The amount of money raised by start-ups via initial coin offerings (ICOs) rose again in October, as more businesses embraced the controversial crowdfunding model.
ICO Funding Surpasses $3 Billion
Around $380 million flowed into ICOs in October, according to CoinSchedule. That’s well below the $800 million-plus the crowdfunding model generated in September. That brings the total capital raised for the year to $3.25 billion.
Readers may recall that ICOs surpassed early stage venture capital following a massive surge in the months of May, June and July. At the start of the year, there was barely any activity in the space.
So far this year, a total of 203 crowdraises have been issued. The previous year saw just 46 with a total raise of $93.4 million.
A Closer Look at the Numbers
More than one-third (37%) of the funds raised this year went toward infrastructure projects. That amounts to a little more than $1.2 billion. Trading and investment platforms generated nearly $420 million, or 12.9% of the total capital raised.
Finance projects were the third most popular at $307 million, or 9.4%. Data storage (8.8%), payments (6.6%) and healthcare (6.2%) were also on investors’ radar.
Practically every industry has been represented in token raises this year, including governance, supply and logistics, machine learning and even commodities.
Infrastructure was by far the biggest category for 2016. accounting for more than 45% of the total capital raised. That was followed by trading and investing (12.3%), content management (9.5%) and events and entertainment (7.8%).
Filecoin continues to be the biggest capital raise ever at $257 million. Tezos is a close second at more than $232 million. The top-ten list of token raises is provided below.
|3.||EOS Stage 1||$185 million|
Some analysts say that a lack of regulatory clarity around token raises may limit their appeal in the future. Regulatory woes may have limited the amount of money raised in August after the Securities and Exchange Commission (SEC) ruled that The DAO tokens were securities and therefore subject to federal laws.
ICOs are often referred to as crowdfunding campaigns but differ in important ways from the products offered on platforms like Kickstarter. Solid ICOs issue new cryptocurrency that can then be used by the network to participate in its essential functions. On the other hand, some of the more unsavory token sales are nothing more than a way to make quick money.
That being said, it is highly unlikely we’ve seen the biggest capital raise just yet. Blockchain powerhouse tZERO is expected to generate between $200 million and $500 million in its upcoming launch. The distributed ledger platform will host its pre-sale via Simple Agreement for Future Tokens (SAFT) between Nov. 15 and Dec. 31. The pre-sale will be administered by New York-based SAFTLaunch.com.
SAFTs are a way for token sales to vet accredited investors. Its proponents say the protocol will help create a self-regulated cryptocurrency market in the absence of a clear government standard.
ICOs have come under attack in several jurisdictions, most notably China and South Korea. The two Asian countries have issued full bans on coin raises on account of financial risks. Several other jurisdictions are also considering similar measures to control the growth and widespread adoption of a funding method they know little about.
Russia has also embarked on regulating the cryptocurrency space. Instead of pursuing an all-out ban, the Kremlin is looking to centralize crypto mining and allow citizens to exchange digital assets for Russian rubles.
Recently, Russia’s First Deputy Prime Minister Igor Shuvalov said the new rules won’t kill the ICO market. President Vladimir Putin has also stated that ICOs represent “tremendous potential” and should not be held back from further development.
Cryptocurrency Market: State of Play
At the time of writing, there are roughly 1,200 cryptocurrencies in circulation. Their combined value is around $169 billion, according to CoinMarketCap. Bitcoin’s meteoric rise earlier this month sent a clear signal that the bulls are still in control, and are keen on buying the dips.
Regulation has had an important influence on the cryptocurrency market, but concerns of prohibition have been largely overplayed. It didn’t take long for bitcoin to rise from the ashes following China’s regulatory attack on cryptocurrency in September. What’s more, several countries appear to be taking a more measured approach to digital assets than their knee-jerk reaction would have entailed.
Even Russia’s decision to regulate cryptocurrency followed an initial overreaction that made many people nervous. Now, there are talks of a ‘CryptoRuble’ and regulating initial coin offerings. In fact, Russia’s largest bank recently joined the Enterprise Ethereum Alliance(EEA), an esteemed venue for enterprises, startups and technology vendors to explore the commercial potential of the ether blockchain. Its members include financial heavyweights Credit Suisse, J.P. Morgan and UBS. Technology giants Microsoft, Samsung and Intel are also part of the group.