptocurrency industry official said. “But investors are now avoiding an ICO without a clear vision or a reputable team member or advisor. In the cryptocurrency industry, some analysts say that the ICO market will shrink significantly beginning in the second quarter."
In particular, there was a sharp rise in reverse ICOs in the second quarter. A reverse ICO refers to an ICO that a company has in order to upgrade their services by combining blockchain technology with them.
ICO Rating said that 15% of all the ICOs were reverse ICOs. The ratio rose by 6 percentage points from the previous quarter. "Globally, reverse ICOs are led by Korean companies so they will be able to take the lead in the blockchain industry by taking advantage of this trend," industry experts say.
In particular, the Korean government announced a ban on all kinds of ICOs last September, but ICO Rating analyzed that the two ICO projects were carried out based on Korea.