Digital Tulips? Returns to Investors in Initial Coin Offerings

About 56% of crypto startups that raise money through token sales die within four months of their ICO

Researchers Hugo Benedetti and Leonard Kostovetsky from Boston College carried out a recent study that analyzed 4,003 executed and planned ICOs which had raised a total of $12 billion since January 2017. They found evidence of significant ICO underpricing which average returns of 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days. Even after imputing returns of -100% to ICOs that don’t list their tokens within 60 days and adjusting for the returns of the asset class, the representative ICO investor earns 82%.

After trading begins, tokens continue to appreciate in price, generating average buy-and-hold abnormal returns of 48% in the first 30 trading days.