What You Should Know Before Investing in IEOs

[sirty143]

The initial exchange offering (IEO) is a relatively new crowdfunding model that's rapidly gaining popularity among cryptocurrency investors. Although similar to the ICO model, IEOs are relying on crypto exchanges to partly fund their marketing campaigns and provide liquidity instead of the startups doing all the work on their own.

Since exchanges are basically putting their reputation at stake when backing IEOs, it is in their best interest to do their due diligence thoroughly before hosting an IEO token sale. As a consequence, IEOs generally enjoy a higher level of legitimacy than ICO projects, where potential investors are expected to rely solely on their own research when determining a project’s trustworthiness. For token issuers themselves, the benefits of the IEO model are obvious as they are able to access an exchange’s existing user base, marketing resources, and get their tokens listed shortly after the token sale ends.

Comparing IEOs Performance to ICOs

After a lackluster 2018, there hasn’t been a resurgence of interest for ICOs in 2019. IEO projects, on the other hand, are performing significantly better as they have outraised ICOs by almost $400 million since the start of 2019. Since 2017, the number of IEO projects has risen from 12 to at least 100 projects and, at the same time, the number of IEO launchpads has increased accordingly.

According to data from InWara’s IEO report, $1.4 billion was raised this year alone out of the $1.67 billion total that IEO projects have collectively managed to raise so far. This indicates that there is a lot of momentum behind IEOs. There was an additional $1 billion raised in May when Bitfinex Leo Token LEO, 0.60% sale was underway, which is not included in the graph since Bitfinex is being investigated by the New York Attorney General for misusing funds of its sister company Tether.

Another indicator that clearly shows which of the two models is more in-demand is that the average IEO campaign lasts for an average of 5.5 days, while ICO sales last considerably longer, 97 days on average. For example, the VeriBlock VBK, 1.38% IEO token sale offered on Bittrex’s IEO platform lasted just 10 seconds before it managed to raise $7 million and was sold out. Another extremely popular token sale was BitTorrent’s IEO on Binance Launchpad, which was sold out in 15 minutes and raised $7.2 million.

Minimum Viable Product (MVP) Comparison Between IEOs and ICOs

A minimum viable product (MVP) is a product with just enough features to satisfy early customers and to provide feedback for future product development. According to InWara's report, only 26% of ICOs had an MVP ready during their crowdfunding campaign. Furthermore, 95% of failed ICO projects did not have an MVP. We can safely deduce that a project’s failure rate seems to be heavily correlated to the absence of an MVP.

IEO projects are only slightly better in this regard than ICOs as merely 30% possessed an MVP at the time of their token sale. It remains to be seen whether a lack of MVPs will prove as problematic as it did for ICOs.

How Have IEOs Fared on the Market so Far

Similarly to ICOs, IEOs can also be described as high-risk high-reward investments. For example, BitTorrent Token BTT, -3.74%’s token price is currently approximately 11 times higher than its IEO price, which translates to an 1100% ROI for the earliest investors. Another very successful IEO project that launched on Binance, Matic Network MATIC, -5.58%, increased in value by 875% since its token sale.

But of course, where there are winners, there are bound to be losers and there are many examples of poorly performing IEO tokens that are down a significant amount from their initial sale price. Even though there are far less outright scams among IEOs than there were in the ICO space, this still does not mean that every project will turn out successfully and generate a profit. Keep in mind that IEOs are subjected to similar regulatory risks as ICOs and that there is a significant overlap between both, as 70% of IEO projects have previously undergone an ICO as well. As is always advised, do your own research before investing any money.

Source: coincodex

[kaleemmalik]

Well i dnt have too much knowledge.. but i get too much knowledge  from your post.. before investing in any coin must do a research...