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Research Shows: Over Half of IEOs Underperform Bitcoin

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Research Shows: Over Half of IEOs Underperform Bitcoin

Research from data analysis firm The Block shows that despite some IEOs achieving massive success, there is still a high speculative component, with the vast majority not suitable for investors.

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Can IEO Make You Rich?
According to a report released by cryptocurrency researcher Larry Cermak from The Block on July 31st, approximately 180 blockchain projects have issued tokens through Initial Exchange Offerings (IEOs), with 40 exchanges listing at least one IEO.

Source: The Block

The report only includes legitimate exchanges in its calculation. Out of the 28 legitimate exchanges that have conducted IEOs, 18 of them, accounting for 64%, have shown positive returns when measured in USD. It is worth noting that less than half of these IEOs have outperformed Bitcoin.

Source: The Block

Binance Leads in Returns
Binance Exchange currently holds a leading position in the IEO space, given the exchange's international influence and stable trading volume. Apart from Binance, Coineal, Exmarkets, Bitforex, and ProBit account for 45% of all IEOs.

The report highlights that the majority of the attractiveness of IEOs comes from speculation and high returns. In 2019, 12 projects brought investors returns of up to 500%. Cermak explains:

Since most investors buy tokens just to sell them at a higher price a few months later, the price will never hold. Around 75% of projects have dropped more than 50% from their all-time highs, with 39% falling over 75%.

Source: The Block

A report points out a strong correlation between token price fluctuations, all-time highs, and the number of days since sale.

Source: The Block

Given the speculative nature of these tokens, Cermak advises investors to carefully select investment projects and avoid holding any specific IEO token for an extended period.

Currently, IEO projects are unable to sustain long-term value. Therefore, the rational strategy to maximize profits is to invest in IEOs listed by high-return exchanges and sell when the time is right, rather than hold for the long term.

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