Token Lockup Periods for Successfully Funded ICO Projects - Q1 vs. Q2 2018
Token lockup periods for successfully funded initial coin offering (ICO) projects have changed only marginally between Q1 to Q2 2018, with a slight decrease in the number of projects choosing not to implement any lockup period at all.
ICORating released a report earlier in August which examined token lockup periods for various ICO projects funded by institutional players in Q2 2018. Our new data examines the same parameters for Q1 2018 and compares the findings from the two reports.
Investors and funds looking to participate in ICO projects must take many factors into account before committing to purchase tokens, but one of the most overlooked factors is the token lockup period.
Distributing tokens to team members shortly after completing an ICO can have unintended negative effects. Doing so can decrease the motivation of the team to continue working on the project, or, in the worst case scenario, early token distributions can crash the token price. Team members looking for liquidity can sell their tokens on the secondary market, collapsing the trading price and making it difficult for investors to receive a return on their own token holdings.
As we outlined in our previous report, about 48 percent of all ICOs funded by institutional capital in Q2 2018 had no lockup period at all, 15 percent of projects had a lockup period of 1 to 3 months, 17 percent locked their tokens up for 4 to 6 months, 14 percent had a lockup period of 8 to 12 months, and 6 percent of projects studied locked their tokens up for 18 to 24 months.
The Q2 token lockup dynamic has only changed slightly from the figures in Q1. 50 percent of projects funded by institutional capital in Q1 2018 had no lockup period; 14 percent had a lockup period of 1 to 3 months, a further 14 percent locked up tokens for 4 to 6 months, 18 percent chose a lockup period of 8 to 12 months, whilst only 4 percent had a lockup period of 18 to 24 months.
As the data shows, the number of projects that didn’t mandate any lockup period for their tokens has decreased slightly in Q2, down to 48 percent from 50. Although the percentage of projects that locked up tokens for 8 to 12 months decreased from 18 to 14 percent, all other lockup periods increased, including a relatively large increase in the number of projects choosing to lock tokens up for 18 to 24 months, which rose from 4 to 6 percent.