Despite investor hesitation about ICOs, many people remain interested in this form of investment. In fact, nearly $2 billion has already been raised so far this year. 2018 is on track to comfortably surpass 2017’s total of $5.7 billion. However, as these token sales are increasingly structured toward private investors, the general public is left with access only to less serious projects. Data show that 84% of all funds raised by ICOs this year have come from private investors.
Private sales help the wealthy grow wealthier
When crowdsales first appeared, they were presented as a way to raise capital and build a diverse community of supporters. For a while that was largely how things unfolded. But in 2018 the ICO landscape shifted. Over the past year private investors have continued to secure the best allocations in top crowdsales, while public sales have often been neglected. Much of the token sale process now happens behind closed doors, leaving the public with very limited opportunities.
Recent figures published by Tokendata indicate that of the $1.97 billion invested in token sales this year, $1.63 billion—about 84%—came from private investors. These numbers do not include the $850 million reported for Telegram’s private sale, an event so exclusive that only the largest backers were invited.
ICOs are delivering modest returns
Of the 94 ICOs Tokendata tracked this year, 28 have tokens currently available for trading on exchanges. At this point, the average return on investment for tokens bought in ICOs and sold on exchanges is only 2.17x, while the return versus ETH is 0.75x. In other words, in many cases investors would have been better off simply holding ether since the start of the year instead of swapping it for new tokens.
The discounts offered during private presales make it much easier for private investors to lock in substantial profits, further widening the advantage between well-capitalized participants and ordinary retail investors.