If you look at a chronology of Initial Exchange Offerings (IEO), they were the bastard child of a spastic Initial Coin Offering (ICO) cycle which rode the coattails of the cryptocurrency explosion of 2017.
In 2017 Bitcoin traded from $1000 to $20,000, in 2018 Bitcoin traded down from $16,000 to $3000 commonly referred to as the Crypto Winter. In 2019 they call the bounce from $3000 Crypto Spring, and as we exit to Memorial Day 2019 many see the emergence reflected in the growth of the IEO Calender now called “Crypto Summer”, as investors regain an appetite for digital coin.
The ICO has evolved into a solid exchange offering calendar starting to quickly fill as we head to summer, and the IEO has replaced the ICO as the responsibility of vetting the coins and the related businesses fall to the exchanges themselves, hence the name Initial Exchange Offering (IEO). But along with this transition comes an increased burden, and given some order to the IEO Calender that looks a lot like the old IPO Calendar from the Internet Boom of the late 1990s. The turn in the crypto season has created a frenzy of companies seeking funding via tokenization essentially picking up where the 2017 demand cycle left off where demand exceeded the coin supply. The companies know this and are looking to cash in so they can fund their ideas and day to day operations.
A look back to the 1990s shows a strikingly similar pattern where we saw Wall Street and Silicon Valley engineer a bursting IPO Calender that raised many millions for Dot.com companies in historic funding cycle, and many of the players are the same, and the structure certainly is the same with the 3 headed monster of Investment Banking, Trading and Research.
The issue here is that the Exchanges are attempting to do it all, which may slow the spigot of the funding cycle. It is too early to conclude anything about the value of the IEO Coins as they emerge from this funding cycle and establish a valuation. It is too early, but the companies continue to line up at the doors of the exchanges. Bigger brands like BitTorrent ($125m valuation) a left over from the 90’s Dot.com cycle, and some ICO stragglers from 2017 dot the landscape. But a few quarters from now we will see 50+ IEO’s trading day to day.
All of a sudden the exchanges have a huge responsibility, they must keep the matching engine working, keep clients money secure so they can mirror institutional custody questions and keep client money safe and they must vett the clients for their members. They must also build membership following KYC and other regulatory requirements while they are in stiff competition from 200+ exchanges touting their launchpads as the best in the land. This is a huge task in a fast moving tokenization trend where lots of money is at stake for everyone.
This story is playing out as the backdrop of Bitcoin itself is back in the media cycle retracing much of the crypto winter decline, as blockchain and tokenization have real-world examples and contributing solutions and revenue potential along with them. The exchanges in Crypto Summer are directly in the spotlight, and so are the companies they bring to the membership in the form of the IEO.
Long live the IEO – the ICO is dead – and so is Crypto Winter !!
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