A new report released by researchers from Boston college claims that the average investor into initial coin offering (ICO) projects receives a return on investment of around 82 percent.
Researchers Leonard Kostovetsky and Hugo Benedetti published the 54-page report, titled “Digital Tulips? Returns to Investors in Initial Coin Offerings,” on May 20. Their research examined 4,003 ICOs that raised a combined $12 billion and tracked the trading value of these ICO tokens across different timeframes.
Despite scam ICOs and fraudulent projects, the study found that the average ICO token price rose 179 percent from the day of its token sale to the day when listed on a cryptocurrency exchange, which took just 16 days on average.
Tokens that failed to list on an exchange within 60 days of their token sale represented a total loss for investors. However, even with failed tokens taken into account, the study found that ICOs generated “at least an 82% average abnormal return for the representative (i.e. weighted by capital invested) ICO investor.”
Investors not participating in a token offering and waiting to buy tokens after listing on an exchange still received an excellent return. Token prices rose by an average of 67 percent during their first 30 days of trading after being listed on an exchange.
Kostovetsky and Benedetti’s research highlight the profitability of holding onto tokens over longer timeframes. Token holders netted 140 percent over 90 days, 430 percent over 180 days, and 1,880 percent over 360 days. However, the researchers noted that most ICO tokens they studied had not been trading on exchanges for a full calendar year.
In general, the study found that “tokens are sold on ICOs at a significant discount to their market price (and at a much greater discount than IPOs)” and that ICO investors are “compensated handsomely for investing in new, unproven platforms through unregulated offerings.”
The researchers conclude with advice for regulating agencies, suggesting that “regulators should continue to deter fraudulent activities, but they need to be careful not to throw out the baby with the bathwater.”