Is IEO Still Sustainable While Most Chinese and Americans Absent?
As the world-leading cryptocurrency exchange Binance launches two token sales on its Launchpad platform at the beginning of 2019, a number of major exchanges have joined this token-issuing trend. The initial exchange offering (IEO) becomes one of the most popular approaches for token sales.
Essentially, there is no much difference between IEO and ICO (initial coin offering). Both of IEO and ICO are set amount token sale at a fixed price, but IEOs are backed by a cryptocurrency exchange and are only available to the exchange’s registered users. In addition, the funding standard coin has changed from mainstream cryptocurrency such as Bitcoin, Ethereum, EOS to exchanges’ native tokens.
This model grew popular in an instant as the two sales, BitTorrent (BTT) and that of Fetch.AI (FET) reached their targets in minutes. many investors get much profit when token price surges after they began trading on Binance. Some crypto enthusiasts even believe that this new fundraising model may tinder the next bull run.
Binance CEO Changpeng Zhao (CZ) also said that: “We are glad that more and more people are joining the IEO club, and we believe that blockchain powered fund-raising will be the ‘killer application’ in this industry.”
However, some industrial insiders commented that this model is ‘unsustainable’. The current IEO craze is largely correlated with the restriction of nationality. As most of the IEOs have excluded the U.S. and Chinese citizens due to the regulation issues, the majority of crypto investors have been banned from participating in IEOs, which tinder the recent ‘huger marketing’.
In addition, as the current bear market persists, the market cap cannot afford so many high-profitable projects which means the IEO projects will still remain high risks.
Exchanges also understand the risks behind this fundraising method. On Mar 15, crypto exchange Bittrex has canceled its first IEO of the RAID token as a result of significant changes in the business status of RAID.
“Trust and integrity are our most valuable assets. Part of earning your trust is to be as transparent as possible,” the exchange emphasized in the announcement.
Although the IEO is a kind of “high-risk, high-rewards” investment, the exchange-backed funding method is suitable to use in the current early stage of the crypto industry.