What is the role of startups in the era of IEO?
We can help your business achieve the same resultsLet us contact you
Startups raise millions of dollars on cryptocurrency exchanges in a matter of seconds. The new crowd sale model of IEO allows to take into account the interests of all participants of the transaction: developers attract investment, users carefully select projects to invest, and trading platforms gain new customers, while increasing their trading activity. BDC Consulting agency expresses the ways IEO is changing the market and how startups are able to cope with this.
How does IEO change the market?
According to TokenData analysts, ICO attracted $118 million in the first 3 months of 2019, which is 58 times less than in 2018. Back at that time, this figure was $6.9 billion. The fading of all the hype over ICO was probably caused by the disappointment among investors due to the cost decrease of the purchased tokens and the increased number of scams.
ICO was replaced with IEO, the fundraising model in which the exchange is acting as an intermediary between token issuers and buyers. This change started to affect the formation of the cryptocurrency market right away.
IEO increases the number of investors and traders on crypto exchanges. A new audience is gained due to the professional audit and the guarantee given that tokens are listed on the platform.
One of the largest cryptocurrency exchanges, Bitfinex, recently eliminated the requirement for a minimum deposit of $10,000. Most likely, the company has realized that there are so many novice traders around the world who are not ready to invest a lot of money which could be equal to the total amount of their deposits, therefore still allowing them to make good money. The exchange has modernized its infrastructure and is now available for a wider audience.
IEO determines the price of Bitcoin. In spring 2019, the number of Google search queries on Bitcoin increased 6 times compared to the same period in 2018. The experts attribute the recent increase in the price of the first cryptocurrency to a level of $5,000 to the new capital entering the market.
IEO helps to create a better product. Developers have an opportunity to focus on the project, shifting the burden of marketing to the exchange. On the top platforms, there's almost no risk of not getting any interest from traders — each token sale brings huge attention from the audience.
Is IEO a new reality in just a couple seconds?
More than 15 stock exchanges run IEO now. On the top platforms, the token sales have become a matter of seconds. The most recent examples are the following:
IEO of VeriBlock project on Bittrex was completed on April 2nd in 10 seconds. $7 million was raised;
sale of the LINIX tokens on ProBit Exchange lasted only 5 seconds on March 15th with a result of $52,500 raised;
IEO Paytomat on EXMO, the tokens were sold out in 99 seconds on April 2nd for $500,000.
At the same time, some IEO exchanges last for weeks and even months. Thus, VESTELLA token sale on Latoken platform was held in 2 stages during the period from 4 to 31 in December 2018.
Why is this happening? The answer can probably be found in the recent Bitwise Asset Management report for the SEC. It contains a detailed comparison of cryptocurrency exchanges with key indicators: trading volume, number of visitors, the correlation between the indicators, and spread / distribution of transaction volumes depending on their value.
Having compared the results obtained, the analysts noted the following: on 95.51 percent of the platforms there was only the appearance of the trading activity given. However, the data corresponded to the reality in only 4.49 percent of the cases.
The majority of cryptocurrency exchanges are obviously overestimating their trade indicators. It means that developers should be more attentive when choosing the platforms to place their projects.
How do startups use IEO's potential to attract investment?
The attractiveness of IEO for cryptocurrency startups is obvious:
reduction of marketing costs;
guarantee of token listing;
liquidity provided by the increased attention to the project at the token sale stage and right after the opening.
The success of any team which creates a high-quality product and looks forward to obtaining funding very much depends on the exchange they choose. The best option here would be one of the major platforms, such as Binance — in this case, the funds will be raised very quickly.
But what if Binance chooses to not back your project?
1. Look for other ways.
Bitwise Asset Management experts mentioned 10 exchanges that publish realistic data on the trading turnover. These are Binance, Bitfinex, Kraken, Bitstamp, Coinbase, bitFlyer, Gemini, Bittrex, itBit, and Poloniex.
2. Concentrate on marketing before running IEO
In particular, try to attract users and potential investors on the landings you've created in advance. Here are the five channels that brought the most investments to BDC Consulting's projects:
- PR-publications on top resources. This helps to form public opinion about the product, which will then influence the investment towards the project. The ones with the highest conversion here are bitcoin.com, cryptocompare.com, ccn.com, bitcoinist.com, newsbtc.com, and forklog.com.
- ICO / IEO trackers. These show users the rating and reliability of the project, informing them about the fundraising launch and serving as a basis for publications in the future.
- Cryptocurrency advertising networks such as Coinzilla, PropellerAds, BuySellAds. These are excellent tools you can use to disseminate information to potentially interested viewers.
- Email newsletter. About 8 percent of all the newsletter recipients invest in the project. Also, the e-mail newsletter brings up 4-5 percent of new users. This means that users forward the letters received from the project to their friends.
- Publication of ads in Telegram chats and groups.
You can try retargeting on social media as well. Of course, if you know the way to go around moderation: some financial instruments are forbidden to be advertised on social networks, and cryptocurrency is among them.
A good outcome could be achieved by using local advertising tools. Find out which ones your target audience uses. For example, given that Vkontakte is the most popular social media in Russia, it is probably an easier way to reach the Russian audience.
Despite the fact that many cryptocurrency exchanges have only just begun to run IEO, the trend started by Binance shows excellent results, attracting more and more platforms and investors. Thanks to IEO, any project that creates a good product has a better chance of attracting investment and the quick coin listing eliminates many of the challenges investors face when it comes to choosing the right project.