Cryptocurrency stocks: ICOs and the Future of Blockchain Investment

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Abdulaziz AlYaqout

February 24, 2019

Understanding cryptocurrency stocks is key when building a successful portfolio. In the cryptocurrency world, stocks in a company are known as tokens and are sold through ICOs. An Initial Coin Offering (ICO) is the blockchain equivalent of a traditional Initial Public Offering (IPO) on the stock exchange.

Nobody will argue that 2017 was the year of the ICO, but things have changed. Are ICOs still a good investment in 2019? Here in this article, we’re going to talk about important things you need to know before you invest in the blockchain or cryptocurrency market.  

Cryptocurrency stocks: A brief history of ICOs

The biggest difference between an ICO and an IPO is what is being distributed to investors. In an IPO, investors buy shares in a company through a stock exchange. In an ICO, investors buy tokens from a company or project by sending them cryptocurrency directly.

People walking around in a business oriented city

The first ICO was called “Mastercoin” and was launched in 2013. Mastercoin’s whitepaper promised to build a protocol layer on top of the Bitcoin blockchain that would make Dapp development more accessible. The project initially raised $500k in funding and was the first proof on concept that the ICO concept was viable.

In 2014 one of the most famous ICOs in history was released, Ethereum. A young developer named Vitalik Buterin wrote the whitepaper for Ethereum which itself has now become the primary platform for Dapps and ICO launches.    

Billion have been raised through ICOs since the release of Mastercoin, but it has not been smooth sailing. The most glaring issue with cryptocurrency stocks and ICOs is SEC regulation.

In the early days, the ICO market was completely unregulated. Investment money was flowing freely through 2017 and while this did lead to some incredible advancements in the space, it was also abused. Many projects launched ICOs during this time that did not have experienced enough teams or lacked viable solutions, some of them could even be considered outright scams.

After the market crashed in late 2017 many people lost faith in the ICO concept. The lack of credibility in many ICOs was one of the main contributing factors leading up to the crash.

ICO investing in 2018 was markedly less lucrative for investors when compared to 2017, but this could be due to the fact that 2018 was a bear market for the majority of the year. While over 6 billion was raised through ICOs in Q1 of 2018 alone, investors didn’t see the 100x returns like in 2017.

Regulations have also become much more strict which is making it more difficult for projects to have an ICO. The SEC has even prosecuted some companies for exchange violations in the wake of the 2017 sell-off. The obvious question becomes “what is the future of ICO investing?”

What’s next for ICOs, cryptocurrency stocks, and securities?

As of right now, the SEC has made it clear that it sees ICOs a little more than securities offerings. The only two cryptocurrencies that have been recognized as non-securities are Bitcoin and Ethereum. While there are many other projects that deserve the same recognition, they have yet to be given this distinction.

The SEC is not the only actor in the regulatory game. The inherently global nature of blockchain and cryptocurrency projects makes it so that regulators from all over the world are trying to get them to conform to their rules. Some countries like Switzerland have embraced cryptocurrencies and ICOs with deregulation, while other like China have outright banned them. The USA is somewhere in the middle, but nobody is denying that future ICOs will exist in a much more regulated world economy.

Security Tokens

In response to regulation “Security Tokens” were formed as a new way to raise money for ICOs. Unlike a traditional token or coin offering that represents a percentage of a company or another intangible asset, Security Tokens represent real-world assets like buildings. Security tokens are much like a normal security and fall under the same laws, but they are much more liquid.

A building that is being used as an STO

Security Token Offerings (STOs) have the potential to fund thousands of meaningful projects all over the world. Imagine being able to raise the necessary funds to build a new apartment building in New York city all through a security token. Each person who purchased tokens would be entitled to a portion of that building and would share in the profits.

As we move farther into the decentralized and distributed future, the nature of ICO investing will continue to adapt. It’s clear that nobody should be thinking that ICOs are dead in any way. ICO investing in 2019 is still a good bet if you know what you’re doing.

The most important thing to realize about any type of investing is that you shouldn’t get involved in it if you don’t understand it. The world of Dapps, ICOs, and cryptocurrencies is complex to say the least. You should make it a point to educate yourself about the space and do your research before making any investments of your own.

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