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IEOs – The Next Crypto Golden Goose?

While we are clearly witnessing the green shoots of a crypto bull market, ICOs in their new avatar are already making headlines with their dizzying return multiples in just a matter of weeks. We had covered IEOs earlier, and now revisiting this topic.

In contrast to the previous iteration of the by-now well-known ICO model, the IEO (Initial Exchange Offering) model of capital raising aims to address some of the former’s shortcomings and pitfalls. IEOs offer projects the opportunity to tap into exchanges’ existing user baseline and also allows them to focus more on project development and spend fewer resources on the sales, marketing and distribution part of a token offering. Centralized exchanges can to a certain extent also solve the Sybil attack problem where ICO investors have in the past resorted to creating new addresses to get around contribution limits that ICO teams imposed on ICO subscribers, as the cost of creating multiple trading accounts on a centralized exchange is much higher than just creating a new Ethereum address.

The unsavory side to all this is of course that IEO launchpads are seemingly engaging in pump and dump schemes to simulate trading activity and perhaps even promising price guarantees for IEO projects in a bid to bring in more upcoming projects to the platform. For example, the graph below depicts the post IEO return of the projects that have launched on Binance in the past three months. Tokens of IEO projects have experienced significant surges in prices in the weeks following their launch and then cratered from the peaks abruptly and significantly.

Post IEO return comparison
Source: Coinmarketcap
Source: Twitter, Larry Cemark

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