BitMex & TokenAnalyst Compile Report on Relationship Between ICOs and Ethereum Price Shift

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BitMex & TokenAnalyst Compile Report on Relationship Between ICOs and Ethereum Price Shift

Cryptocurrency exchange BitMex, in collaboration with TokenAnalyst, an independent third-party research body, released a study to track Ethereum balances of various Initial Coin Offerings (ICO) on October 1, 2018.

Ethereum Holdings and Sales

The study mainly focused on how much ether was raised in different ICOs and if or when there were any gains or losses incurred in terms of USD, which were caused by volatility in ether’s value. Some of these ICOs are known names right now such as EOS, Tezos, Bancor Protocol, ans Basic Attention among others.

Recently, Ethereum was in the news after XRP dethroned it as the second biggest cryptocurrency by market cap. At the time of writing, Ethereum has regained second place and is changing hands at $229.68. However, the report states, that most of the ICOs had already sold the ether that they had raised (in terms of USD).

In late 2017 and early 2018, prices of many cryptocurrencies (including bitcoin) skyrocketed. At the time, Ethereum was trading at $1,371 in the second week of January 2018. Post the substantial gains, a bear run led some people to wonder if there was “a downward price spiral” due to concentrated Ethereum holdings of the ICO project.

The study from BitMex and TokenAnalyst, further explores that there was a theory that “many ICOs were sitting on a large treasure troves of Ethereum” and that falling price of the cryptocurrency would lead most of the projects to sell due to fear of being the last ones holding a bag full of coins with no value.

However, to the relief of those who did not sell in the panic, the study found that there was no such factor at play. The researchers looked at around 222 projects (ICOs), and most have sold almost all the Ethereum-based tokens raised. However, there was a margin difference of $11 million. At the moment, the ICOs hold 25 percent of the total funds raised, which comes to approximately 3.8 million ether.

The report stated that, despite the 85 percent crash in the price of ether, the projects still managed to recover $727 million das many sold their holdings before the most recent downward trend. Fortunately, the crash will not severely impact ether’s price since the ledger books of these ICOs show that they only 3.8 million as compared to Ethereum’s total volume (102 million), making them a minority stakeholder even collectively.

Insight on the EOS Project

Bitmex and TokenAnalyst also looked into the EOS project a little differently than the method used for other ICO projects, as it raised nearly 70 percent of the total ether raised by the other projects on the study’s previous list.

The research identified nearly 171 of EOS’ “internal transactions,” which were used to transfer ether to external addresses, had no bearing on EOS. The total value of these transfers was 7.2 million ETH or $3.9 billion which was determined from the closing price of the cryptocurrency on the day of each transaction.

The study states that “using these figures and the average Ethereum price during the ICO, we believe EOS raised [$3.8 billion] worth of Ethereum, reasonably close to the reported [$4.2 billion] figure,” which could also include funds raised in cryptocurrencies, apart from ether.

Concluding, the study reported that although ICOs made a lot off their token sales, they had considerably less exposure to the price of the ether in their treasury account.

Pratik Makadiya

Pratik Makadiya is a cryptocurrency journalist and content writer based out of Gujarat, India. He's an avid fan of Cryptocurrency, Ethereum, ERC-20 tokens, and fintech in general.