Even if you haven’t bought your first cryptocurrency yet, you’ve probably heard of Binance. As the industry’s currently leading exchange, Binance plays a major role in the progress of the overall cryptocurrency space. The Malta-based exchange is often seen as one of the major platforms in terms of daily trading volume (especially adjusted, or ‘real’ volume). It’s not uncommon for the platform to facilitate more than $2 billion in trading activity on a daily basis. Binance users have access to more than 540 individual crypto-to-crypto pairs.
Now that the exchange is also expanding the possibilities for deposits and withdrawals via fiat currencies, it is expected that the platform will only continue to grow.
Binance plays a substantial role in the crypto industry, dictating stats and trends, absorbing liquidity, and forcing new crypto exchanges to fight for market share. Several exchanges don’t want to be the next Binance,ut they all have to exist in their shadow as they strive to create their own niche.
There is a lot of enthusiasm surrounding Binance Chain, and rightly so. Initial coin offerings (ICOs) were a major talking point in 2017 and early 2018. However, after the spate of poor quality to token offerings failed to resist the bear market, the craze died down and ICOs are no longer have the appeal they used to. A report from Diar.co indicated that over 86 percent of the initial coin offerings have failed. The report further added that around 70 percent of such tokens have reduced in value compared to their ICO price.
The decline in ICOs led to the development of security token offerings (STOs) and initial exchange offerings (IEOs). For consumers, IEOs provide another layer of confidence which is absent in traditional token offerings, due to the backing of the exchange in question. This decreases the likelihood of scams or fraudulent projects selling tokens to investors. Token developers are also often provided with an easier route to market, as many IEO tokens are listed on the exchange where they are hosted shortly after the sale concludes. This also offers the exchange a base of income via listing fees. It’s a win-win-win scenario, for the investors, the project teams and the exchanges. .
The popularity of the IEOs hosted on Binance, in particular, show signs that the token sale mania is coming back. Binance has kickstarted the 2020 the IEO trend this January by announcing the IEO of WazirX (WRX) via Binance Launchpad. To date, more than 95 IEOs have been carried out across all exchanges or Bitcoin Hong Kong Exchange, raising a total of more than $275 million. 13 of these IEOs (arguably the most popular of the bunch) were conducted via Binance’s Launchpad platform.
Are IEOs the Future? The IEOs Investment Performance
In 2019, IEOs brought us a slew of smart contract platforms, dapp scaling solutions, and crypto protocols, but in many cases token performance failed to deliver. BitMEX Research Specialists studied the investment performance of twelve IEOs from last year. Statistics showed that tokens lost up to 93% of the price as compared to their offering price.
In regards to their opening exchange trading price, almost all tokens fell by more than 80%. Only four IEO has been profitable for investors, with performance ranging hugely from 7.9% to 493%.
The most outstanding project by far in terms of token performance was Matic Network (MATIC), an IEO launched on Binance Launchpad in April, demonstrating an impressive 493% ROI compared to its IEO price. The MATIC token, which has shown extreme volatility in recent weeks yet is on a clear general upwards trajectory since its listing, has been highly regarded since being listed. MATIC reached its all-time-high in December of last year with a whopping ROI of more than 1600% .
The success of the Matic is due largely to its stellar rate of adoption of Dapps looking to leverage its plasma-based scaling solution, with 40+ Dapps already building on Matic, and its range of collaborative partnerships with top-tier industry players. The most recent of these is with Whitebit, the professional digital asset trading platform that focuses on security, liquidity, and execution speed. Through the collaboration of Matic and Whitebit, MATIC holders will be provided with the best trading terms such as low fees and bonuses.
BitMEX Research emphasized that the price of coins as offered at IEO is lower than when starting trading on the exchange. Therefore, many IEO investors have certainly been given at least the opportunity of a profitable investment.
Nevertheless, investors who invested in 8 of the 12 IEO tokens discussed in the BitMEX Research report lost from 15% to 93% of their investment value. In the report, BitMEX Research experts doubted the long-term prospects of the IEO model, even though the capitalization of these projects was close to $1 billion at that time.
That said,, as more exchanges emerge, IEOs could grow to be the key for retail investors to securely support hopeful projects and join the blockchain ecosystem with greater certainty.
Even though the regulatory landscape of the crypto space is still far from being crystal clear, IEOs around the world offer an insight into how the industry can advance its path to higher compliance and transparency. The most significant advantage that exchanges can offer both investors and traders is their reputation and the existing legal framework. Since crypto exchanges depend heavily on image and reputation, they will likely support projects with higher chances of success, while meeting stricter regulatory and compliance standards.
There is already an impressive number of IEOs at various stages of progress, and it is clear that IEOs are a new trend to keep an eye on. With the crypto industry finding new ways to provide legitimacy and transparency to projects and investors, it is also likely that the space will find greater mainstream respect and acceptance.