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What can startups do in the era of initial exchange offerings?
Startups raise millions of dollars on cryptocurrency exchanges in a matter of seconds. The new crowd sale model of an initial exchange offering (IEO) takes into account the interests of all participants of the transaction: developers attract investment, users get carefully selected projects as potential investments, and trading platforms win new customers and high trading activity. BDCenter digital agency spoke about the ways IEOs are changing the market and what startups can do in order to cope with this.
How does an IEO change the market?
According to TokenData analysts, in the first three months of 2019, initial coin offerings (ICOs) attracted $118 million, 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 ICOs was probably caused by the disappointment of investors due to the cost decrease of the purchased tokens and the increased number of scams.
The ICO was replaced with the IEO, a model of fundraising where the exchange acts 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
The new audience is attracted 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 yet to invest a lot of money that could be equal to the total amount of their deposits but at the same time allow them to make good money. The exchange has modernized its infrastructure and is now available for a wider audience.
IEOs affect the price of Bitcoin
In spring 2019, the number of Google search queries on Bitcoin increased six 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 capitals entering the market.
IEOs help to create better products
Developers have an opportunity to focus on their projects, shifting the burden of marketing to the exchange. On the top platforms, there’s almost no risk of not getting any interest from traders, since each token sale brings huge attention and an audience.
Is the IEO suddenly the new reality?
More than 15 exchanges run IEOs now. On the top platforms, token sales have completed in a matter of seconds. The most recent examples are the following:
- The VeriBlock project IEO on Bittrex was completed on April 2 in 10 seconds with $7 million raised.
- Sale of the LINIX tokens on ProBit Exchange lasted only 5 seconds on March 15 with $52,500 raised.
- The Paytomat IEO on EXMO sold out the tokens in 99 seconds on April 2nd for $500,000.
At the same time, some IEO exchanges last for weeks and even months. For example, VESTELLA token sale on Latoken platform was held in two stages during the period from December 4-31, 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 by key indicators: trading volume, number of visitors, the correlation between the indicators, spread and distribution of transaction volumes depending on their value.
Having compared the results obtained, the analysts noted that only 4.49% of exchange reported data that corresponded with reality with the majority of cryptocurrency exchanges obviously overestimating their trade indicators. It means that developers should be more attentive when choosing a platform for their projects.
How do startups use an IEO to attract investment?
IEOs are attractive for cryptocurrency startups for obvious reasons.
- Reduced marketing costs
- Guaranteed token listing
- Liquidity due to 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 does not choose your project?
Look for other ways
Bitwise Asset Management experts mentioned 10 exchanges that publish realistic data on trading volumes. These are Binance, Bitfinex, Kraken, Bitstamp, Coinbase, bitFlyer, Gemini, Bittrex, itBit, and Poloniex.
Concentrate on marketing before launching an 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 BDCenter’s digital agency projects.
- PR-publications on top resources
This helps to form public opinion about the product, which will then influence the investment in 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, as well as inform them about the launch of fundraising and serve as a basis for publications in the future.
- Cryptocurrency advertising networks such as Coinzilla, PropellerAds, BuySellAds
These are also an excellent tool you can use to disseminate information to potentially interested viewers.
- E-mail newsletterAbout 8% of all the newsletter recipients invest in the project. Also, the e-mail newsletter generates 4-5% new users. This means that readers forward newsletters about projects to their friends.
- Publication of ads in Telegram chats and groups
You can try retargeting on social media as well — if you know the way to go around moderation since some financial instruments are forbidden to be advertised on social networks, and cryptocurrency may be 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 launch an IEO, the trend started by Binance is showing excellent results by attracting more and more platforms and investors. Thanks to IEOs, any project that creates a good product has a better chance of attracting investment. And the quick coin listings eliminate many of the challenges investors have faced when trying to choose the right projects.